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Posted on July 31st, 2012, by

The exploration of both the traditional constituents of operations management and newly emerging perspective of strategic operations through understanding of the impact of business processes on organizational performance

Operations management plays an important role in the contemporary business and functioning of various organizations, including non-profit and public organizations. At the same time, its significance is particularly obvious in relation to private and commercial organizations which focus on the achievement of higher profitability and investment attractiveness. It should be pointed out that the development of operations management is accompanied by the introduction of new approaches and technologies in the process of functioning of an organization. This is why it is possible to estimate that operations management is constantly evolving and therefore it is necessary to take into consideration the recent trends in economic as well as technological development in order to better assess perspectives of the operations management in the future and to develop effective strategies of the implementation of new trends in operations management in an organizations. On the other hand, it is impossible to deny or totally reject traditional approaches to operations management because they may be still quite effective and provide ample opportunities for the development and steady growth of a company.

In such a situation, it is important to research the problem of the implementation of both traditional constituents of operations management and new trends in the development of strategic operations in the context of the modern business environment and its impact on the organizational performance. In this respect, it should be said that such a modern trend as outsourcing affects operation management consistently and may influence the general performance of a company.

Literature review

The successful functioning of an organization often depends on the successful performance and effectiveness of operations management of the organization. Specialists point out that the development of operations management is accompanied by the constant changes related to the development of new economic trends and approaches to business. It is not a secret that one of the major trends in the contemporary market is the development of outsourcing, which may be viewed as a perfect alternative to the traditional approaches that are used by organizations (Pine and Gilmore 1999). Basically, it should be said that outsourcing is viewed as an excellent opportunity for a company to save costs and increase the effectiveness of its performance. Obviously, this trend could not fail to affect the development of operations management because it involves a considerable change in the functioning of an organization and its operations. Specialists (Stewart 2004) estimate that outsourcing can change the basics of operations management of an organization consistently because it leads to a considerable change in the processes that the organization is involved in.

To put it more precisely, it should be pointed out that the outsourcing leads to the change in the functioning of an organization because some of its operations are performed by another company that provides the customer with services and operations it is either unwilling to perform or unable to perform effectively (Mohrman 1998). What is meant here is the fact that the company delegates a part of its functions to another company, a partner, which is supposed to provide the company with the services of a higher quality and at lower costs. In such a situation, the company using outsourcing to increase the effectiveness of its operations management attempts to make an alliance, which could be beneficial for both companies involved in the process of outsourcing.

On the other hand, some specialists (Benfari 1999) warn about the possibility of negative effects of outsourcing.

Basically, such an attitude to outsourcing is considered to be quite conservative because it is based on the traditional approach to operations management (Benfari 1999). In fact, the apprehensions concerning the possibility of the failure of outsourcing are based on the idea that the company should control totally all its major operations and performance. Otherwise, the company may face a threat of losing its freedom in the choice of methods that it could apply and improve its performance management consistently because some of its operations would be performed by other companies involved in the process of outsourcing (Heilbroner and Milberg 2000). As a result, there exists a threat that the company grows more and more dependent on the suppliers of the services or operations that have been outsourced.

In such a situation, it is quite natural that many specialists insist on the necessity to maintain traditional approaches to operations management and avoid experiments such as outsourcing because, due to its relatively innovative nature, it may be viewed as a risky operation that could threaten to the normal performance of a company (Mohrman). This is why it is often recommended to focus on the development of the production of goods and services by the company without the involvement of other companies. In such a way, the company could work on the improvement of the effectiveness of the production, infrastructure, logistics that will naturally increase the effectiveness of the performance of a company and therefore improve its market position.

However, it should be pointed out that it is a traditional approach to operations management, which apparently is very conservative. At any rate, it is obvious that without the implementation of new, innovative approaches, including outsourcing, it will be more and more difficult for an organization to keep progressing and improve the effectiveness of its operations management. Many specialists (Peters 2007) point out that in the current business environment the improvement of the performance of a company cannot be provided solely by the implementation of traditional approaches to operations management, because they cannot guarantee the fast progress of the company.

The latter is very important in the modern business environment since the competition is constantly growing and it is more and more difficult to maintain the positive performance or the leading position in the market without the implementation of new approaches to operations management. In fact, traditional approaches to operations management have proved their effectiveness, but they cannot provide a company with an opportunity for the rapid progress to gain the strategically advantageous position compared to its major competitors. As a result, the modern business environment forces companies to implement innovative approaches to operations management, including outsourcing, even though these approaches may be quite risky. However, without taking risks it is quite difficult to improve the position of the company in the market consistently.

Methods

In order to assess and evaluate the effectiveness of the implementation of new approaches to operations management and the impact of the modern business environment on the performance of a company, it is necessary to apply the effective methods of the research of this problem that will help find out whether such approaches as outsourcing may be really effective in the modern business environment and whether it can improve consistently operations management or probably it is really an ineffective approach that is not worth of application.

First of all, it should be said that it is necessary to apply a variety of methods to increase the reliability of the results and its objectivity. In this respect, it is possible to use the traditional approaches which have already proved its efficiency in the research of business problems. For instance, it is primarily necessary to conduct a literature research dedicated to this problem. This will help better understand the extent to which the problem is researched, in terms of this paper this is the problem of outsourcing and its effectiveness in the contemporary business environment. Also, the analysis of the existing researches contributes to the assessment of different views on the problem of outsourcing and its effectiveness because it is obvious that each research has its own peculiarities as well as they can reveal some common trends that may be taken into consideration in terms of the current research.

Furthermore, it is also necessary to involve specialists in the research in order to find out their opinion concerning the problem discussed. To put it more precisely, it is possible to involve specialists in the research of the problem of the effectiveness of the outsourcing. In this respect, it is possible to use questionnaires that could be distributed among executives that have already implemented outsourcing in their companies. Also, it is possible to involve professional economists as well as other specialists that are working on the problem of outsourcing and that have a profound knowledge of this problem as well as they are able to make clear judgments concerning the application of this approach to operations management in the current business environment and the modern economic context. It is very important that specialists involved in the questionnaire could be able to respond not only questions concerning the outsourcing but also assess it in comparison to traditional approaches to operations management.

What is meant here is the fact that it is very important to include in the questionnaires questions that could help assess the effectiveness of traditional approaches, their advantages and disadvantages and the effectiveness of outsourcing as a new trend in the modern business environment. It should be pointed out that the effectiveness of outsourcing should be assessed specifically in the context of the contemporary business environment in comparison to traditional approaches because it will reveal the extent to which the application of outsourcing could be advantageous or disadvantageous in the current situation.

Naturally, it is impossible to conduct a research of the application of new approaches to the operations management, namely outsourcing, without the research of concrete examples. This means that it is necessary to conduct a case study of an organization that has already applied outsourcing in an attempt to improve its market performance and increase the effectiveness of its operations management. In terms of this paper the case of JP Morgan will be discussed in order to reveal the effectiveness of the outsourcing, which was applied by the company in recent years.

On the basis of the collected data it will be possible to analyze and discuss in details the perspective of the application of the new approach to operations management and assess its effectiveness compared to traditional approaches to operations management, taking into consideration not only the opinion of specialists but also findings made in the result of the case study of the company that has already applied one of the new approaches (Volti 2005).

Results/Findings

In fact, the research of the literature dedicated to the problem of operations management and the application of outsourcing in the contemporary business environment reveals the fact that the application of new approaches, such as outsourcing, should not be used in isolation from the traditional approaches to operations management. To put it more precisely, it is important to use traditional approaches as the basis to increase the effectiveness of the production of goods and services of a company and maintain its stable performance. At the same time, the use of new approaches, such as outsourcing, may be very helpful in the provision of new opportunities for the further growth and development of the company. What is meant here is the fact that the use of new approaches may enforce the effectiveness of the traditional approaches targeting at the improvement of the effectiveness of production. For instance, specialists (Peters 2007) estimate that outsourcing opens new opportunities for a company to the improvement of its operations management and market performance because it can decrease costs of the production, due to the reduction of the personnel, for instance, and increase the effectiveness of the production due to the involvement of companies that are specialized specifically on the outsourced operation.

At the same time, specialists (Heilbroner and Milberg 2000) warn that such perturbation within the company can lead to the deterioration of the internal atmosphere in the company that naturally threatens to the effectiveness of its functioning and therefore threatens to the performance of the company in the market. In this respect, specialists (Pine and Gilmore 1999) recommend the application of traditional approaches to operations management that could minimize positive negative effects of the implementation of new approaches to operations management, which could be viewed as highly perspective in the current business environment. In such a way, it will be possible to maintain the stable performance of a company in case of the failure of outsourcing or any other new approach to operations management.

Also, it should be said that the practical application of outsourcing, as a new approach to operations management, reveal quite contradictive results. In this respect, it is possible to refer to the case study of JP Morgan. The company attempted to outsource its IT services. Basically, the company needed the improvement of the quality of IT and IS applied in the company in order to increase its effectiveness and its security. For this purpose JP Morgan outsourced IT services relying on the IBM as its major business partner in this field. The latter was supposed to provide JP Morgan with IT and IS of the highest quality, thought it was the first experience of outsourcing at such a scale for both companies, because both JP Morgan and IBM occupy the leading positions in their industries. At first glance, the outsourcing could bring obvious benefits to JP Morgan, such as the decrease of costs on IT developments, increase of the quality of IT and IS, the reduction of the personnel employed in the company working on the problem of IT developments. However, the outcomes of the outsourcing had a number of disadvantages which made the company to shift IT developments back into JP Morgan. In other words, the new approach to operations management, i.e. outsourcing, proved to be not as effective as it was initially supposed to be. To put it more precisely, IBM could not provide a substantial increase of the quality of services because it was the first experience for the company, thought it would be a mistake to estimate that the effectiveness of IT and IS provided for JP Morgan decreased. At the same time, there were much more serious problems which affected JP Morgan directly. In this regard, it should be said that the outsourcing led to the transfer of the personnel from JP Morgan to IBM but the problem was that some specialists had lost their jobs. As a result, the personnel felt uncertain in the future and employees had certain apprehensions concerning their future in JP Morgan. At the same time, the decision of the company to refuse from the services of IBM deteriorated the situation even more because this also resulted in the loss of professionals who, being uncertain in their future, simply preferred to find another employer to work for.

Discussion/analysis

Obviously, the results of the research of the problem of the application of new approaches to operations management, namely outsourcing, in the current business environment reveal the fact that the application of innovations leads to a dubious results. On the one hand, it had a number of advantages, such as the decrease of costs on certain operations as well as the reduction of the personnel employed to perform these operations. Also, outsourcing contributes to the maintenance of the outsourced services on a high level or even the improvement of the quality of the outsourced services. On the other hand, it is necessary to take into consideration possible threats such as the possible unpreparedness of the personnel to the introduction of the innovations in operations management leading to the deterioration of the internal atmosphere within the company. What is meant here is the fact that outsourcing, for instance, may increase uncertainty of the personnel in the future and lead to the growing turnover of the personnel in the company. Naturally, in such a situation it will be difficult to maintain a positive performance of the company in the market.

Conclusions and recommendations

Thus, taking into consideration all above mentioned, it is possible to conclude that the implementation of new approaches to operations management in the modern business environment should be very carefully planned and prepared in order to minimize possible negative effects. This is why it is possible to recommend preparing the personnel for introduction of the change and combine it with the implementation of traditional approaches to operations management. This strategy will help to gain maximum benefits from the introduction of innovations in operations management and, at the same time, prevent the company from the possible crisis or deterioration of the situation in the result of the failure of the innovations in operations management. However, traditions approaches solely can hardly provide the company with opportunities to keep increasing efficiency of its production.

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