Operations Management in the Global Economy: Trends and Best Practices

Introduction

Operations management refers to the administration of business to build the highest level of efficiency possible within an organization. To maximize the profit of an organization it is concerned with converting materials and labor into goods and services efficiently as possible. In other words, it is concerned to manage the inputs and outputs i.e. the process that turns inputs like raw materials, energy, and labor (human resources- staff or workers) into outputs such as goods and services.

Lasserre (2017) operations management denotes the set of activities which create value through the transformation of materials or inputs into final products or services. Intense technological advancements, the lifting of international barriers to trade, the boom in certain underdeveloped states, and market globalization are some of the factors causing a modification to the structure of many nations’ economies.

These influences, among others, have pushed many companies to alter their strategies as well as how they conduct their commercial activities. Fast transformation of business approach entails a careful rethinking of the plan for operations management. Innovative methodologies to the global new cycle of product development, logistics, sourcing, and manufacturing are necessary for sustaining and enhancing a competitive advantage (Hickson & Pugh, 2014). These dynamics are well articulated especially if the involved parties are affiliated to various scenarios of the economy. However, it should be understood that internationalization processes do not limit nation-specific concerns but instead emphasize them.

Nature of Global Operations Management

Global operations management is defined as the large number of activities utilized by a multinational business to transform various resource inputs like labor and materials, among others into final products and services. A properly managed and designed operating system determines a company’s productivity as well as the quality of goods and services released to the market. Again, operations management dramatically contributes to the determination of the speed of a company’s responsiveness to new technological developments, changes in the consumer’s tastes, competitive threats, and pricing levels among others (Lasserre, 2017).

The setting of global operations management should be closely related to the strategy of the organization. Its long-term strategy greatly influences the structure and control of a company's operations. Global operations management is concerned with the state-of-the-art knowledge of managing operations of the business in a global perspective. The focus will be on a modern-day issue related to operations which are of relevance in a firm’s ability to effectively collaborate with its logistics and supply chain partners in order to remain competitive in the global economy.

When an organization sets up services in a foreign country it involves some added complexities in its operations. Global markets require new standards on quality, time, and technology which is changing over time and makes it more challenging and competitive in the international market because of the fast transformation and advancement in business approach; as every foreign country has its own standards and general SOP’s to abide by which can also be fruitful to the economy. A firm’s plan drives many activities of operations management including facility design, location, and the controlling of logistics.

Overseeing activities in both assembling and administration associations have advanced colossally throughout the years with the adjustment in market prerequisites. The market has turned out to be worldwide, along these lines convincing undertaking tasks to keep up. The use of data innovation/data frameworks (IT/IS) and re-appropriating in overseeing tasks have essentially modified the scene of activities the executive's (OM) methodologies, systems, and advances (AngappaGunasekaran, 2011). Cognizance towards natural and well-being likewise encourages organizations to inspect their OM approach and assemble from different points of view. As of late, vitality cost and assurance against fear-based oppression have changed the arrangement of big business activities and thusly the way to deal with OM.

Global operations management happens to be a more difficult task than controlling of domestic operations. At the international platform, managers and directors are obliged to compete with the many suppliers from different countries, diverse laws and government regulations in all the areas the company does business, disparate networks, and transportation facilities, long distances, and multiple markets. Managers should decisively consider how and where to manufacture commodities (Lasserre, 2017). For instance, a company must decide on the most suitable location to establish a sales office or a plant. Additionally, the firm is also obliged to consider the ultimate supplier for its inputs and how to obtain them. Inventory levels and transportation choices should also be wisely considered. Logistics, location, and resources are the main complexities related to global operations management (Hickson & Pugh, 2014).

Vertical integration and management of the supply chain

Operations management has solid foundations in both supply chain management and logistics. For example, understanding global trends in supply chain management in order to meet client demand is often critical. With logistics, the careful and considered use of resources, as well as cost-effectiveness, has become increasingly important in an era in which resources can often be in short supply and customer expectations have skyrocketed. The supply chain denotes an array of procedures and steps companies use to source for the various inputs needed for creating final products and services. This function is usually considered a strategic issue due to its underlying implications for the cost and quality of goods as well as domestic capital demands. Vertical integration denotes the degree at which an organization either creates its resources or outsources them externally. This strategy is one of the major considerations when developing a corporate-level strategy. It helps companies reduce costs and improve efficiencies.

For the MNC to enter foreign markets, it must select the necessary method for shaping its international commercial activities. There are many methods to enter into the foreign business including franchising, licensing and direct investments such as mergers, ownership of new ventures, acquisitions and joint ventures. There are various streams of theories which handle the entry of companies into the global market like the analysis of transaction cost, behavioral theory, economic factors evaluation as well as the OLI approach. In short, global operations management is a majorly change-related actions of a multinational firm (Hickson & Pugh, 2014).

Global Operations Management Issues

As it has been earlier pinpointed, managers of multinational organizations must grapple with various issues related to business location, logistics management, and governing the supply chain (Lasserre, 2017). Because managing global operations is way more difficult than managing domestic ones. Managers should not act and think about domestic markets first and then global markets later, rather it could think globally and act locally. Also, they must need to have a fine understanding of their competitors. Some other main and important challenges of managing multinational operations that we cannot ignore include other languages and customs, different management style, unfamiliar laws and regulations, and different costs.

Manufacturing procedures look into, together with administration tasks and techniques explore, and structure the foundation for an examination of the activities the executives. Albeit a great part of the appraisal and scrutinize is coordinated at tasks methodology, and conventional activities the executive's issues, for example, innovation, efficiency, and quality likewise gone under investigation as to their job in technique (Adam, 1989).

1- Location Decisions

Location and layout decisions are two of the most strategic areas in all of global operations management. The possible decisions regarding location include the target countries for positioning the business and the kinds of products consumable by the market. The MNC should also consider the government policy about setting up the firm in a foreign land. Some factors like the political environment and taxation levels for business can either be harmful to a business or can be an advantage. Organizational decisions like the quality, expertise, and competence of the workforce should be taken into consideration when a company is going global (Hickson & Pugh, 2014).

Location of services is a long-term competence decision as a business cannot move to any location every now and then and in most cases, it’s almost of only a one-time decision; which involves a long-term commitment to the geographically static factors that affect a business. For a business, it is an important thing to be considered for the strategic level of decision-making. It includes with major questions such as where our main operations should be based? As there is a huge investment is made in building plants and machinery and in setting up a business at some specific location so one cannot risk it. It doesn’t only include the investment in building plants, the marketing cost also holds the major portion of the investment.

An improper location of the plant may lead to waste of all the investments made in plant and machinery equipment. Hence, the location of the plant should be based on the company’s expansion plan and policy, diversification plan for the products, changing resources of raw materials, and many other factors. The purpose of the location study is to find the optimal location that will result in the greatest advantage to the organization.

2- Supply-chain Management

The choices managers have to make concerning this aspect include partnering, vertical integration, and sourcing as well as make-or-buy decisions. Regarding sourcing, the MNC should look for areas to get raw materials. It includes management processes that incorporate the network of suppliers, manufacturers, warehouses and retail outlets so that the right type of goods are sourced, supplied, produced, and shipped in the right quantities, to the right locations, at the right time, and are received in sound condition. To achieve successful incorporation, the flow of information (such as purchase orders, shipping notices, waybills, and invoices), materials (including raw and finished products), and finances (payments and refunds) through the supply chain must be coordinated effectively. The source should be very convenient to prevent the interruption of the supply chain. Moreover, the firm is also entitled to make radical choices regarding partnering. That is, does the company have enough effort to order for all inputs by itself or it will work together with other organizations with similar interests? Partnering or outsourcing the inputs may be a cheaper and more convenient way because it can consider economies of scale (Lasserre, 2017). Regarding make-or-buy choices, the MNC is faced with the challenge of deciding whether to make a particular component or to outsource it from other suppliers in consideration of the cost of producing the product and the desired margins.

What are the three things all successful supply chain management function needs? Supply chain management touches all of an organization’s functions because it acts as the mediator between all the inputs and outputs of the operations of the company. To be successful, it requires focused effort across the entire company and association with all outside suppliers and service providers. This means that supply chain management must have a multidimensional approach, involving people, processes and technology.

3- Materials Management

Lasserre (2017) states that material management entails the storage of goods, packaging, input flow, options for transport as well as speed. The raw materials should be transported at the most convenient speed to avoid production delays to the respective manufacturing centers. They should be packaged appropriately to facilitate proper flow and transportation of the inputs. The managers of the MNC should also consider efficient shipping of the materials to the respective countries which manufacture their commodities. Inventory levels and lead times should be well calculated to avoid stock shortages.

The organization must always be looking for ways to improve the functioning of their supply chains to ensure that their supply meets projected demands cost-effectively.

If the supply is no longer satisfying the demands and also the supply is not sufficient, the company will lose customers. If they produce too much product, they must pay for expensive warehousing of the excess inventory and also the increase in overheads cost, which they might not be able to sell. If goods are not sourced carefully and vigilantly; production is not monitored, companies might be faced with mass product recalls or returns. These can result in financial damage in investment for a company. By managing the material production, purchasing, and procurement, companies can select the most cost-effective solution at each phase in the chain and can avoid business costs. This gives a company with a real competitive edging. The cost savings in material management increase additional cost-cutting manufacturing methods and strategies that many international companies have already introduced. These strategies include the following: Just-in-time (JIT) manufacturing (reducing inventory levels, overall costs, product variability, and production times, and also improving product quality) Lean manufacturing (producing goods using less manpower, raw materials, time, and space) Total quality management (embedding awareness of quality in all operational strategies) Global supply chain management has many benefits for a company. It enables business processes to be organized using international organizations that be reduced, companies can react rapidly to unforeseen market conditions, transport strategies can be improved, costs can be minimized and waste can be eliminated. You can get your product to market substantially more quickly. Small- and medium-sized businesses benefit as well. These smaller organizations, especially with niche technologies or specializations, can now sell to multinational organizations or to their suppliers. Many of these large firms have started outsourcing activities that were carried out internally in the past.

International manufacturing management provides an unparalleled opportunity for companies to grow into new markets while at the same time boosting their competitiveness. However, most of today’s networks are legacy structures only a fraction was strategically planned. As a result, there is huge potential to be captured from rethinking traditional structures, approaches and supply relations, and huge potential for getting it wrong.

Attaining Global Operations

Every country has its unique ways of communicating, interacting, and behaving and managers should identify and recognize this different culture for effective communication to take place. In terms of Global Operations management, language barriers is one of the biggest obstacles managers face when conducting business operations in international markets. Language is one of the most important if not foremost frontier, where companies need adequate research before entering a foreign market (Ferdows, 2008).

Global business is the one that engages in international trade. Multinational corporations usually involve themselves in this kind of activity and own or control various facilities in many countries. A transnational company, on the other hand, is one that combines the advantages of local responsiveness and the comprehensive benefits (Hickson & Pugh, 2014). The following are the main reasons why companies would wish to globalize their operations. The first is to reduce costs, especially when they create low-tax or tariff-free zones for conducting business. Another reason is to provide better commodities to its clients through the use of improved methods and technology which may not be at the home country (Hofmann et al., 2013). Again, the majority of firms choose to go global to increase their market share, retain or attract international talent, and learn different ways of enhancing performance together with improving their supply chains.

Considerations for Attaining Global Operations

Managers of companies should consider the following factors before going global. First, they should measure whether their product design is international. The technology and the nature of their processes should be scaled up (Hofmann et al., 2013). They should also consider if they have adequately handled the underlying cultural barriers and ethics that may impede their business progress. Some of the customer matters that must be solved in the international business platform include extended hours for lunch, bribery, punctuality variations, and anticipations of thievery. The locations should also be suitable and convenient for the conducting of international business.

Lasserre (2017) states that in creating an international global services business, the managers of the MNC should determine if the available facilities or workforce are enough to facilitate service creation. The company should establish the type of activities that are of great interest to foreign clients. Again, international markets should be free from government control.

Management of the global production network is becoming more and more complex day by day. Here the most crucial question is not where to produce but where to perform the vital individual production tasks. The host sites for the outsourcing of business and management if business to attain its maximum becomes a dominating factor (Ferdows, 2008).

Managing Operations for Global Service

Managers must anticipate the possible toxic side effects of organizational change and shelter their global teams as much as possible. To effectively manage the MNC doing service business, adequate location, capacity layout, and facility, design planning should be undertaken. Scheduling services is also essential to enhance efficiency in dealing with international operations (Mangan et al., 2016). The management of international operations is essential if a company is to succeed in foreign business. This means that logistics, location, and supply chain should be well considered to eliminate any sub-optimal prospect. Managers of international operations deal with issues regarding the management of the supply chain materials and location decisions. However, the problem can be mitigated. Products, processes, procedures, and technology should be designed in a way that suits the culture, lifestyle, tastes, and preferences of the potential consumers of the MNC products and services (Hofmann, 2014). In this way, the efficiency of global operation management will be attained.

There are four developments, which have spurred the trend toward globalization. These are:

1. Improved transportation and communication technologies;
2. Opened financial systems;
3. Increased demand for imports;
4. Reduced import quotas and other trade barriers.

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