Executive Summary
The purpose of this paper is to provide an overview of operations and information management and related concepts. The description of operations and information management is informed by literature review. The influences made by operations management on different spheres are discussed. In addition, the researcher critically analyses the external and internal factors which affect the manufacturing process design at the smartphone division of Lenovo Group Ltd. The impact of five operational performance objectives on process design and layouts is also discussed in detail.
Introduction and Background
The purpose of every business is to produce some kind of product or service. Competition prompts companies to maximise the use of assets and develop such business processes which will allow them to deliver their products or services to customers in the most efficient way possible. Those companies which fail to commit to the idea of constant process improvement are bound to find themselves at a disadvantage.
The field of corporate management is dynamic and reflects the responsive nature of business (Ates & Bititci 2011, p. 5601). The changing nature of business means that organisations are required to constantly deliver innovative responses through the optimisation of business operations and the implementation of new, more efficient business practices (Ates & Bititci 2011, p. 5601). Because of this fact businesses came to understand the importance of operations management in improving organisational performance.
The concept of operations management is concerned with the processes designed to deliver products and services to customers (Slack, Chambers & Johnson 2010, p. 2). Naturally, due to the fact that a variety of companies deliver different products and services in specific business environments, the design of operations varies. A number of internal and external factors influence process design, operations management, and development. This paper seeks to address the issue of operations and information management and the variables which influence the design of operations. The researcher critically discusses the main factors that influence the manufacturing process design at the smartphone division of Lenovo Group Ltd. In addition, the role of the five Operational Performance Objectives is discussed in decision-making associated with process design and layouts.
The Overview of Operations Management Theory
Operations management is a concept that describes the activity of managing the processes between the production of a product and its delivery to the customer (Slack, Chambers & Johnson 2010, p. 4). Service operations management addresses the same processes in the service industry.
In its essence, operations management is concerned with managing a business process. A business process can be defined as an established pattern of activities followed to produce a certain outcome (Forster 2006, p. 4). A business process design may have variability, some internal or external factor which impacts the design of the process. An example of variability may be the delay of shipment with raw materials used in production. The greater the variability is, the bigger the impact on process development is.
There are several general approaches to process management. In the manufacturing industry, the following approaches are outlined: project, jobbing, batch, mass, continuous process. In the service industry, the following approaches are defined: professional services, service shops, and mass services (Slack, Chambers & Johnson 2010, p. 665).
The layout of an operation can be defined as the allocation of resources and tasks, which happens during the production and delivery of a product or service (Slack, Chambers & Johnson 2010, p. 179). Several layout types are defined by the researchers. These include: fixed-position, functional, cell, and product layout (Slack, Chambers & Johnson 2010, p. 180).
The concept of operations management is directly connected to the operations function of an organisation (Slack, Chambers & Johnson 2010, p. 4). Every company produces some sort of output, be it a product or service, and as such, the operations function is inherent to all businesses. Operations management has direct implications for business profitability and sustainability. The continuous effort towards refining the design of operations will allow the company to stay ahead of the competition and therefore, stay in business as long as the improvement is made.
Due to the increasing importance of technology in business operations, the concept of information management was developed to address organisational activity in the field of information technology (Slack, Chambers & Johnson 2010, p. 212). Information management is concerned with the design of processes established to allow storage, management, and sharing of information within the organisation. A broader definition of operations management includes technical and information systems activities as part of the operations management (Slack, Chambers & Johnson 2010, p. 5).
Most today’s businesses depend on the flow of information between various stakeholders: the employees, the public, other organisations, etc. Effective information management is vital to allow for timely and secure management of information within organisations. Such management is aimed at establishing the infrastructure and necessary software solutions intended to maximise business efficiency through collecting, storing and analysing operations data. With the shift towards integrated communications, information management plays an important role in assisting a company in creating and sustaining integrated communication on different operational levels. Integrated communication requires cross-functional planning and monitoring, which is impossible without proper information management. Depending on the size and nature of business, information management may be concerned with setting up a simple Intranet network, or implementing a set of integrated business-management applications known as ERP.
Supply chain management is a part of operations management, and it refers to the organisation of all supply chain activities, with the goal of creating the best customer value and competitive advantage (Boyer & Verma 2009, p. xvii). A supply chain is “the means by which a company brings its products or services to the marketplace” (Straus 2012, par. 1). The management of the company is responsible for the creation of a corporate strategy, a broad set of policies and plans which coordinate operational goals. Operations managers develop operations strategy and an efficient supply chain strategy in order to achieve certain strategic or competitive priorities.
The Impact of Operations Management
Operations management is critical for every organisation activity, successful maintenance of which ensures that the company will perform decently due to the appropriate production and redesign of business processes (Slack, Chambers & Johnson 2010, p. xix). It has an enormous impact on various spheres such as decision making, customer satisfaction and loyalty, and overall performance.
As operations management deals with the administration of various activities, it presupposes the necessity to formulate strategies for their maintenance. It is tightly connected with such specific topics as scheduling, planning, or control. Operations management is targeted at finding the most appropriate and useful solutions so that they incline to the main objective functions. In this way, duration, cost or usage of a particular product is taken into consideration when making a decision. Coming to right conclusions, managers align those business activities that should be accomplished with suitable steps and characteristics. When management step is failed, no well-grounded decisions can be made.
Customer satisfaction is also likely to be affected by operations management. In this way, it can depend on the way the product or service is delivered to the client. The most vivid example can be the duration of the waiting time. When clients expect to obtain something, they tend to be positively approached initially, but delays in the distribution are likely to cause problems. The speed of the delivery is a part of operations performance that depends on management. Professionals are to pay enormous attention to the speed, dependability, and quality of their products and services if they are willing to ensure customer loyalty. Managers’ decisions, in this way, can attract more clients and make them satisfied or lead the company to the bankruptcy because of client attrition.
In general, it is considered that operations management practices can substantially improve organisational performance through the procedures and methodological solutions that are maintained on the shop floor. Thus, managers are to utilise appropriate approaches and specific methodologies that deal with all spheres of their business to be able to solve different kinds of problems. Processing, warehouse and material management tend to be the most critical elements in this framework. For example, World Class Manufacturing approach should be used when considering workplace maintenance while Total Quality Management should focus on specific tools that provide an opportunity to ensure high quality of products and their delivery (Battistoni et al. 2013, p. 3).
All in all, operations management is expected to enhance quality, reduce production time, improve human resources management, simplify accounting, increase profits, and reduce stocks.
Company Information
Lenovo Group Ltd. is a Chinese personal technology company, one of the biggest personal computer vendors in the world. In addition to personal computers, Lenovo produces a variety of other technology products, including servers, smart televisions and mobile devices such as smartphones and tablets. Lenovo has a growing global presence and currently operating in over 160 countries around the globe. Lenovo is pursuing the strategy of growth through merger and acquisition. Recently, Lenovo purchased well-known American technology company Motorola.
The focus of this paper is the operations management of the smartphone division of Lenovo Group Ltd. The smartphone division manufactures Android smartphones under brands Lenovo and Motorola. Lenovo uses vertical integration to acquire greater control over “product development and supply chain operations” through owned manufacturing capabilities (“About Lenovo” n.d., para. 5). This business model allows the company to remain competitive in one of the most competitive industries – smartphone business.
Currently, the company is number four smartphone manufacturer in the world (“About Lenovo” n.d., para. 7). The company’s mission is to become “the leading personal technology company in the world” (“About Lenovo” n.d., para. 8).
The manufacturing process of Lenovo smartphones is done by the traditional method of production line and includes the following steps:
- production of motherboards and other necessary components;
- quality testing of components produced in-house;
- assembly of smartphones;
- testing of smartphones;
- packaging of smartphones;
- storage and delivery.
Factors which Influence the Manufacturing Process Design
Lenovo applied operations and information management to establish an efficient production process. The design of the manufacturing process at Lenovo is dictated by the need to produce a large volume of products. The type of manufacturing process used at Lenovo is the mass process since the company produces a limited number of smartphones in large volumes. The need for high-volume production which is associated with a relatively low degree of product variety necessitates a repetitiveness of process designs, and the development of a core process which remains largely unchanged with the introduction of new products (Slack, Chambers & Johnson 2010, p. 93). The need for high-volume production with little product variability is the main internal factor which influences the design of the company’s operations.
Mobile division of Lenovo produces smartphones, and it has to establish a supply chain to purchase those components which are not manufactured in-house and create and maintain facilities where these components and smartphones are stored. Warehouses and necessary infrastructure are used by manufacturing firms like Lenovo to store goods produced in advance and sustain a steady supply of smartphones. As such, Lenovo has to establish and maintain storage facilities and organise the delivery of its products to customers. This is another internal factor which dictates the way manufacturing process is organised.
In addition to internal factors, business settings have a profound effect on the requirements established for operations and information management (Slack, Chambers & Johnson 2010, p. 11). In the case of the smartphone division of Lenovo, among the external factors the most important ones are demand fluctuations, rapidly developing smartphone technology, rising quality expectations, and increased price competition, as well as the infrequent introduction of new products. These factors prompted Lenovo management professionals to develop innovative responses to the changing business conditions.
Since Lenovo is a manufacturing company, is has to produce the right volume of smartphones to correspond to the customers’ demand. As such, Lenovo has to adjust demand to fit available production and storage capacity. In this regard, Lenovo uses lean approach to establishing a demand-driven supply network (O’Marah n.d., para. 2). The model of lean thinking implies achieving greater efficiency by eliminating waste, i.e. such practices or activities which negatively affect business performance, and use lean principles to creating better customer value. One of this principles is the adjusting of production to meet demand.
The company uses “an end-to-end value chain approach, with hard-line control over at least sourcing, manufacturing, logistics and planning” to meet supply and demand (O’Marah n.d., para. 2). Lenovo’s supply chain includes an expansive infrastructure, which is leveraged to develop new products using existing logistics and IT solutions and immediately affects the company’s operating and financial performance. Lenovo expands its supply chain management to various existing locations as part of its business strategy. The company focuses on the developing markets outside Chine and invests in the infrastructure in this region (“About Lenovo” n.d., para. 5).
Smartphone technology has been developed rapidly with new, innovative products presented every one or two years. This fact means that smartphone manufacturers have to establish such production process which can remain largely unchanged with the introduction of new smartphone models. Lenovo uses the production line method of mass production of smartphones and components, which means that the company can relatively quickly produce a supply of new models to respond to changes in consumer preferences. The repetitive design of Lenovo smartphones is another measure taken by the company in response to the rapidly developing smartphone technology. Such design allows the company to introduce new smartphone models with better characteristics with minimum design changes and using the same production processes.
The primary goal of any business in a competitive industry is to find a competitive advantage and establish it through operations. The smartphone market is a ferociously competitive one with a number of technology companies offering the same or similar products locally and globally. Due to the competitive nature of this industry, the manufacturers have a limited ability to regulate prices. The pressure from Chinese manufacturers which operate at very low gross margins necessitates using all possible means to keep costs of production low. This is one of the factors which influence the design of Lenovo manufacturing process. In order to contain costs, the company produces smartphones in large volumes and at least partially uses components manufactured in-house. Both of these strategies allow the company to cut production costs through standardisation and vertical integration of components supply.
Customer-induced variability has an effect on the design of the manufacturing process at Lenovo. If customers do not buy Lenovo smartphones, the company will have to cease the production to limit financial losses. If customers buy the company’s smartphones but are not satisfied with their quality, they are likely to penalise the company and Lenovo will have to make some changes to its production pipeline. As such, Lenovo pays special attention to quality control and performs extensive tests on all of its smartphones.
Five Operational Performance Objectives and Process Design
The operational performance focuses on five main objectives that are to be considered by all organisations that are willing to achieve success. However, managers are free to choose which one should be emphasised more than others depending on the company’s peculiarities.
Professionals tend to agree that quality is the most significant determinant of success. It aligns with the customer needs and ensures the stability of the product or service. Lenovo realises such tendencies and emphasises that customer satisfaction is critical to it. That is why it ensures high quality of all produces devices and provided services in the framework of its strategy (“About Lenovo” n.d., para 9). Quality is an integral element that is never ignored. Lenovo aligns it with affordable prices and attracts clients in this way.
The time of the product delivery is critical because it has enormous influence on the customer satisfaction and loyalty. It addition to that, it can affect the quality of the product in some cases. Speed also deals with the time needed for research and development, as it influences the way a company responds to customer needs and requirements. Even though this aspect is not as critical as quality for Lenovo, the organisation does its best to improve supply chain operations and ensure their efficiency through the development of appropriate strategies.
Dependability presupposes customers’ dependency on the company and its products. It can be increased through the on-time product delivery and its correspondence to customer expectations. Even though this objective is not directly discussed by Lenovo, it develops response-time targets for the similar purposes, which ensures stability.
Flexibility is vital for an organisation that is willing to attract diverse populations and to be able to respond to any changes. It presupposes readiness to change and adapt that is often rejected by the staff. For Lenovo, flexibility is one of the main objectives. The company does its best to meet the needs of its clients so it provides a wide range of products that can appeal almost to everyone (“About Lenovo” n.d., para. 23). It also gathers customer feedback to be proactive and give the clients what they want to obtain.
Defining different cost for products, organisations receive an opportunity to satisfy more clients. Due to the great number of offerings, Lenovo can state various unit costs so that all people can afford something to their liking.
In this way, operational performance objectives determine decisions that Lenovo makes in the framework of process design and layout. Volume, the variety of products, and their cost alter to align with customer needs and organisational goals. Quality, flexibility and cost are those critical objectives that are emphasised by Lenovo and form its offerings.
Conclusion
Operations and information management are essential to business’ success and development. Nowadays, competition and economic conditions require businesses to be committed to process improvement in order to respond to market changes. Operations and information management are necessary to deliver products and services to consumers.
Technology company Lenovo established efficient operations management to gain competitive advantage and remain profitable in a highly competitive smartphone market. Among the factors, which influenced the design of Lenovo’s manufacturing processes, are high production volumes, the variability in supply and demand, rapidly developing smartphone technology, rising quality expectations, and increased price competition, as well as the infrequent introduction of new products.
Operations management professionals play an important role in establishing a corporate strategy and a set of performance objectives to drive the company forward. With performance objectives defined, operations management professionals adjust the operating environment to accomplish them. Operational performance objectives are necessary for businesses to improve their performance and remain competitive.
References
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Battistoni, E, Bonacelli, A, Colladon, A & Schiraldi, M 2013, ‘An analysis of the effect of operations management practices on performance’, International Journal of Engineering Business Management, vol. 5, no. 1, pp. 1-11.
Boyer, K & Verma, R 2009, Operations and Supply Chain Management for the 21st Century, Cengage Learning, Boston.
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O’Marah, K n.d., Lenovo: Doing everything right to be demand-driven, Web.
Slack, N, Chambers, S & Johnson, R 2010, Operations management, Prentice Hall, Upper Saddle River.
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