Systems Thinking Approach to Operations Management Process
Implementation in Services
 
 
 
 
 
 
 
 
 
 
 

    

 

Monique Haddad
 
MGT 565 V1
 
Operations Management
 
Fall 2017
 
Due December 16, 2017

 

Abstract

 

The implementation of operations management practices, managed with
quality-based strategies, is essential to the growth and success of a
service-based organization. Ease of access to information and technology has
led to fast-paced changes in today’s society. In order for an organization to
remain economically stable, and grow, they must study and learn patterns and
behaviors of stakeholders. Kreng and Huang (2011) believe that “the role
corporations play in the wider society will help build their corporate image…how
a business deals with employees, investors, communities, and others will
influence consumer perceptions of it”. Adopting systems-thinking based
operations management practices will help an organization align its core
mission, values, and goals with those of its stakeholders. Through the
utilization of knowledge management practices, competitive awareness, and data
analytics, service organizations can ensure their messaging and functional operations
are efficient and dynamic while satisfying stakeholders, and remain profitable.
To further implement and expand systemic operations, total quality management
(TQM) should be introduced to effectively manage and refine operations.

 

 

 

Globalization
and advancements in technology have led to innovation, leading to expanded
possibilities and opportunities for consumers, as well as the organization. Modern
technology and instant access to information are changing business processes and
functions across the globe. Additionally, accessibility to endless content and
the reliance on technology for entertainment has influenced the relationship
between companies and customers. Service-based industries, in particular, must
ensure their internal operations run efficiently as possible, and that
customers find value in their services, and are ultimately satisfied. In an
effort to shape future success, and attempt to anticipate and control customer
response, organizations must conduct research into their performance and influence,
from a customer standpoint, as well as internal.

Organizational
direction typically begins with leadership. It is the responsibility of leadership
to ensure all functional groups are aligned and working towards shared company
missions and goals, guided by values of the organization. Functional groups, or supply chain, include internal
operations such as human resources and finance, while external relationships
are between suppliers and customers (Heizer,
Render, and Munson, 2017). Specifically, operations practices managed by
quality control initiatives help to assess and optimize performance in areas
including service quality, employee results, customer results, marketing
results, community results, financial performance, and operational results,” (Oschman,
2017). In order for functional groups to work together, they must understand
their contribution and importance to the system, or organization, and how it
relates to other business groups. Systems thinking is necessary for growth, development,
and sustainability of an organization. Clear
goals and deliverables must be established in order to provide a focus and
direction to the organization (Senge, 1990). Carefully selecting top
initiatives that align with the organization’s mission and values provides a
framework for reference. All employees of the organization should understand
their function and their roles importance as part of the system. Simplifying
the goals of the organization is helpful when delegating importance and
priority.

Implementing
the operations management practices and managing these processes through a
quality management system will increase customer satisfaction and forward the
company into self-sustaining growth. “Faced with the current challenges of
environmental uncertainty and globalization, firms…must evolve dynamically by
interacting with various affiliates, such as vendors, governments, consumers,
suppliers, and competitors,” (Kreng and Huang, 2011). In order to remain relevant, service-based companies
must ensure their customers are satisfied, and their managing operations
efficient, and organizational relationships positive. Process design must
consider the level of interaction and product customization required to service
the customer (Heizer, Render, and Munson, 2017). As customer expectations change,
service organizations must be flexible with processes regarding customer
engagement, but should still maintain focus and in alignment with the company core
values. The benefits of adopting operations management practices, and execution
and management of the practices, will lead to increased customer satisfaction
and growth.

Understanding an organization as a system, the organization is comprised
of several components, or business groups, that maintain a specific role or
task in order for the system to function properly. While it is important to
recognize each component of a system, each working interdependently to support
stakeholder initiatives, it is also necessary to understand how the system
operates as a whole. The application of systems thinking exists as the
foundation of several effective operations management tools. The following
recommendations are tools for the company to effectively understand their
positioning, potential problems, and ways to manage and resolve the problems,
leading to efficient performance and sustained results.

Knowledge
Management

Knowledge
management refers to the “…development of a set of organizational capabilities
which should enable the firm to recognize, create, transform, and distribute
knowledge with a focus on a knowledge flow and value creation from the
intangible resources both within and outside the organization,” (Del Rosario,
M., Aguilar, A., Cedillo-Campos, M., and Hernandez, 2017). As related to a
system, knowledge management manages the flow of material and capital as fueled
by collaborative thought, or shared information and knowledge, across
functional departments of the organization (Del Rosario, M., Aguilar, A.,
Cedillo-Campos, M., and Hernandez, 2017). Senge (1990) introduced the learning
organization, in which the organization practices knowledge management
continuously seeking perfection. Knowledge can be considered an intangible
asset. Through appropriate channel management, knowledge can be harnessed to
create value and competitive advantage for the organization (Del Rosario, M.,
Aguilar, A., Cedillo-Campos, M., and Hernandez, 2017). Understanding and
utilizing skills from a separate business group or supply chain member allows
organizations to leverage the knowledge contained within their existing resources,
but not necessarily within the organization. Successful knowledge management
allows for an organization to utilize internal assets, human knowledge and,
proprietary technology, to harness information which in turn leads to
successful operations management and efficiency.

Data
Analytics

            The second recommendation is for the
services organizations to implement data analysis. Collection of and utilization
of data is helpful in service-based industries to optimize resource allocation
to organizational operations. Human resource management and allocation needs
may be difficult to anticipate or may vary from forecasts. Managers, in an
effort to plan and problem solve, often focus on immediate events, disregarding
causes of variation that can affect timely completion. Lee, Ford and, Joglekar (2008)
suppose that accurate resource allocation is imperative to timely project
completion and schedule performance. As a service provider, reducing project
times can improve or increase customer satisfaction, and potentially benefit as
an overall cost savings to the business unit or company (Lee, Ford, and
Joglekar, 2008). Cost reduction is seen as a benefit to consumers, and thus
increases the value of the organization (Kreng and Huang, 2011). In services,
labor is the primary consideration for planning, based on demand. To
effectively manage resources, aggregate planning for labor and demand
coordination is used. Aggregate planning, used for sales and operations
planning, assists with the coordination of internal and external resources
based on forecasted demand, as well as communication of the plan details for
execution (Heizer, Render, and Munson, 2017).

Managers must consider variation in order to properly forecast future
goals. Common cause variation occurs naturally, an accident or mistake is made
in production or a task and changes in productivity are hindered, while special
cause variation can be attributed to an event or a unique circumstance (Senge,
1990). Data analytics in regard to systems development of organizational
processes allows for analysis of historical data to study variation and
constraints, used for forecasting and projection (Lee, Ford, and Joglekar,
2008). Applying the results of data analysis to systems development allows for
groups to understand past struggles, and make process changes to better future
performance.

Systems
Dynamics and Theory Building

The study of system dynamics through data analysis is helpful in
determining problematic processes and practices and ultimately improve overall company
performance. “In system dynamics system operations are monitored by considering
the personnel, capital, materials, orders, and machines in an organization as a
flow,” (Kreng and Huang, 2011). Researchers seek to understand
stakeholder behavior patterns and expectations to aid in the design and
implementation of successful processes (Kopainsky and Luna-Reyes, 2008). Data
analysis allows for problem identification, and hypothesis development
surrounding the problem, and study of information and behavior, including
dynamic reactions, to create changes within the system (Kopainsky and
Luna-Reyes, 2008). One key piece of this research is to understand mental
models and paradigms of thought and how these thought processes influence
system dynamics.

Theory building is a research method which studies systemic and dynamic
thought processes in order to map out and test possible solutions, while taking
into consideration potential dynamic variables (Kopainsky and Luna-Reyes, 2008).
Data collection for this research is primarily qualitative, interactions and
behavior responses, with the inclusion of a quantitative analysis of relevant
metrics. According to Kopainsky and Luna-Reyes, systems dynamics is a suggests
that “… evolutionary behaviour of social systems over time is explainable in
terms of endogenous processes represented by feedback loops, rates and stock
variables,” The data, feedback loops, rates and stock variables, are then
analyzed in the theory building process, and used to understand societal
paradigm shifts. The key to successful theory and systems dynamic study is
repetition. “Key outputs from the theory-to-practice components of theory
building are carefully obtained data/findings and experiential knowledge that
are used to confirm, or disconfirm, and further refine and develop the existing
theory and to enhance the utility of the theory in practice,” (Kopainsky and
Luna-Reyes, 2008).The data is collected and refined to fine-tune strategies and
discover social shifts.

Once strategic
planning and systems thinking have been introduced to an organization and
practiced, leadership must continue to research and study trends and effects of
centralized processes. To best meet stakeholder needs, and ensure the
organization is operating efficiently, implementation of quality management
systems is recommended. Total Quality Management (TQM) is the ideal method for
a service-based industry to organize processes, and measure success.

TQM is defined
as the “process through which the organization is managed and directed on a
daily basis,” (Oschman, 2017). The function
of TQM is to compare expected demand with resources to ensure processes in
place are operating in the most cost-effective way possible (Oschman, 2017). TQM
essentially organizes and continuously refines operations processes between the
company, customers, and supply chain, but TQM is beyond a set of processes. The
practice has been
considered a management philosophy, and a practice which involves an entire
organization, and is embedded
in a company’s core values, used to increase productivity and stakeholder
satisfaction (Oschman, 2017). TQM also can drive an organization forward.
According to Oschman (2017), “…the practice of TQM enables organizations to
achieve competitive, sustainable excellence while improving their productivity
and profitability initiatives, building organizational capabilities with higher
product quality performance standards, and meeting service delivery objectives
that satisfy customer requirements,” (Oschman, 2017).

Implementation
of TQM requires the incorporation of several primary and supportive tasks,
beginning with leadership. Oschman (2017) details six primary “dimensions”
critical to companies looking to implement TQM, including leadership
commitment, strategic planning, empowerment, teamwork, continuous improvement,
and customer and employee satisfaction. Within these dimensions are supportive
pieces, such as communication and training, culture forming, systems thinking,
and process development (Oschman, 2017). With strategic planning and clear
communication, total quality management, the collaboration and integration of
these dimensions seek to aid with competitive advantage and sustainability of a
company, while ensuring it is effective and flexible.

Total quality management
success in manufacturing is measured through benchmarking, or “selecting a
demonstrated standard of products, services, costs or practices that represent
the very best performance for processes or activities very similar to your own,”
(Heizer, Render, and Munson, 2017). With regard to services, TQM focus on
meeting customer expectations and perceptions, and anticipating occurrences
where customers may be dissatisfied, and putting processes in place to restore
customer satisfaction (Heizer, Render, and Munson, 2017). Once a standard, or
goal, is selected, data collected can be analyzed, and the strategic
organization can make well informed planning decisions. TQM in services relies
heavily on well-executed processes. Benchmarking can occur internally, to
examine and improve operations, and to set goals. Benchmarking externally
allows an organization to assess competitive advantage against competitors, or
study best practices of companies that execute a particular function exceptionally
well (Heizer, Render, and Munson, 2017). Measuring the success of processes in
a service-based industry is more difficult than that of a manufacturing firm (Heizer,
Render, and Munson, 2017). A balanced scorecard or dashboard is effective in
measuring success because specific criteria can be analyzed and compared to
other internal functions to determine success. This comprehensive performance
measurement system includes finances, levels of stakeholder satisfaction, and
efficiency of resource allocation and internal operations (Hulthén, Näslund, and
Norrman, 2016). “The scorecard approach implicitly uses effectiveness
and efficiency in the customer and internal process perspective, our
comprehensive framework explicitly defines and structures the related measures
and their relation to the process performance,” (Hulthén, Näslund, and Norrman,
2016). The measurement system in place should ultimately review
organizational strategy, aid with implementation and offer directive feedback
should the organization need to make adjustments, or if they are well-positioned
for success (Hulthén, Näslund, and Norrman, 2016).

Strategic management of operations for service-based industries must
begin internally, with leadership recognizing the importance of systems
thinking, team learning, and data analysis. These tools help to clearly define
objectives, determine requirements for operations, and incorporate data
analysis as a method of benchmarking to determine a firm’s competitive advantage
and market position. These items help align day-to-day operations, and give
purpose to end results. Change an improvement can only occur if the subject
matter is digested and applied. Clear definition of goals and purposes is
necessary for all stakeholders to understand the value and function of the
services provided by the company, and the value of the services or product
available to customers. Applying systems thinking methodologies to an
organization will ultimately help the company establish competitive awareness
in the market, while constantly seeking new information and refining data to
make improvements to internal processes to fuel performance. A dynamic approach
ensures the services company is flexible and can adjust processes as needs
change. Managing the processes and measuring success is imperative to change. Systems
thinking and operations management planning resources will ensure efficient
resource allocation and lead the company to sustainable growth and stakeholder
satisfaction.

 

 

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