POINTS OF VIEW
8008 - Operations Management and Purchasing Theory
As I have said elsewhere, when I started out in work one of three main legs of business management was that of production. The ground has disappeared from underneath this leg due to the fact that production is now such a small part of the economy, replaced by ephemeral services. This is a shame, since many lessons can be learned from operations management.
I suppose that I especially liked the area of production management; especially where I ran my own factory at BTR. The nicest thing about it was that you could walk around and touch things. You could see, before your very eyes, what was happening; the stocks building up between the various stage of the operation or the equipment which was behaving badly. It made management much easier, though managing such factories -- due to the human element -- was still a nightmare.
All that has gone. For most of us, on the other hand, the disciplines involved still have significance. Thus all the principles of logistical management still apply in service industries. People may be pushing paper, or more likely these days, electronic files, but the processes involved still very much follow the same rules as those for the physical problems. The difficulty is that people can no longer see them piling up around the factory. Thus, poor service is meted out to most customers these days. It is overlooked because it doesn't end in a heap on the floor, but the same logistical factors are applicable. Thus, if you halve the number of people handling customer inquiries, you should not be surprised -- as some people are when they aim for cost savings -- that customer service declines. Of course, as they rarely measure customer satisfaction, they can probably get away with it in terms of what their management observe; if not in terms of what customers experience.
Indeed, the computer as provided a wonderful excuse for poor management. The number of times I've heard people say 'it's the computer' when in fact is must be the people -- the computer only does what people tell it to. Most organisations simply don't understand what are the abilities of their computer systems, and certainly not what are the problems it can cause.
One other major problem, on this front, was the demise of IBM. It was most successful, and made its big money, by developing new computer applications for its customers. Its focus was on existing customers, expanding their business, adding to this quite simply by understanding their business better than them and selling them computer solutions -- rather than computers -- which made their handling of customers more effective. The emphasis on cheap solutions, which replaced the IBM approach, has meant that computers - typically based on the PC in one form another - has done little to improve the effectiveness of these organisations.
Finally, in this section, purchasing is still the Cinderella of the business functions. Yet, these days, it accounts for by far the greatest part of the overall cost - whatever the product or service is. Most manufacturers these days only assemble components made by others. Most service organisations simply pass on products or services created by others. Yet the purchasing function is largely ignored!
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