Part – A

Critical analysis of the importance of Operations Management to the organization and how
it has had an impact to the performance levels of the organization.

Brief of KFC- Kentucky Fried Chicken

Kentucky Fried Chicken a.k.a. KFC, is one of the leading fast food giants in the world. It is
based in Louisville. It has been ranked third largest chain with more than 13000 outlets in more
than 109 countries and serves approximately 12 million consumers every day. KFC is known for
its original recipe for fried chicken, which is prepared using a blend of secret 11 herbs and spices
(Buick, 1982). They are operating in an industry which is based on quick service and delivery to
its consumers. They have managed to curtail the service time by more than 50% and improved
the productivity of its employees. This helped them to outperform others and yield higher profits
and sales figures (Fitzsimmons, Fitzsimmons and Bordoloi, 2014). They aim at providing
continued superior service whilst non-stop improvement. It is highly crucial for them to improve
the efficiently of their entire operation so as to be able to serve customers as quickly as possible.
To achieve this, they have focused on all aspects, such as facility layout, quality management,
total costs and infrastructure to match up with the desires and need of its consumers.i

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Operation Management

Operations management is the administration of business practices to create the highest level of
efficiency possible within an organization. It is concerned with converting materials and labor
into goods and services as efficiently as possible to maximize the profit of an organization.
Operations management teams attempt to balance costs with revenue to achieve the highest net
operating profit possible.ii

Operation Management at KFC

KFC uses various tools and techniques to determine the best selection of its location, such as
factor rating method, cost-profit-volume analysis, and transportation and simulation models
(Matai, Singh and Mittal, 2013). KFC considers lot of factors in designing their facility.iii

They ensure their proximity to the consumers, so that they can be easily approached. This is
why they have opened so many locations in each city. They understand it is important to remind
the consumers about their presence. They always select a favorable location for its outlets, which
will lead to increased sales (Ojaghi et al., 2015). They make sure that all the outlets are located
on the main road, so that footfall rises.iv

Since they are operating in a saturated and a highly competitive market, they need to keep the
prices low (Potoĕnik et al., 2014). For this, they choose locations that are available at low
costs. All these decisions will help them to keep the price of their product low. They locate their
outlets where proper infrastructure is available and where there is abundance of skilled labor
(Ramachandran and Prasad, 2014). This can reduce labor cost as they are easily available and
easy access to stores for consumers is possible.v

Most of the stores of KFC are franchised, which reduces their maintenance efforts (Wang, 2014).
They simply conduct regular quality checks to ensure that all the required standards are met.
Their facility layout decisions are influence by the volume of production, fragility of the product,
nature of the service to be provided and the costs required to build the operations area (Zhang et
al., 2014). Their outlets are brightly lit, with attractive colour schemes and comfortable seating
arrangement and a warm and welcoming staff. Their suitable and quick cooking process,

2
superior service makes it desirable among consumers. This effective layout helps them in easy
supervision, smooth coordination which leads to high flexibility and efficiency. This also reduces
bottlenecks and reduces materials handling costs.vi

Importance of Operation Management at KFC

As a fast food supply chain, KFC had their own unbroken reputation in global market because of
their strong operation management skills. According to the KFC management structure
Operation management is important for;

 maintain the nature of operation

 improve overall productivity
 maintain customization
 increase revenue and leading to enormous profit

In Sri Lanka, KFC had operated 27 outlets island wide. To continuously maintain customer
requirements the company have to maintain unbreakable supply chain to make fast food like
Krushers, French Fries, Chicken buckets, Ice Cream and etc. The operation management
takes part to know the quantities of daily, weekly, monthly and annually requirement of
demand and supply. Furthermore through the Operation management system the company
got to know the pattern of goods utilization. It was directly push the company to planning,
organizing, managing controlling and supervising of the whole business process.

Ex: In 2013 as a result of bird flu fear KFC at China lost 36% sales during the month of
April. According to the worst condition there was no need to stock more inputs like
chicken. It means, the business plan was changed according to the condition due to the
operation management suggestions.

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 Source : https://www.slideshare.net/PalashGoyal/operations-strategies-of-kfc

The ratio of input to output is termed as productivity. It gives a measure of the efficiency of
the manager as well as the employees. Since the discipline focuses on using the available
resources in the best possible way to achieve end goals, so it improves the overall
productivity.vii

Accurate operation management can save waste of materials and increase productivity in
efficient manner. Through the operation management system, a company can work according to
a work plan and there will be no sudden requirements popping-up to attend. Also, 5s and Kaizen
concepts eliminate unnecessary things and store fresh and nutritious items such as fresh chicken,
eggs, potatoes and etc. Furthermore the concept of TQM (Total Quality Management) leads to
long term success through customer satisfaction and makes it easy to succeed.

The growing demand for customization in quick-service can be attributed to consumer insistence
on a ―me society‖ and operators‘ intense battle for food-share. Today, menu customization
remains a critical business strategy for competing in the fast-food industry.viii

4
According to the purpose of maintain customization, KFC was introduced wide range of
products at competitive prices and increased CSR (Cooperate Social Responsibility) values. To
maintain wide range of products the company needs strong supply chain, good practice in HRM
(Human Resource Management), strong stores and high frequent capacity in production
mechanism.

An organization that provides end-to-end services to the consumer accurately completes many a
different services on one single day by operational management. As a result of the operation
management, the uninterrupted supplying of necessary quantities of required raw materials is
ensured. If, in the end, this operation fails, not only customized requests but also delivery of day-
to-day services would also be completely stalled.

As a result of operational management, waste is reduced. The revenue increases because the
requirements are fulfilled timely and even though income has been rising, the profit has been
rising in comparison to cost-cutting. Furthermore, profits increase as a result of operational
management driven to exploit the existing resources in possible way. As a consequent to high
efficiency and the fast-paced fast service is flying to buy the consumer again. All this leads to
higher incomes and lower costs.

The operations management as the centralized governing mechanism of a company, transform its
role in business operation to various operations such as inventory system, supply chain,
employee relations, warehouse management and etc.

Inventory is one of the most difficult systems in any business. It can determine what you have,
when you have it, and whether your funds and investments are sitting on shelves collecting dust,
or working for you. Operations management oversees inventory systems, which determine how
effectively your inventory is managed.ix

The operation management being the centralized governing body of the company, it controls
every management layer and every step of the production process.

Ex: Operation Management at KFC determines the quantity of raw materials required for the
production process, the storage of those materials, the release, the service and the food
production.

5
It also designates tasks to departments, supervisors and subordinates. Operations management
handles things such as personnel management and training, and performance evaluations or
audits. Staying abreast with efficient documentation procedures and consequential personnel
issues can streamline daily tasks.x

Inventory is one of the most difficult systems in any business. It can determine what you have,
when you have it, and whether your funds and investments are sitting on shelves collecting dust,
or working for you. Operations management oversees inventory systems, which determine how
effectively your inventory is managed. Your inventory control dictates how your inventory
flows. It commands and directs whether or not an employee has products on hand or if customers
are forced to wait on back-ordered items.xi

Ex: Operation management defines the quantity of raw materials released; the quantity of raw
material needed per day and the quantity of the raw materials have to purchase and etc.

Supply chain management is the entire process, from start to finish, detailing how a customer
gets the company‘s product or services. This includes purchasing and procurement, storage,
transportation and delivery.xii Therefore operation management has to decide, coordinate and
manage these steps otherwise the process of production will shattered.

Ex: The operation management will not decide the quantities, deliveries, storing method,
necessity and ordering at right time the whole process of business will collapse. As an example if
customer made an order for 2 chicken buckets with 2 krushers, but stored chicken is not enough
for 2 chicken buckets, then the order will be cancelled. The sense of the example is the operation
management in the company is not capable for doing right decisions at right time. Thus, the
operation management should have properly coordinated with supply chain management in this
context.

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Evaluation of how operations management has an impact to the bottom line of the
organization and its positive implications to increase revenue.

The bottom line refers to a company's net earnings, net profit, net income or earnings per share (EPS).
The reference to "bottom" describes the relative location of the net income figure on a company's income
statement. Bottom line also refers to any actions that may increase/decrease net earnings or a company's
overall profit. A company that is growing its net earnings or reducing its costs is said to be "improving its
bottom line". Most companies aim to improve their bottom lines through two simultaneous methods:
growing revenues (i.e., generate top-line growth) and increasing efficiency (or cutting costs).xiii

Economic bottom line is only partly about the financial profitability of the business. The company
economic capital must be measured in terms of how much of an impact the business has on its economic
environment. The business that strengthens the economy it is part of is one that will help sustain the
economy into the future.xiv It is not uncommon to hear some variation of the phrase, "we are managing to
the bottom line." It is a misnomer. A company may set bottom line profit targets, but circumstances in the
marketplace (and the firm's strategy and operations) ultimately combine to create the revenues and costs
that determine the bottom line.xv

Ex: Every quarter, KFC invests money in food production and consumer financing to cater for food. At
the end of the scheduled financial period, all of these expenses are calculated with all applicable taxes
and other expenses. Then company arrive the bottom line value. It shout be profit or lose.

Therefore lots of companies are striving to deduct unnecessary payments and they try to control financial
usage more than allocated budget. The budget of the company is made by the accounts department. But
each department has to exhibit department expenses. The main duty of the operation management is to
arrange every single step of the business operation in durable and correct way.

Ex: When the stocks are going to end? When we have to purchase new stocks? How much we allocated
for stock purchase? What are the quantities we are going to purchase? What are the methods we stock
our inputs? The operation management has to answer above mentioned type of questions. If the
operation management was arranged every step in the business, then never will occur an overdue
during the business process. That less overdue, proper management decisions and control over
expenditure is pointing bottom line to the sustainability.

The profitable business secret is its strong bottom line. In fact, it has to be implemented new experience
and technology to make strong bottom line of the business.

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Ex: KFC had online order placement system and through the system customer can enjoy delicious KFC
food at his home.

The operation strategies are depending on the existing market competition. As a result of high market
competition in the fast food sector the operation system at KFC must tighter and efficient as possible.

Ex: Burger King, Subway, Pizza Hut, Mac Donalds, Dominos are market competition. To compete with
them KFC have to make efficient methods of operations.

To make profit operation strategy has to concern about several points such as,

1. How much we spread our facilities?

2. How we formulate the supply chain?
3. Nature of the work force
4. Quality assurance
5. Stores and storage

The operation mechanism has to invent durable solution for each and every question which was occurring
during the business process. Operation management has to add value to the customer. It has to be made
customer satisfied and happy. Customers are seeking for the satisfaction more than they were spent to get
the product to the service. Hence the operation mechanism has to be dexterous to add value to the
customers as same as his spent money. To achieve the target company has to provide its customers with
additional at an increase in cost that is perceived to be less than those benefits.

Ex: KFC Vs Mac Donalds restaurants

There are key points to maintain,

1. Cost
2. Quality
3. Delivery
4. Flexibility
5. Service

Through the above mentioned key points company can uplift its productivity and the incensement of the
productivity produce more competitive cost structure for the organization and enable the organization to
offer more competitive prices to its customersxvi.

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 1. Technological productivity

Through the technological productivity company can be gain efficiency, accuracy and the quality of
maintenance.

2. Employee productivity

Under the employee productivity the company can be produce more production in the same time frame.

3. Managerial productivity

Improvement of managerial productivity support improves quality and the quantity of the product,
communication, employee relations and decision making.

Furthermore, to earn more profits the company has to enter to the new markets.

Ex: number of Current KFC outlets in Sri Lanka – 30

To earn more profits the company has to expand outlets network over the country and the company has to
enhance and redevelop the existing products, menu and service due to the global trends and competitors
movements.

9
The service segment is growing to be an important element in every business, attracting more
importance towards having a strong operations management mechanism”.

Service industry is an industry that creates services rather than tangible objects. Goods-producing
industries are agriculture, mining, manufacturing, and construction; each of them creates some kind of
tangible object. Economists divide all economic activity into two broad categories, goods and services.
Service industries include everything else: banking, communications, wholesale and retail trade, all
professional services such as engineering, computer software development, and medicine, nonprofit
economic activity, all consumer services, and all government services, including defense and
administration of justice. A services-dominated economy is characteristic of developed countries. In less-
developed countries most people are employed in primary activities such as agriculture and mining.xvii

Basically, service sector consist 05 components.

1. Hotels and Restaurants

2. Transport, storage & communication
3. Finance, insurance , real estate & business service
4. Public administration & defense
5. Social and Personal service

During the development process of the service industry itself in last decade, a general trend featuring
increasing diversification and sophistication of services. The mechanism functioning behind that trend is
innovation, which can be identified as two types, with one being technical innovation and the other
management innovation. This identification also points to two ways of modernizing traditional services,
that is, technical improvement and management improvement. The former implies that a service provider
such as a service firm can introduce advanced technologies like information technology and high
technology so as to transform its obsolete hardware structure. The latter means that a service provider can
reform its old operational and organizational modes by importing modern management expertise and
specialized talents. These two types of transformation and improvement can be implemented separately or
simultaneously for a specific service provider.xviii

Example: Mac Donald restaurant introduced special break down food menu during the Ramasan season.
It is a management innovation. Online order placement system of KFC is a technological
innovation.

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The advances in new technology in the last decade brought about a major advancement in the service
sector. The use of the new technology was effective and with the use of technical tools, the customer
could get services at home.

Ex: The customer can order anything he wants to eat from KFC through the internet and order will
complete within half an hour.

Internally, the spread of business has accelerated, and in the past decade, many new service providers
have entered new local markets.

Ex: Insurance sector in Sri Lanka – AIA, Fair First and Softlogic were entered to the domestic insurance
market in last decade.

The service provided with the product, which plays a significant role in selling goods. The service
provided at the time of sale or sale directly affects the merchandise markets. Hence Service providers are
more concerning about the service same as goods. Because service which is provided with goods are can‘t
able to satisfied a customer it will directly effect to the sales.

Ex: KFC controversy

Source:https://www.tripadvisor.com/ShowUserReviews-g293962-d5005245-r196706044-KFC_Maharagama-Colombo_Western_Province.html

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This comment was published by a customer of KFC on a website which is guided by travelers and it is
unavoidable that this kind of insight can hurt the existing market in bad way. There was unsatisfied of
food and did not properly study the production process by the outlet management. But the whole
operation management system couldn‘t avoid its responsibility regarding to this controversy. These kinds
of terrible mistakes are spoiling other excellent services which is providing by the KFC and it also offer a
negative feedback of the service of the company. Henceforth, the company have to more consider about
the service same as foods and beverages. Otherwise as a result of current customer trends negative
impacts can ruin a business so easily. So not only the final product but also the services provided by the
company also very important to gathered customers.

The upper-level manager who directs this transformation process is called an operations manager. The job
of operations management (OM), then, consists of all the activities involved in transforming a product
idea into a finished product, as well as those involved in planning and controlling the systems that
produce goods and services. In other words, operations managers manage the process that transforms
inputs into outputs.xix

Source: https://2012books.lardbucket.org/books/an-introduction-to-business-v2.0/s15-operations-management-in-manuf.html

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All manufacturers set out to perform the same basic function: to transform resources into finished goods.
To perform this function in today‘s business environment, manufacturers must continually strive to
improve operational efficiency. They must fine-tune their production processes to focus on quality, to
hold down the costs of materials and labor, and to eliminate all costs that add no value to the finished
product. Making the decisions involved in the effort to attain these goals is the job of the operations
manager. That person‘s responsibilities can be grouped as follows:xx

1. Production planning: During production planning, managers determine how goods will be
produced, where production will take place, and how manufacturing facilities will be laid out.
2. Production control: Once the production process is under way, managers must continually
schedule and monitor the activities that make up that process. They must solicit and respond to
feedback and make adjustments where needed. At this stage, they also oversee the purchasing of
raw materials and the handling of inventories.
3. Quality control: Finally, the operations manager is directly involved in efforts to ensure that
goods are produced according to specifications and that quality standards are maintained.

Ex: KFC Operation Management System

 Production planning: Prior to the every step in the business the company must consider about
the goals get by marketing section. Because they are the one who determine daily, monthly and
annual sales targets. Always the operation has to be suit for the targets and it has to be based on
the target. To achieve the Target the company has to take production methods decisions. The
company has to plan,
1. How many inputs are we going to purchase?
2. What are the needed inputs?
3. Are we standardized or customized our product? and etc.

The task of the operations manager is to work with other managers, particularly marketers, to
select the process that best serves the needs of the company‘s customers. Furthermore to achieve
to Targets Company has to take some facilities decisions. After selecting the best production
process, operations managers must then decide where the goods will be manufactured, how large
the manufacturing facilities will be, and how those facilities will be laid out.xxi

The company has to make site Selection to reduce the production cost.In choosing a location, managers
must consider several factors:

13
  To minimize shipping costs, both for raw materials coming into the plant and for finished goods
going out, managers often want to locate plants close to suppliers, customers, or both.
 They generally want to locate in areas with ample numbers of skilled workers.
 They naturally prefer locations where they and their families will enjoy living.
 They want locations where costs for resources and other expenses—land, labor, construction,
utilities, and taxes—are low.
 They look for locations with a favorable business climate—one in which, for example, local
governments might offer financial incentives (such as tax breaks) to entice them to do business in
their locales.xxii

Purchasing and Supplier Selection is another important section in the decisions making.The process of
acquiring the materials and services to be used in production is called purchasing (or procurement). For
many products, the costs of materials make up about 50 percent of total manufacturing costs. Not
surprisingly, then, materials acquisition gets a good deal of the operations manager‘s time and attention.

As a rule, there‘s no shortage of vendors willing to supply parts and other materials, but the trick is
finding the best suppliers. In selecting a supplier, operations managers must consider such questions as
the following:

 Can the vendor supply the needed quantity of materials at a reasonable price?
 Is the quality good?
 Is the vendor reliable (will materials be delivered on time)?
 Does the vendor have a favorable reputation?xxiii

If a manufacturer runs out of the materials it needs for production, then production stops. In the past,
many companies guarded against this possibility by keeping large inventories of materials on hand. It
seemed like the thing to do at the time, but it often introduced a new problem—wasting money.
Companies were paying for parts and other materials that they wouldn‘t use for weeks or even months,
and in the meantime, they were running up substantial storage and insurance costs. Hence inventory
control is really important in the operation management.xxiv

Production control: In the opinion of Mary Gushing Niles, ―Control is maintaining a balance in
activities towards a goal or set of goals evolved during production planning.‖ Planning only outlines some
course of action whereas control is an execution process involving standardization, evaluation and

14
corrective functions. Thus production control is some scientific procedure to regulate an orderly flow of
material and co-ordinate various production operations to accomplish the objective of producing desired
item. In right quantity of desired quality at the required time by the best and the cheapest method i.e., to
attain highest efficiency in production.xxv

Alternately, production control is the function of management which plans, directs and controls the
material supply and processing activities of an enterprise; so that specified products are produced by
specified methods to meet an approved sales programme. It ensures that the activities are carried in such a
way that the available labour and capital are used in the best possible wayxxvi.

Quality Control: To compete today, companies must deliver quality goods and services that satisfy
customers‘ needs. This is the objective of quality management. Total quality management (TQM), or
quality assurance, includes all the steps that a company takes to ensure that its goods or services are of
sufficiently high quality to meet customers‘ needs. Generally speaking, a company adheres to TQM
principles by focusing on three tasks:

 Customer satisfaction
 Employee involvement
 Continuous improvementxxvii

To provide better service, operation planning, production control & quality control have to be together
and improved.

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Explanation of the importance of continuous improvement for operational excellence using:

• TQM

• Kaizan

• 5s

Operational Excellence is the execution of the business strategy more consistently and reliably than the
competition, with lower operational risk, lower operating costs, and increased revenues relative to its
competitor. It is needed more than ever in today‘s technology driven rapidly changing business models,
which require organizations to undergo end-to-end business transformation. Operational Excellence can
also be viewed as execution excellence.xxviii

Some of the key process methodologies used is Lean Manufacturing, Six Sigma, Kaizen, Hoshin
Planning, Balanced Scorecard etc. However, the focus of Operational Excellence goes beyond the
traditional continuous improvement methods to a long-term change in organizational culture. Companies
in pursuit of Operational Excellence do two things significantly differently than other companies: they
manage their business and operational processes systematically and invest in developing the right
culture.xxix

Operational Excellence manifests itself through integrated performance across revenue, cost, and risk. It
focuses on meeting customer expectation through the continuous improvement of the operational
processes and the culture of the organization. This culture is built upon guiding principles of integrity,
questioning attitude, always problem-solving, daily continuous improvement mind-set, level of
knowledge, teamwork, and process driven.xxx

 Total Quality Management (TQM )

Total Quality Management (TQM) describes a management approach to long-term success through
customer satisfaction. In a TQM effort, all members of an organization participate in improving
processes, products, services, and the culture in which they work.xxxi

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Total Quality Management Principles: The 8 Primary Elements of TQM

Total quality management can be summarized as a management system for a customer-focused

organization that involves all employees in continual improvement. It uses strategy, data, and effective
communications to integrate the quality discipline into the culture and activities of the organization. Many
of these concepts are present in modern Quality Management Systems, the successor to TQM. Here are
the 8 principles of total quality management:xxxii

Source: https://www.smartsheet.com/total-quality-management

1. Customer-focused

The customer ultimately determines the level of quality. No matter what an organization does to foster
quality improvement—training employees, integrating quality into the design process, upgrading
computers or software, or buying new measuring tools—the customer determines whether the efforts
were worthwhile.xxxiii

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2. Total employee involvement

All employees participate in working toward common goals. Total employee commitment can only be
obtained after fear has been driven from the workplace, when empowerment has occurred, and
management has provided the proper environment. High-performance work systems integrate continuous
improvement efforts with normal business operations. Self-managed work teams are one form of
empowerment.xxxiv

3. Process-centered

A fundamental part of TQM is a focus on process thinking. A process is a series of steps that take inputs
from suppliers (internal or external) and transforms them into outputs that are delivered to customers
(again, either internal or external). The steps required to carry out the process are defined, and
performance measures are continuously monitored in order to detect unexpected variation.xxxv

4. Integrated system

Although an organization may consist of many different functional specialties often organized into
vertically structured departments, it is the horizontal processes interconnecting these functions that are the
focus of TQM.

Micro-processes add up to larger processes, and all processes aggregate into the business processes
required for defining and implementing strategy. Everyone must understand the vision, mission, and
guiding principles as well as the quality policies, objectives, and critical processes of the organization.
Business performance must be monitored and communicated continuously.

An integrated business system may be modeled after the Baldrige National Quality Program criteria
and/or incorporate the ISO 9000 standards. Every organization has a unique work culture, and it is
virtually impossible to achieve excellence in its products and services unless a good quality culture has
been fostered. Thus, an integrated system connects business improvement elements in an attempt to
continually improve and exceed the expectations of customers, employees, and other stakeholders.xxxvi

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5. Strategic and systematic approach

A critical part of the management of quality is the strategic and systematic approach to achieving an
organization‘s vision, mission, and goals. This process, called strategic planning or strategic management,
includes the formulation of a strategic plan that integrates quality as a core component.xxxvii

6. Continual improvement

A major thrust of TQM is continual process improvement. Continual improvement drives an organization
to be both analytical and creative in finding ways to become more competitive and more effective at
meeting stakeholder expectations.xxxviii

7. Fact-based decision making

In order to know how well an organization is performing, data on performance measures are necessary.
TQM requires that an organization continually collect and analyze data in order to improve decision
making accuracy, achieve consensus, and allow prediction based on past history.xxxix

8. Communications

During times of organizational change, as well as part of day-to-day operation, effective communications
plays a large part in maintaining morale and in motivating employees at all levels. Communications
involve strategies, method, and timeliness.xl

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  Kaizen

Source: http://leansixsigmadefinition.com/glossary/kaizen/

Kaizen means all personnel are expected to stop their work when they encounter any abnormality and,
along with their supervisor, suggest an improvement to resolve the abnormality. When the improvement
requires personnel outside of the immediate work area, a kaizen burst (or radical process improvement)
event may be useful. A Kaizen burst event should be part of an overall program of continuous
improvement if they are to be successful and for gains to be sustained.xli

With Kaizen management practices, the main priority is given to the manufacturing process, as the
process of achieving results is not less than the final result. The reason for this focus is that imperfect
processes could potentially not lead to achieving the goal. A corresponding task of kaizen is to become a
part of market by improving processes within the organisation instead of pushing products into the
market. One of most important tasks in Kaizen involves improving the quality of work in an organisation
by achieving TQC (total quality control).xlii

The kaizen method is now a base model for other quality improvement methods including: suggestion
systems, automation, small group activities, Kanban system, just-in-time, zero defects, total productive
maintenance, total quality control, etc.xliii

10 Principles of Kaizen

The Kaizen method follows ten specific principles, which are described below:

1. Improve everything continuously.

2. Abolish old, traditional concepts.
3. Accept no excuses and make things happen.
4. Say no to the status quo of implementing new methods and assuming they will work.

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 5. If something is wrong, correct it.
6. Empower everyone to take part in problem solving.
7. Get information and opinions from multiple people.
8. Before making decisions, ask ―why‖ five times to get to the root cause. (5 Why Method)
9. Be economical. Save money through small improvements and spend the saved money on further
improvements.
10. Remember that improvement has no limits. Never stop trying to improve.xliv

 5S

Source :
http://www.andaluciarealestate.info/5s-concept-ppt/5s-lean-workplace-concept-powerpoint-template-sketchbubble-liveable-5s-
concept-ppt/

5S represents Japanese words that describe the steps of a workplace organization process. English
equivalent words are shown in parenthesis

1. Seiri (Sort)
2. Seiton (Straighten, Set)
3. Seiso (Shine, Sweep)
4. Seiketsu (Standardize)
5. Shitsuke (Sustain)

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In simple terms, the five S methodology helps a workplace remove items that are no longer needed (sort),
organize the items to optimize efficiency and flow (straighten), clean the area in order to more easily
identify problems (shine), implement color coding and labels to stay consistent with other areas
(standardize) and develop behaviors that keep the workplace organized over the long term (sustain).xlv

To upgrade the operation excellence the company can practice TQM, Kaizen and 5S strategies. Through
the TQM the company can enhance the quality and productivity in the business organization. TQM aims
to all parties who were involved in the production process. TQM is the approach that puts quality at the
heart of everything done by the operation. Its play a great role in improving productivity, product quality
and reduce manufacturing cost as well.

TQM is really helpful in meeting the market competition. It‘s a review of progress and its help to identify
non-productive activities and waste. Through the TQM the company can cost cut and minimized the
waste and gain a profit via that saving. Although, the strategy of TQM is supporting to maintain the
better quality performance. Hence, if company exercises the TQM it will help to uplift operational
excellence.

Every business aspires for excellence in its business. Operation Excellence demands Lean and Kaizen
thinking. While Lean or Kaizen thinking focuses on waste reduction by making the people capable to
identify waste and remove it. There were two types of waste.xlvi

Visible Waste – waste that can be seen:

When one walks into a shop floor there are many things one can observe with minimal efforts.

- Dirt

- Disorder

- Leaking machines

- Material placed in a disorganized manner

- People using no personal protective equipment‘s and donning uniformsxlvii

These are right there, in front one‘s eyes. The challenge is to observe it and not just ‗see‘ it every day.
When ones start observing; it is said the process of change begins. No observation, no problems; no
problems; no improvements.xlviii

22
Invisible Waste – difficult to see and attack:

What about:

- Unused human potential?

- Poor sharing of information?

- Office related delays…slow or poor decision making, waiting, complex processes . These waste are
also killers, but often disguised. Let me just take the first one. Unused human potential is a
national challenge, let alone it being an organizational challenge. Millions of people are with
fertile brains, but untapped. How do we deal with this? Often in organizations, there is no system
in place to engage with employees to tap their ideas and improvement suggestions. They are
simply asked to follow orders. The going trend is - majority must only act, while a privileged
few will think. How about waste with purchasing or waste in design or R&D process? There are
not readily visible and one must engage tools like process mapping, value stream mapping to get
to the bottom.xlix

Hence, Kaizen is continuous process and it has to be continually implemented. Then it‘s not a hard thing
to achieve operational excellence.

5s concept is a key component of establishing a visual workplace and both apart of kaizen concept. 5s
concept will lead the company to low cost through the minimizing of the waste. On the other hand, it will
help to maintain the better quality of product and service. Because everything arranged according to the
order and it will help to find out things easier. It will lead to produce quick service and it will be safe than
mess. With these positive movements productivity will high and employees are highly satisfied about
them self and these implications lead a company to the high level of operation excellence.

23
 Part B

The organization can use Lean Six Sigma principles to improve the effectiveness of its operations
management in order to stay ahead of competition.

Concept of Six Sigma is a quality management model, initially developed and implemented by Motorola
in 1986 and based on the statistic works of Joseph Juran. The model supplies a set of tools destined to
improve the capacity of the company‘s business processes. The term sigma is a Greek symbol used
statistically to measure processes‘ deviations referent to the optimal.The central idea of the model is that
it is possible to measure the defects quantity in a certain process, so it is also possible in a systematic way
how these are eliminated, approaching them of the ―zero-defects‖. It‘s, therefore a methodology that
concentrates in the prevention of defects through the use of statistic tools, being applicable to any process
inside the organization.l This cycle includes:

Define – The process begins when the project team creates a charter that defines the scope of the project,
who is on the team, the process the team will be improving and the project‘s objective. The team gathers
customer data and uses this information to determine the critical to quality (CTQ) customer requirements.
The team will then focus on these CTQsli.

Measure – This phase begins by selecting the key measurement for the project that captures the output of
the process and connects it to customer needs. Data is then collected on the process and analyzed for
variation. Variation in the process is what Six Sigma seeks to eliminate. This data provides a process
Sigma, or the current amount of variation in the process. The goal is to reduce variation until the process
meets the Six Sigma standard.lii

Analyze – This phase seeks to identify the possible causes of variation in the process. This phase uses
process mapping and additional data gathering to develop hypotheses about the potential causes of
variation. These hypotheses can be used to determine the root causes of process variation. This phase
includes quantifying the financial benefit of eliminating defects from the process.liii

24
Improve – This phase focuses on finding solutions to addressing root causes of problems and reducing or
eliminating process variation. This phase requires creative thinking and constant refining of the solution
through analysis. When a solution is developed, it is tested with a small-scale pilot program and if it is
financially viable, it is applied to the entire process.liv

Control – This phase documents the new process and its controls. The project team also creates a
timetable for implementing the plan. After the process is implemented, this project team will continue to
monitor it for several months to ensure that the new process meets productivity and financial
expectations. Finally, the team assesses what it learned during the project and looks for other areas in
which this learning can be applied.lv

Source: https://www.6sigma.us/wp-content/uploads/2017/07/Lean-Six-Sigma.jpg

The aim of ―Lean‖ is to achieve more with less - be it less human efforts, less machines, less time, or less
space. The following are the latent benefits of Lean that pave the path for organizational efficiencies:

 Decrease in lead time

 Enhanced throughput
 Lower requirement for inventory or idle stock
 Reduction of wastages, thus cost

25
  Improved engagement of employee
 Enhanced level of customer satisfaction
 Lower cost of implementation lvi

The main functionality of Six Sigma projects is to improve operational effectiveness and efficiency. A
continual improvement of operational effectiveness and efficiency is vital in order to avoid competitive
disadvantage, however it is all but straightforward to convert the results into sustainable profitability. It is
more about staying in the race than about getting ahead. In order to use Six Sigma strategically, a
company should do more than just conduct Six Sigma projects by the book, but develop the competencies
that the programme can bring to an organization. These competencies – disciplined and effective problem
solving and decision behaviour – have the potential to be a source of competitive advantage, when
integrated with a company's strategy.lvii

In the global arena lots of multinational companies are practicing six sigma in efficient way and they are
gaining more profit after the implementation of the six sigma.

Ex: Motorola – saved $1.5 billion in the first ten years in six sigma.

The other sense of the example is if Motorola does not implement six sigma they will lose $1.5 billion
within 10 years in vain. Six Sigma, on the other hand, targets the following types of waste materialized in
costs:

 rework;
 scrap;
 excessive cycle times and delays;
 unsatisfied customers with the goods and/or services provided;
 cost of opportunities lost due to lack of resources to take advantage of;
 poor quality.
lviii

Furthermore, company can reduce waste with the implementation of e six sigma such as correcting, over
production, unnecessary process, underutilizing people, motion and etc. Without the proper mechanism
like six sigma employees are not motivated to work. Through the process of six sigma every employee
had his own tasks to complete in responsible manner. Naturally it will reduce waste and cost. Eventually,
it will lead a company to maintain strong bottom line. On the other hand the quality of the product and

26
service may be poor. But with six sigma customer can gain a more effective service for cheap price.
Hence, six sigma is the essential contribution to the business.

The operations management can impact the business performance at each stage of the Product life
cycle.

Source: http://virtualrealitygames.xyz/virtual-realitys-life-cycle-still-rising/

The product life cycle has 4 very clearly defined stages, each with its own characteristics that mean
different things for business that are trying to manage the life cycle of their particular products.lix

Introduction Stage – This stage of the cycle could be the most expensive for a company launching a new
product. The size of the market for the product is small, which means sales are low, although they will be
increasing. On the other hand, the cost of things like research and development, consumer testing, and the
marketing needed to launch the product can be very high, especially if it‘s a competitive sector.lx

Ex: searching for new French fries recipes, testing and launch the product.

Growth Stage – The growth stage is typically characterized by a strong growth in sales and profits, and
because the company can start to benefit from economies of scale in production, the profit margins, as

27
well as the overall amount of profit, will increase. This makes it possible for businesses to invest more
money in the promotional activity to maximize the potential of this growth stage.lxi

Ex: Large numbers of customers are buying French fries from the KFC after the product launch.

Maturity Stage – During the maturity stage, the product is established and the aim for the manufacturer
is now to maintain the market share they have built up. This is probably the most competitive time for
most products and businesses need to invest wisely in any marketing they undertake. They also need to
consider any product modifications or improvements to the production process which might give them a
competitive advantage.lxii

Ex: Pizza hut is introducing new flavored French fries for low cost.

Decline Stage – Eventually, the market for a product will start to shrink, and this is what‘s known as the
decline stage. This shrinkage could be due to the market becoming saturated (i.e. all the customers who
will buy the product have already purchased it), or because the consumers are switching to a different
type of product. While this decline may be inevitable, it may still be possible for companies to make some
profit by switching to less-expensive production methods and cheaper markets.lxiii

Ex: KFC French fries becoming marginalized in the market.

Extension strategies extend the life of the product before it goes into decline. Again businesses use
marketing techniques to improve sales. Examples of the techniques are:

1. Advertising – try to gain a new audience or remind the current audience

2. Price reduction – more attractive to customers
3. Adding value – add new features to the current product, e.g. video messaging on mobile phones
4. Explore new markets – try selling abroad
5. New packaging – brightening up old packaging, or subtle changes such as putting crisps in foil
packets or Seventies music compilations

Benefits of Product Lifecycle Management

 Improved product quality and reliability

 Reduced prototyping costs
 More accurate and timely RFQs
 Quick identification of sales opportunities and revenue contributions
 Savings through the re-use of original data

28
  A framework for product optimization
 Reduced waste
 Improved ability to better manage seasonal fluctuation management
 Improved forecasting to reduce material costs
 Maximize supply chain collaborationlxiv

Using examples of your choice, explain as to how Strategic Supply Chain Management can deliver a
Sustainable Competitive Advantage?

Competitive advantages are conditions that allow a company or country to produce a good or
service of equal value at a lower price or in a more desirable fashion. These conditions allow the
productive entity to generate more sales or superior margins compared to its market rivals.
Competitive advantages are attributed to a variety of factors including cost structure, branding,
the quality of product offerings, the distribution network, intellectual property and customer
service.lxv

Source: http://ecsm.listedcompany.com/competitive_advantage.html

29
To create a competitive advantage, you've got to be clear about these three determinants.

Benefit: What is the real benefit your product provides? It must be something that your customers truly
need and that offers real value. You must know not only your product's features, but also its advantages
how they benefit your customers. That means being constantly aware of new trends that affect your
product, especially new technology. For example, newspapers were slow to respond to the availability of
free news on the internet. They thought people were willing to pay for news delivered on a piece of paper
once a day. lxvi

Target market: Who are your customers? What are their needs? You've got to know exactly who buys
from you, and how you can make their life better. That‘s how you create demand, the driver of all
economic growth. Newspapers' target market drifted to older people who weren't comfortable getting
their news online. lxvii

Competition: Have you identified your real competitors? That's more than just similar companies or
products. It includes anything else your customer could do to meet the need you can fulfill. Newspapers
thought their competition was other newspapers until they realized it was the internet. They didn't know
how to compete with a news provider that was instant and free.lxviii

To be successful, the company needs to be able to articulate the benefit and provide to the target market
that's better than the competition. That's the competitive advantage.

Consumers often think that a product is simply the physical item that he or she buys. In order to actively
explore the nature of a product further, let‘s consider it as three different products – the CORE product,
the ACTUAL product, and finally the AUGMENTED product. This concept is known as the Three
Levels of a Product.lxix

Source: http://www.marketingteacher.com/three-levels-of-a-product/

30
The CORE product is NOT the tangible physical product. You can‘t touch it. That‘s because the core
product is the BENEFIT of the product that makes it valuable to you. So with the car example, the benefit
is convenience i.e. the ease at which you can go where you like, when you want to. Another core benefit
is speed since you can travel around relatively quickly.lxx

The ACTUAL product is the tangible, physical product. You can get some use out of it. Again with the
car, it is the vehicle that you test drive, buy and then collect. You can touch it. The actual product is what
the average person would think of under the generic banner of product.lxxi

The AUGMENTED product is the non-physical part of the product. It usually consists of lots of added
value, for which you may or may not pay a premium. So when you buy a car, part of the augmented
product would be the warranty, the customer service support offered by the car‘s manufacturer and any
after-sales service. The augmented product is an important way to tailor the core or actual product to the
needs of an individual customer. The features of augmented products can be converted in to benefits for
individuals.lxxii

Every company wants to grow their business, yet few know how to sustain it for the long-term or look
beyond the next quarterly or yearly report. Growing a business requires the right intellectual capital,
carefully selected strategic partnerships, and products and/or services with strong marketplace demand.
Beyond these fundamentals, sustaining growth requires a strong operational foundation – to reduce the
risks to the business over time.lxxiii

Prior to build a sustainable business, company has to take action in support of the following six factors.

1. Top Talent - Without the right people, a business can‘t grow and it certainly makes it difficult to
sustain momentum over time.
2. Operational Efficiencies - Efficiencies drive costs down and embed a mindset within the
workplace culture that makes people sensitive to costs and ways to streamline how the
organization communicates, operates and connects the dots of opportunities. This helps to assure
that activities within the organization are in alignment with the needs of the business to create and
sustain growth.
3. Prospecting the right client - Entrepreneur is no longer just a business term anymore, it‘s a way
of life. The company must always embrace an entrepreneurial attitude to see and seize the right
opportunities – especially those previously unseen or that others don‘t see at all. This is why the
company must embrace an entrepreneurial spirit when prospecting the right clients –to assure the
business not only grows, but sustains itself over time.lxxiv

31
 4. Sound Decisions making - Problem solving is the essence of what leaders exists to do. As
leaders, the goal is to minimize the occurrence of problems – which means we must be
courageous enough to tackle them head-on. We must be resilient in our quest to create and sustain
momentum for the organization and people we serve.
5. Great leadership - The most successful leaders are instinctual decision makers and thus have the
circular vision to see opportunity in everything. Having done it – made decisions – so many times
throughout their careers, great leaders will become immune to pressure situations and extremely
intuitive about casting strategic, long-term plans for the future.
6. Don’t be afraid to grow - To sustain growth, you must have the mindset of embracing risk as
your best friend. The moment that employees are not encouraged sharing their ideas and ideals, it
becomes difficult to take ownership of the needs of the business – and the marketplace quickly
begins to pass you by. Sustaining growth requires you to share your momentum with others. It
demands that you have the best interests of others on your team, and colleagues throughout the
organization, at heart.lxxv

The main goal of effective logistics and supply chain management is providing of Sustainable
Competitive Advantage. The foundations for success in the marketplace are numerous, but a simple
model is based around the triangular linkage of the company, its customers and its competitors – three-
way relationship, while leveraging the effect of the experience curve.lxxvi

Seeking a sustainable competitive advantage has become the concern of every manager who is alert to the
realities of the marketplace. It is no longer acceptable to assume that good products will sell themselves,
neither is it advisable to imagine that success today will carry forward into tomorrow, without assuring
sustainable competitive advantage.lxxvii

32
End Notes

i
https://myassignmenthelp.com/free-samples/operation-management-kfc
ii
https://www.investopedia.com/terms/o/operations-management.asp
iii
https://myassignmenthelp.com/free-samples/operation-management-kfc
iv
Ibid
v
Ibid
vi
Ibid
vii
https://www.mitsde.com/Blog/importance-of-operations-management/
viii
https://soranews24.com/2016/11/22/this-kentucky-fried-chicken-day-we-investigate-the-rumored-custom-
ordering/
ix
https://smallbusiness.chron.com/operations-management-improve-efficiency-business-operation-80747.html
x
https://smallbusiness.chron.com/operations-management-improve-efficiency-business-operation-80747.html
xi
Ibid
xii
Ibid
xiii
https://www.investopedia.com/terms/b/bottomline.asp
xiv
https://econation.co.nz/financial-bottom-line/
xv
https://www.thebalancecareers.com/understanding-the-bottom-line-in-business-2275163
xvi
https://www.slideshare.net/richieb93/the-relationship-between-operational-management-and-business-profit
xvii
https://www.britannica.com/topic/service-industry
xviii
https://chinafinanceandeconomicreview.springeropen.com/articles/10.1186/2196-5633-1-3
xix
https://2012books.lardbucket.org/books/an-introduction-to-business-v2.0/s15-operations-management-in-
manuf.html
xx
ibid
xxi
Ibid
xxii
Ibid
xxiii
Ibid
xxiv
Ibid
xxv
http://www.yourarticlelibrary.com/production-management/production-control-definition-necessity-objectives-
and-levels/27924

33
xxvi
Ibid
xxvii
https://2012books.lardbucket.org/books/an-introduction-to-business-v2.0/s15-operations-management-in-
manuf.html

xxviii
http://insights.btoes.com/resources/what-is-introduction#What_is_Operational_Excellence

xxix
Ibid
xxx
ibid
xxxi
http://asq.org/learn-about-quality/total-quality-management/overview/overview.html
xxxii
ibid
xxxiii
ibid
xxxiv
ibid
xxxv
Ibid
xxxvi
Ibid
xxxvii
Ibid
xxxviii
ibid
xxxix
ibid
xl
ibid
xli
http://leansixsigmadefinition.com/glossary/kaizen/
xlii
https://www.kanbanchi.com/what-is-kaizen
xliii
Ibid
xliv
Ibid
xlv
http://leansixsigmadefinition.com/glossary/5s/
xlvi
https://in.kaizen.com/blog/post/2015/03/24/operational-excellence-for-business-excellence-the-kaizen-
way!.html
xlvii
Ibid
xlviii
Ibid
xlix
ibid
l
http://knoow.net/en/economics-business/management/six-sigma-model/

li
https://www.sixsigmadaily.com/six-sigma-the-non-complicated-definition/

34
lii
Ibid

liii
Ibid

liv
Ibid

lv
Ibid

lvi
https://www.greycampus.com/blog/quality-management/costs-and-efficiencies-in-lean-six-sigma

lvii
https://www.tandfonline.com/doi/abs/10.1080/14783360500528221

lviii
http://www.management.ase.ro/reveconomia/2011-2/26.pdf

lix
http://productlifecyclestages.com/

lx
Ibid

lxi
Ibid

lxii
Ibid

lxiii
Ibid

lxiv
https://www.investopedia.com/terms/p/product-life-cycle-management.asp

lxv
https://www.investopedia.com/terms/c/competitive_advantage.asp

lxvi
https://www.thebalance.com/what-is-competitive-advantage-3-strategies-that-work-3305828

lxvii
Ibid

lxviii
Ibid

lxix
http://www.marketingteacher.com/three-levels-of-a-product/

lxx
http://www.marketingteacher.com/three-levels-of-a-product/

35
lxxi
http://www.marketingteacher.com/three-levels-of-a-product/

lxxii
http://www.marketingteacher.com/three-levels-of-a-product/

lxxiii
https://www.forbes.com/sites/glennllopis/2015/09/29/top-6-ways-to-sustain-business-growth/#61033c5b67ee

lxxiv
https://www.forbes.com/sites/glennllopis/2015/09/29/top-6-ways-to-sustain-business-growth/#61033c5b67ee
lxxv
Ibid
lxxvi
http://www.biz-development.com/SupplyChain/6.2.Sustainable-Competitive-Advantage.htm
lxxvii
Ibid

36