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Operation Risk Management

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Before this assignment, I explored production planning, control and scheduling methods, including MRP alternatives. As we compared these various methods, you likely noticed that some methods have inherent risks for certain types of organizations and/or operational sectors. Moreover, these risks can lead to operations management failures, but such is only the case if said risks are not effectively managed, and part of this effectiveness is knowing the reasons for potential failure.

At first glance, many might say it is better to avoid these risks altogether, and sometimes this is true, but there are some risks worth taking. The question is how does one decide which risks are worth taking and which are not? In operations management, managers must continually assess risks in order to answer this question and look for ways to reduce the negative effects of potential failures.

Question:  In 400 to 500 wards, examine how to avoid and alleviate failure in operations management under the following heading

  • The most common reasons for operations management failure as necessary.
  • Methods for successfully decreasing the chances of failure.
  • Use a practical example from your experience or find appropriate case from external sources e.g Mark Zuckerberg.

Note: All reference should be Harvard referencing and cited in the body of the write up.

PRINTED BY: Bukola Fasalojo <[email protected]>. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. 18 Operations improvement Key questions Why is improvement so important in operations Management? What are the key elements of operations improvement? What are the broad approaches to managing improvement? What techniques can be used for improvement? INTRODUCTION Even when an operation’s strategy is set, its design finalized and its deliveries planned and controlled, the operations manager’s task is not finished. All operations, no matter how well managed, are capable of being improved. In fact, in recent years the emphasis amongst operations professionals has shifted markedly towards making improvement one of their main responsibilities. In this part of the book we treat improvement activities in three stages. First, this chapter looks at the elements commonly found in various improvement approaches, examines four of the more widely used approaches, shows how these approaches fit together, then illustrates some of the techniques which can be adopted to improve the operation. Second, Chapter 19 looks at improvement from another perspective, that is, how operations can improve by managing the risks of getting worse. Finally, Chapter 20 looks at how improvement activities can be organized, supported and implemented. These three stages are interrelated as shown in Figure 18 . 1 . Figure 18.1 Operations improvement 578 Operations Management, 7th Edition Page 1 of 33
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PRINTED BY: Bukola Fasalojo <[email protected]>. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. Check and improve your understanding of this chapter using self-assessment questions and a personalized study plan, a video case study, and an eText – all at www . myomlab . com . OPERATIONS IN PRACTICE Delivering global optimization at TNT 1 When you are in the business of express parcel delivery, operations improvement is not an option; it’s a necessity if you are going to survive. Customers tend to be less than understanding if their package is late, or, worse, doesn’t arrive at all. Costs, especially fuel, are on a rising curve. Competitors are getting better all the time. Setting up a global network of hubs and routes takes immense amounts of capital, and because global networks are expensive to maintain, demand has to be kept high just to break even. In addition, increasingly society expects such companies to reduce their carbon emissions. So it’s a ‘no brainer’: delivery operations must continually be reducing costs, improving levels of service to delight customers, and deploying its resources in a manner as close to optimum as possible. This is why TNT express started the Global Optimization Programme (known as the GO Programme) to optimize its complete logistic chain. Within this programme TNT Express aims to improve how it makes vehicle routing, hub operations, scheduling and customer service decisions all over the world by sharing best practices of the different businesses and by developing its improvement methods. TNT Express is a package delivery service with 80,000 employees, headquartered in the Netherlands, which operates air and road networks in Europe, China, south America, the Asia-Pacific region and the middle east. Although the company had been achieving broadly acceptable cost and service levels of performance for a number of years, by 2005 the company realized that it was not making full use of the type of analytical quantitative modelling tools that its competitors, such as Federal express and Ups, had been using for years. It became clear that TNT Express was very late in adopting such techniques by the standards of competitor companies. Yet some parts of the company had been engaged in using analytical improvement tools. In Italy, TNT Express had launched its drive to optimize how it used the domestic road network to improve operational performance. Using the success in Italy as a foundation, TNT Express decided to formalize the company’s improvement efforts by establishing its Global Optimization (GO) project. Just as important was the company’s decision that improvement through the use of analytics must not be relegated to the sidelines as the preserve of a few specialists, but that it should be at the core of the business. However, specialist help would clearly be needed, so the company partnered with ORTEC, providers of advanced planning and optimization software solutions. With experience in providing solutions that set out to optimize the kind of activities at the heart of TNT Express’s operations, such as fleet routing and dispatch, vehicle and pallet loading, workforce scheduling, delivery forecasting, and network planning, ORTEC helped provide the ‘analytical muscle’ needed for such complex operations. 578 579 Operations Management, 7th Edition Page 2 of 33
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PRINTED BY: Bukola Fasalojo <[email protected]>. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. 19 Risk management Key questions What is risk management? How can operations assess the potential causes of, and risks from, failure? How can failures be prevented? How can operations mitigate the effects of failure? How can operations recover from the effects of failure? INTRODUCTION No matter how much effort is put into improving operations, there is always a risk that something unexpected or unusual will happen that could reverse much, if not all, of the improvement effort. So, one obvious way of improving operations performance is by reducing the risk of failure (or of failure causing disruption) within the operation. Understanding and managing risk in operations can be seen as an improvement activity, even if it is in an ‘avoiding the negative effects of failure’ sense. But there is also a more conspicuous reason why risk management is increasingly a concern of operations managers. The sources of risk and the consequences of risk are becoming more difficult to handle. From sudden changes in demand to the bankruptcy of a key supplier, from terrorist attacks to cybercrime, the threats to normal smooth running of operations are not getting fewer. Nor are the consequences of such events becoming less serious. Sharper cost cutting, lower inventories, higher levels of capacity utilization, increasingly effective regulation, and attentive media can all serve to make the costs of operational failure greater. So for most operations managing risks is not just desirable, it is essential. But the risks to the smooth running of operations are not confined to major events. Even in less critical situations, having dependable processes can give a competitive advantage. And in this chapter we examine both the dramatic and more routine risks that can prevent operations working as they should. Figure 19 . 1 shows how this chapter fits into the operation’s improvement activities. Figure 19.1 This chapter covers risk management 610 Operations Management, 7th Edition Page 1 of 32
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PRINTED BY: Bukola Fasalojo <[email protected]>. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. Check and improve your understanding of this chapter using self-assessment questions and a personalized study plan, a video case study, and an eText – all at www . myomlab . com . OPERATIONS IN PRACTICE Cadbury’s salmonella outbreak 1 In June 2007, Cadbury, founded by a Quaker family in 1824, and now part of Kraft, one of the world’s biggest food companies, was fined £1 million plus costs of £152,000 for breaching food safety laws in a national salmonella outbreak that infected 42 people, including children aged under 10, who became ill with a rare strain of Salmonella montevideo. ‘ I regard this as a serious case of negligence ’, the judge said. ‘It therefore needs to be marked as such to emphasize the responsibility and care which the law requires of a company in Cadbury’s position. ’ One prominent lawyer announced that ‘ Despite Cadbury’s attempts to play down this significant fine, make no mistake it was intended to hurt and is one of the largest of its kind to date. This reflects no doubt the company’s high profile and the length of time over which the admitted breach took place, but will also send out a blunt warning to smaller businesses of the government’s intentions regarding enforcement of food safety laws. Before the hearing, the company had, in fact, apologized, offering its ‘sincere regrets’ to those affected, and pleaded guilty to nine food safety offences. But at the beginning of the incident it had not been so open: one of the charges faced by Cadbury, who said it had co-operated fully with the investigation, admitted that it failed to notify the authorities of positive tests for salmonella as soon as they were known within the company. While admitting its mistakes, a spokesman for the confectioner emphasized that the company had acted in good faith, a point supported by the judge when he dismissed a prosecution suggestion that Cadbury had introduced the procedural changes that led to the outbreak simply as a cost-cutting measure. Cadbury, through its lawyers, said: ‘ Negligence we admit, but we certainly do not admit that this was done deliberately to save money and nor is there any evidence to support that conclusion .’ The judge said Cadbury had accepted that a new testing system, originally introduced to improve safety, was a ‘ distinct departure from previous practice ’, and was badly flawed and wrong ’. In a statement Cadbury said: ‘ Mistakenly, we did not believe that there was a threat to health and thus any requirement to report the incident to the authorities – we accept that this approach was incorrect. The processes that led to this failure ceased from June last year and will never be reinstated. 610 611 Operations Management, 7th Edition Page 2 of 32
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Journal of Manufacturing Technology Management The impact of operations and maintenance practices on power plant performance Shyong Wai Foon Milé Terziovski Article information: To cite this document: Shyong Wai Foon Milé Terziovski , (2014),"The impact of operations and maintenance practices on power plant performance", Journal of Manufacturing Technology Management, Vol. 25 Iss 8 pp. 1148 - 1173 Permanent link to this document: http://dx.doi.org/10.1108/JMTM-12-2012-0122 Downloaded on: 22 September 2016, At: 07:35 (PT) References: this document contains references to 78 other documents. To copy this document: [email protected] The fulltext of this document has been downloaded 980 times since 2014* Users who downloaded this article also downloaded: (2011),"Integrating sustainable development into operations management courses", International Journal of Sustainability in Higher Education, Vol. 12 Iss 3 pp. 236-249 http://dx.doi.org/10.1108/14676371111148027 (2013),"Enterprise resource planning, operations and management: Enabling and constraining ERP and the role of the production and operations manager", International Journal of Operations &amp; Production Management, Vol. 33 Iss 8 pp. 1075-1104 http://dx.doi.org/10.1108/IJOPM-11-2011-0430 (2015),"The relationship between lean operations and sustainable operations", International Journal of Operations &amp; Production Management, Vol. 35 Iss 2 pp. 282-315 http://dx.doi.org/10.1108/ IJOPM-03-2014-0143 Access to this document was granted through an Emerald subscription provided by emerald-srm:187202 [] For Authors If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services. Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. Downloaded by University of Liverpool At 07:35 22 September 2016 (PT)
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*Related content and download information correct at time of download. Downloaded by University of Liverpool At 07:35 22 September 2016 (PT)
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