Slides for Chapter 12

The Future of Strategic Operations

We can envisage that the future of operations management will be fundamentally concerned with heightened, global competition and a corresponding need to provide customer service and satisfaction. This may have been seen in the past as the responsibility of sales, marketing and after-sales service departments. In future we may expect it to be reflected in the role of operations management.

In helping to avoid failure the clear challenge for operations managers is to achieve a very prompt process implementation for new products and services (or technologies), coupled with excellent customer after-sales service, without the luxury of plenty of time to get to market or sustained, steady-state operating conditions; these were features of mass production and aligned to benign, immature consumer markets and early 20th century world geography.

The Future of Strategic Operations

Past to Present Views

(The past led to) a ‘throw-away’ culture, which now appears to be unsustainable. While this can be addressed through design for recyclability, reverse logistics and sound recycling (industrial and personal), the concept of product churn will always run counter to the imperative of reducing consumption in order to achieve one-planet living.

Remanufacturing

Remanufacturing could be said to be a feature of a more sustainable future that is already with us. It entails dismantling a product and then rebuilding it for a further useful life, refurbishing and re-using as many components as possible.

Gray and Charter (2006) ... report that “Machines at Xerox are designed for disassembly and contain fewer parts because of this. Parts are also designed for durability over multiple product lifecycles. As a result each new generation of Xerox products offers increasing functionality while conserving energy and materials, and requiring fewer hazardous substances throughout the product lifecycle.”Other companies actively engaged in remanufacture include Caterpillar, Milliken Carpets, Perkins Engines, Flextronics, Hanover, Siemens, and the US Military (with BAE Systems).

Remanufacturing

An Overview of Xerox’s remanufacturing processSource: Gray and Charter 2006

Scenarios

The intra-regional geography may be expected to include a move of manufacturing (by foreign and Chinese producers) from China to other Asian countries (perhaps Thailand, Vietnam, Phillipines, etc.) but also to other parts of the world, e.g. Mexico, with low cost labour, stable political economy and membership of the North American Free Trade Agreement, or even ‘old world’ activity, such as at the MG plant or Volvo.

China

As great amounts of foreign direct investment flowed into China from 1980 onwards the East coast of the country saw significant development and growth. The principal incentive for this were low labour costs, the potential for in-country demand for products (with a population of 1.3bn, expected to become more affluent) and a base from which foreign firms could supply to the other developing countries in Asia. Few Westerners understood China, however, and there were some famous failures (see Studwell, 2002 for an excellent history of the develop of modern China).

China

We can expect China to take the traditional path in the near future - moving up the value-adding chain, with higher skilled, better educated workers producing higher specification products (R&D expenditure and investments in higher education have been increasing for some time) while component production and lower value-adding operations are ‘off-shored’

Geographic Shifts in Operations Managers

European operations managers have been going abroad to live and work for centuries. North Americans did likewise in the twentieth century and Japanese for the last three decades. Now it is the turn of the Chinese. In addition to European specifics such as Volvo and MG, Chinese general overseas investment is massive. In Africa, for example, estimates vary between $80 and $100 billion so far

Labour costs in Asia

Some Examples of National Consumption Levels

4.62.73.9

4.5 1.20.5

3.81.31.6

0.4 – 1.5

6.0

Source: derived from WWF Living Planet Report 2010

Source: Developed from the WWF Living Planet Report 2010

Key Points

Organisations are likely to face the need to satisfy customer demands without a ‘steady state’ operating system, at the same time as embracing new technologies and gearing up for new market offerings (the promises of their marketing colleagues) which may need to be produced in entirely different ways, in different locations, and at dramatically lower cost.

Key Points

The drive for leanness is likely to continue, both for competitiveness in cost terms but also for constant reductions in resources usage and waste

Key Points

Sustainability, especially in the context of carbon emissions and scarce increasingly resources, is likely to grow as a strategic driver.

Key Points

There may well be a new geographic logic; operations managers may not be able to identify any specific territory as exclusively ‘home.’

Key Points

There will be a need for Operations managers with much broader skills sets, including knowledge and awareness of global geography, understanding of cultural differences, and economic and political trends.