Every forward-thinking organization should factor in all its stakeholders in its key strategies and processes of production. It is thus prudent for these organizations to effectively manage the resources involved in the production processes of goods and services. These processes are managed with the key stakeholders namely customers, suppliers, shareholders, employees and society in mind (Kamauff, 2010, p. 67). The processes and strategies incorporate performance objectives of the organization and its focus on achieving profitability and competitive edge in the industry it finds itself in. It is, therefore, important for an organization to aim to achieve a balance of all its five performance objectives.
Five Performance Objectives
There are five performance objectives that act as a pointer to how an organization deploys its resources in its operations. The book Introduction To Operations Management defines operations performance objectives as “a criterion against which to evaluate the performance of operations.” These performance objectives essentially act as the operational yardsticks for organizations keen to survive and prosper within a business environment in the long-term (Naylor & Naylor, 2002, p. 24). These performance objectives are namely; cost, dependability, speed, quality and flexibility.
The first objective, cost, focusses on an organization’s ability to produce at low costs and incorporating proper cost structures to reduce overall operational costs. An organization should be keen on boosting its effectiveness i.e. increasing its production while maintaining a minimum cost of operations (Mahadevan, 2010, p. 47). This translates to more production of goods and services and availing at the market at competitive prices while maintaining profitability at the same time.
Dependability, on the other hand, focusses on the ability to deliver to the stakeholders within the stipulated parameters i.e. time, condition, price et cetera. Organizations thrive on good reputations and reliability which goes on to show why there is the need for them to be dependable in this context. Dependability runs in both the external and internal organizational environment. For instance, internally employees should be able to perceive the organization i.e. the organization paying them within the stipulated time Parker, 2012, p. 56). Externally, the suppliers should be able to have their obligations met by the client within the specified terms.
The third performance objective, speed, is defined as the ability to respond quickly to the stakeholder demands. This focusses on the reduction of lead times between when a stakeholder for instance, a customer orders a service or product and when he or she receives it. A speedy response to the stakeholders whether, external and internal, is a positive indicator of a progressive organization (Simons, 2011, p. 38). Speed boosts profitability as stakeholders such as the customer returns with more business in most instances. Speed also means the production processes manage to churn out a large output in a short span of time.
Quality as a performance objective dwells on the need to produce in accordance to specifications and set standards and devoid of errors. An organization should ensure its products conform to the set standards. To the external organizational environment, the organization will be able to satisfy its stakeholders. With nothing to complain about, for instance, the clients will be more than likely to continue consume the products. This translates to more revenue. As for the internal organizational environment, operational quality will ensure that the production processes run without hitches. This consequently impacts on the external stakeholders who rely on the internal processes of the organization i.e. manufacturing and provision of services.
Flexibility as performance objective focusses on an organization’s ability to change the mode of operations. This can center on the ability to change the volume of production, product mix, production time and, innovation and introduction of new products. A flexible organization is able to meet virtually most of its goals due to its ability to adjust and adapt to different scenarios.
Five Performance Objectives Analysis of Apple Inc. and Ryanair
All these performance objectives apply to all organizations despite having different models and operation processes. The extent to which the objectives are met is what sets apart the organizations, in this case, organizations in the manufacturing and service industry. The manufacturing industry involves primarily production of tangible products. Apple Inc., manufacturing company focusses on the production of consumer electronic products such as mobile phones, smart phones, computers, iPads, tablets et cetera. Apple Inc., is a global leader in business due to its operational and market strategies. The Apple Inc. operations can be analyzed using five performance objectives.
Apple Inc. Manufacturing Company Analysis
Apple has incorporated quality control measures in its organizational controls. Every product churned from the Apple industries undergoes quality assurance procedures. This ensures that the end product that reaches the market is devoid of defects or malfunctions. The Apple products have a unique serial and IMEI numbers that are key in ensuring the products that have undergone rigorous quality assurance process reach the target market. Apple also has a quality policy effected on its suppliers of raw materials key in the production process. All suppliers are required to adhere to a quality assurance policy that ensures the multinational corporation only sources the best components for its end-products. Currently, the company is faced with the problem of counterfeits in the market. These products find themselves in the market as imitations of genuine Apple products.
Apple Inc. like any other company has put in place cost-cutting measures to manage its operation process globally. The company has outsourced most its production functions to China due to competitive wages and cheap source of raw materials. China also has ease in availability in industrial equipment which lowers capital expenditure for Apple Inc. The outsourcing function as a cost-cutting measure has faced recent backlash from human rights. Many consumer groups point out that Apple Inc. factories have a number underage workers on their payroll as well as extended working hours that turn employees to modern-day slaves. These repercussions of these allegations have put Apple Inc. management under a microscope with human rights and consumer groups asking for boycotting of the Apple products.
Most of the genuine Apple products are dependable due to the warranties extended to the end users. The Apple distributors have elaborate procedures in place to ensure that the market is well satisfied with the Apple products. Warranty documents acquired on purchase ensure that a customer gets a genuine product as well as compensation or free repair for malfunctions covered by the warranty. The challenge arises from the implementation of these procedures in all consumer electronics outlets. Some unscrupulous sellers, however, fail to pass these benefits to the Apple customers. Cases of overheating iPads, buggy software, failing antennas have been on the rise despite the multinational corporation winning the PC World “Reliability and Service Survey” award in 2010.
Speed as a performance objective can also be observed in the Apple Inc. operations globally. This is evident with the establishment of the online platform dubbed “Apple Support Communities” with a 24/7 online support personnel who tackle problems raised by consumers speedily. On September 2014, there were reports in the social media that new iPhone 6 and 6 Plus models were defective. The iPhone6 plus particularly was observed to be vulnerable to bending. Apple responded speedily by looking into the affected cases and offering a public defense citing that bending was a “rare occurrence” (Bailey,2014).
The organizational culture at Apple Inc. has fused flexibility in its production process through its overseas production option. In a short span of years, the company has managed to launch diversified products to meet the needs of various market niches globally. The supply chains too in Asia have a lot of flexibility due to the fact that they can easily scale up and down in accordance with the market needs. The outsourcing option also allows for tapping into flexible employees in China. The Chinese can work overnight or on demand as long as they are paid. The location of the factories in China also encourages flexibility due to the presence of complementing factories producing elements that are essential for the end production of Apple products.
Ryanair Service Company Analysis
Focusing on the service industry, the organization of choice is Ryanair a European low-cost carrier. The company operates globally by providing travel service, hotel bookings, online gaming, online checking et cetera to the market. The organization has adopted various strategies to ensure efficiency in operations by implementing a lean elaborate structure. Analyzing its operations using the five performance objectives we can ascertain its competitiveness and standing in the global air travel service industry.
Quality as a key element of performance objectives has seen Ryanair recruiting qualified employees and professionals. The personnel are instrumental in ensuring that the service offered to the end consumers. The organization is facing hurdles as it tries to keep up with quality. There have been many complaints regarding the management’s focus on profits rather than the quality of their services (Müller, 2011, p. 19). The quality is a thorny issue due to the cut-throat competition that defines the air travel industry. There are many air travel companies offering much better quality in terms of services. In September 2013, the Ryanair CEO Michael O’Leary openly admitted that the price was more of a priority than customer service. This fact emboldens the belief that Ryanair has continuously overlooks quality at the expense of cost (Smith, 2013).
Ryanair boasts of being the largest low carrier in Europe and amongst the crème de la crème of the world low-cost airlines due to its pricing strategy. Its strongest strength lies in the fact that it extends low fares to its clientele. The one-way seat strategy, for instance, has enabled the company to attract many customers which has ultimately impacted on the company’s pricing structure (Kahawatte, 2010, p. 33). By incorporating other ancillary services in its package, Ryanair is able to boost sales while reducing unit costs. As much as the company is touted as cost-effective, it still faces hurdles in managing internal operational costs arising unstable crude oil prices. The low-cost strategy has seen Ryanair not issuing crude oil surcharges impacting on the company’s cost of operation. Due to this strategy, the company reported in 2009 its first annual loss when the prices of crude oil were on a record high.
The areas where speed plays a major role for Ryanair operations are reservations, turnaround time of aircrafts, aircraft maintenance and luggage handling. The actualization of the effective time-saving measures and speed have a direct impact on costs. Ryanair has been forced to outsource external service providers in order to meet the clientele demands.
Dependability for Ryanair has always been high especially with low-cost travelers. A sizable number of European travelers prefer traveling with the airline over local ones. The ease in its online booking known as web check-in allows passengers not to waste time at the arrival baggage carousels. The one-way ticket also has made Ryanair be perceived somewhat dependable by many of its passengers. The ticket is cheap and convenient for travelers wishing to use other means of transport back. However, the airline has continuously suffered the wrath of its passengers who cite that its customer care service is in a sorry state. In 2013, The Telegraph newspaper blog reports that Ryanair scored poorly in a consumer “comfortably lowest of all 100 firms” (Gulliver Business Travel, 2014).
Flexibility, in Ryanair’s case, is enhanced due to the fact that customers are only charged basic airfare with other additional services paid for separately. The flexibility here is translated offering of additional options which Ryanair’s does by offering supplementary services. Due to economies of scale and its global standing, the company is able to negotiate with other service providers to offer alternatives to its passengers such as ground transportation, hotel chains and online shopping portals. The challenge here, however, lies in the numbers that the airline handles which makes it less effective in ensuring flexibility. In its effort to achieve flexibility by incorporating other service providers, the passengers incur more unseen costs in the process.
Through the critical assessment of the two companies using the performance objectives analytical tool, it is easy to tell a balance of the objectives can be achieved. Apple Inc. through the five objectives has invested much in cost-mitigating, speedy response, quality assurance and flexibility measures in its operational processes. Ryanair ,on the other hand, focusses on low-cost and speed as its core tenets as it tries to fuse effectiveness in its operations. It is prudent to understand excelling at one or more of the set performance objectives can guide an organization to arrive at business strategies. Any operation based strategy ought to match customer requirements to operational excellence. A tradeoff is in order for excellent performance by Ryanair (service). John Naylor in his book Introduction to Operations Management notes that “operations cannot be all things to all people. There is the need to identify a single goal or task for operations; a clear set of competitive priorities to act as the objective” (Naylor & Naylor, 2002, p. 25). The Sandcone model of operations excellence illustrated below captures the balanced approach to performance objectives of Apple Inc. as a manufacturing organization.
The operation functions in the balanced case are managed strategically with any organization aspiring to reach the peak level possible. There is a sequence to be followed if the organization aims to fully tap into its operational capabilities. The starting point should be the emphasis on improving quality. On quality, dependability should be built followed by flexibility (which at times is taken to include speed) then finally cost. Operational capabilities established this way are more likely to withstand individual capabilities.
Apple Inc., as the organization of interest in this case, should adopt several strategies to solve its performance issues. The use outsourcing function as a means to manage the operational costs as aforementioned is facing hurdles. The presence of human rights and consumer rights group raising issues on the ethics and exploitation of Chinese workers in Apple factories ought to be mitigated. Apple Inc. can institute in-house management of the employee affairs and also open the doors to human rights and consumer groups. This will ensure the outsourcing continues to run effectively. The company can further reduce costs by incorporating innovation and sourcing for cheaper raw materials, for example, recycled electronic elements.
The performance objectives enable organizations to efficiently manage the resources involved in the production processes of goods and services. These processes are managed with the key stakeholders namely customers, suppliers, shareholders, employees and society in mind. These processes and strategies incorporate performance objectives of the organization and its focus on achieving profitability and competitive edge in the industry it finds itself in. The performance objectives are namely; cost, dependability, speed, quality and flexibility. They are applied differently in solving performance related issues. Apple Inc. adopts a balanced approach while Ryanair adopts a focused approach. The balanced approach is analyzed using the Sandcone model of operations excellence while the focused approach dwells on the trade-off of performance objectives options.
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