Lecture 5.pptx challanges in operation management

Lecture 5
Challenges Faced in
Operations Management

Learning Objectives
LO1. General challenges affecting Operations Management
LO2. The impact of the post-pandemic world on the supply chain
LO3. Factors affecting pricing models, the increased volatility and rising costs of
raw materials.
LO4. Dealing with post-Brexit trade barriers and regulations, and the impact this
has had on operations and supply chains
LO5. Increased customer expectations relating to quality, sustainability and
variety.
LO6. Social and environmental issues e.g. political disruption, climate change,
natural disasters.

Overview
Operation concerns every aspect of business.
Operations management involves planning, organizing, and supervising in
the context of production and manufacturing.
Good operations management enables a company to be efficient and
effective by using the fewest resources and meeting customer demands.
Operations management highlights the link between process and value.
With increasing customer expectations and the decreasing supply of
some resources, operations management is increasingly important for
the success and profitability of businesses.

General challenges affecting Operations Management
There are multiple challenges that operations managers face frequently:
1. Globalization
2. Sustainability
3. Effective Communication
4. Ethical Conduct
5. Adapting to Dynamic Business Environments
6. Global Operations Complexity
7. Technological Advancements
8. Technological Advancements
9. Human Factors Influencing Operations (Risk Aversion, Resistance to Change, Need for Agile
Management Practices)
10. Satisfying customer expectations
11. Managing resources
12. Change Management
13. Reducing wastage and costs

Globalization
Globalization is defined as the process by which businesses interact with people, companies, and
governments on an international scale.
This is being driven by the reduction of trade barriers, advancements in information/transportation
technology, and more.
The benefit of globalization is that there is more interactions between different populations around
the globe and allows companies to reach a wider market.
Operations managers have found themselves facing competition not only from their country of
origin, but from countries all around the globe.
To maintain their competitive advantage, operations managers must keep up with the trends and
software technology available to help increase their production

Sustainability
Sustainability is about whether or not we will
have the appropriate amount of resources
needed in order to have a sustainable future.
When discussing the concept of sustainability,
the three factors of sustainability usually
come into play, which include social,
environmental and economic.
Operations managers need to be aware of the
outcomes of each of these pillars, including
how their production facility or work will
affect these factors.
Sustainability challenges include (but are not
limited to) climate change, global poverty
and. inequality, natural resource depletion,
and environmental degradation.

Effective Communication
Consistency and effectiveness of communication is extremely difficult within
organizations.
The challenge for operations managers is to be able to communicate
effectively with all internal and external stakeholders.
This will ultimately allow for more thorough transparency within your
production facility, which will aid your factory floor immensely.
Effective Communication can boost efficiency within your manufacturing
operation with ease and operations management needs to look into software
that can make this much simpler for them.
Effective communication is a must for manufacturing facilities that are seeking
to boost operational efficiency in areas such as demand planning, demand
forecasting, using the collected date to implement into production plan.

Ethical Conduct
Ethics is defined as a subset of business ethics that is meant to ensure that
production functions or activities are not damaging to people or society.
Understanding the ethics of business will ensure that business will not fall
out of line in terms of keeping the people and environment of business
safe.
Unethical behavior has contributed to the demise of various companies
around the globe - which is why understanding them is so important.
Being ethical across all functions of business will ensure that operation
runs smoothly and that you will not turn into one of the companies that
have failed due to this.

Dynamic Business Environments:
Operations managers must adapt to rapidly
changing business environments.
They play a pivotal role in integrating
various functions across the organization,
impacting areas like product development,
customer service, and financial
management.
This requires a holistic view of the
company's operations and the ability to
make decisions that support the
interdependencies of these areas.
Global Operations Complexity:
For organizations operating on a global
scale, managing operations across diverse
geographical locations adds a layer of
complexity.
Managers must navigate different market
trends and operational challenges unique
to each region.
This often involves adapting to various
regulatory environments, cultural
differences, and economic conditions, all
while striving to maintain efficiency across
international supply chains.

Technological Advancements:
As technology evolves, operations
managers are expected to keep pace
with new tools and systems that can
enhance productivity.
This necessitates a deep understanding
of information management and the
technical skills to implement and
manage these advanced technologies
effectively.
Time Management Issues:
Efficient time management is crucial in
operations management.
Managers often face the challenge of
allocating their time effectively across
multiple tasks.
Common time management issues
include handling unexpected problems,
managing workforce shortages, and
balancing long-term strategic planning
with immediate operational demands.

Satisfying customer expectations
Meeting changes in customer trends and
preferences is the real change of today’s
market.
Customers need more value for their
money spent to be satisfied.
The pricing and quality of competitors
create a real challenge for the operations
team to stay ahead in the market.
Many factors including technology,
marketing strategies, innovative products,
brand value, and service quality are
subject to regular changes in the current
dynamic market.
Customer trends also change drastically
based on these factors making it hard for
operations management to anticipate and
deliver within the given infrastructure and
support.
Managing resources
Efficient management of workforce, equipment
and material towards delivering quality goods
with low operating costs forms the focus of
operations management.
Administration of these factors poses challenge
to operations management. Managing an
increasingly diverse workforce, shortage of
adequate skill supply, cost and availability of
raw materials are challenges to be met by the
operations team.
Internal conflict resolution that could flare up
between employees or departments also needs
to be addressed.
All these challenges come under the operations
team to settle without further escalations.

Change Management
Change is inevitable for any business to meet
market dynamics, but managing change is a huge
challenge for the operations management team.
Innovation, development and operationalization
continue as a cycle for performance improvement.
Business processes might need to be redesigned or
restructured from time to time to optimize output.
Adoption of new technologies and processes could
lead to employee resistance as employee’s view
change as a threat to their jobs.
Communicating, convincing and managing
resistance to change is a huge task.
It is also challenging for the operations
management team to streamline activities where
employees are reluctant to accept change.
Reducing wastage and costs
Controlling and maintaining
minimal resource wastage is a
true challenge to operations
management.
Weak and inefficient systems,
underutilized workforce,
inadequate control mechanisms
and complex long handoff
processes result in resource
wastage and high operating
costs.
Operations management is
responsible for the productive
management of costs and
business wastage. Identification
of wastage itself is a core
challenge to the operations
department.
Operations management should
be competitive enough to
recognize the activities that
bring value to the company and
eliminate those that do not.

Human Factors Influencing Operations:
Risk Aversion: Many operations managers exhibit risk-averse behavior, which
can hinder innovation and responsiveness. For instance, the reluctance to
implement new technologies or change existing processes can delay
improvements in operational efficiency.
Resistance to Change: Change management is a significant aspect of
operations management. Resistance from both leadership and staff can impede
the adoption of new strategies or technologies that are critical for the
company’s advancement.
Need for Agile Management Practices: Modern businesses require operations
management approaches that are not only systematic but also adaptable. This
is especially true for businesses undergoing significant transformations or those
that need to integrate a wide range of functions into a cohesive operation.

The Impact of the post-pandemic world on the supply chain
The pandemic had substantial negative effects on supply chains
The COVID-19 pandemic was a global disruption across trade, finance, health and education
systems, businesses and societies like few others in the past 100 years.
Serious disruptions affected 57%, with 72% reporting a negative effect (17% reported a significant
negative effect, and 55% mostly negative). Research done by EY

The pandemic had substantial negative effects on supply chains
Often in uncertain economic environments, companies slow their technology investments to a trickle.
But during the COVID-19 pandemic, 92% did not invest in technology. This speaks to the value of a digital supply
chain in helping enterprises navigate disruptive forces and respond faster to volatile supply and demand.
There were some clear winners by industry during the pandemic, with 11% reporting positive effects, including
increased customer demand (71%) and bringing new products to market (57%).
These companies were mostly in the life sciences sector and the positive effects may be largely because the
products they produce are essential. (pharmaceuticals, biotechnology, medical devices, biomedical
technologies)
The pandemic also required some life sciences companies to double down on creating essential new products
such as COVID-19 tests or vaccines.
All automotive and nearly all (97%) industrial products companies said the pandemic has had a negative effect
on them.
47% of all companies reported the pandemic disrupted their workforce. While many employees were asked to
work from home, others — especially in factory settings — had to adapt to new requirements for physical
spacing, contact-tracing and more personal protective equipment (PPE).
Industrial products and high-tech manufacturing companies are investing overwhelmingly in technology to
reduce employee exposure to COVID-19 in more labor-intensive industries.

The Impact of the post-pandemic world on the supply
chain
Big changes are on the horizon for supply chains – Greater supply chain visibility,
efficiency and resilience
Agility, visibility, automation and upskilled people will be key, which together drive not only cost
reductions but better decision-making, and process standardization and excellence across the
supply chain and clients eco-system partners.

Shift from linear supply chains to more integrated networks connecting many
players. Application IoT devices or sensors to provide valuable data on where
goods are in the chain and their condition.
With 61% of respondents saying they will retrain and reskill their workforce in the
next year, there will be efforts to help workers use digital technologies, adapt to
changing company strategies and ways of working like increased virtual
collaboration, and assist people in operating equipment with health and safety in
mind.
Top workforce measures identified in the survey include increased automation
(63%) and investments in AI and machine learning, with 37% of respondents
already deploying these technologies and another 36% planning to use them soon.

The future of supply chains is digital and autonomous
2020 survey found that 64% of surveyed supply chain executives say digital transformation will
accelerate due to the pandemic.
2022 research report shows the race is on for digital enablement and automation: by 2035, 45% of
supply chains are expected to be mostly autonomous (e.g., robots in warehouses and stores,
driverless forklifts and trucks, delivery drones and fully automated planning)

Impact of Brexit on Supply Chains
Brexit has fundamentally reshaped the landscape of UK supply chains, bringing about significant
challenges that businesses must navigate.
Increased Costs and Regulatory Complexity
New tariffs, customs checks, and regulatory requirements has led to higher operational costs for
businesses.
According to McKinsey, 70% of UK companies have reported increased supply chain costs directly
related to these new regulations.
The complexity of navigating new trade agreements and ensuring compliance has also added a
substantial operational burden.
Businesses must now allocate additional resources to manage these complexities, including hiring
specialized compliance staff or investing in legal services to ensure adherence to the new rules.
Impact: These regulatory changes have created friction in the movement of goods, leading to
longer lead times and increased administrative work. This has strained the profitability of many
companies,
Example: A manufacturer importing raw materials from the EU now faces additional costs and
delays due to customs checks and tariffs, impacting their production timelines and costs.

Supply Chain Disruptions
The Brexit impact on supply chain has been particularly severe in the form of disruptions.
These include delays at borders, shortages of key materials, and increased lead times.
McKinsey reports that 50% of UK companies have experienced significant delays, with
customs procedures extending delivery timelines by an average of 30%.
These disruptions have forced businesses to rethink their supply chain strategies,
emphasizing the need for greater resilience.
Impact: These disruptions have affected sectors across the board, from automotive to
consumer goods, leading to missed deadlines, stakeouts, and, in some cases, lost
business.
Example: Retailers relying on timely deliveries from European suppliers have had to deal
with unexpected delays, resulting in empty shelves and dissatisfied customers.

Workforce Shortages
Brexit has also exacerbated workforce shortages, particularly in sectors such as
logistics and manufacturing, where the reduction in EU workers has had a
significant impact.
According to a Financial Times survey, 45% of logistics companies report difficulties
in filling roles, which has directly affected their ability to maintain efficient
operations.
Impact: The shortage of skilled labor has increased operational challenges, leading
to lower productivity and higher labor costs as companies compete for a smaller
pool of workers.
Example: A logistics company struggling to find drivers and warehouse staff may
face delays in moving goods through the supply chain, exacerbating delivery delays.

Strategic Sourcing and Supplier Relationships
The Brexit impact on supply chain in UK has made strategic sourcing
and supplier relationship management more critical than ever. With new
trade barriers in place, companies are finding it necessary to diversify their
supply bases and build stronger, more collaborative relationships with
suppliers to ensure supply chain continuity.
Impact: Companies that previously relied on a few key suppliers from the EU
are now seeking to establish relationships with suppliers in other regions to
mitigate risks.
Example: A UK-based electronics manufacturer may shift some of its
component sourcing to Asia or North America to reduce dependency on EU
suppliers

Logistical Challenges
Brexit has introduced new logistical challenges, particularly related to increased border checks and
customs procedures. These challenges have created bottlenecks, leading to delays in the
transportation of goods across borders.
Impact: Logistical delays have increased costs and decreased the efficiency of supply chains,
particularly for goods that require just-in-time delivery.
Example: A company exporting perishable goods may experience delays at customs, leading to
spoilage and financial losses.

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