Critically Appraise the Importance of Effective Operations Management in Improving Productivity in Retailing - Essay Example

of the of the Concerned Management 29 February Critically Appraise the Importance of Effective Operations Management in Improving Productivity in Retailing Introduction Operations management is the branch of business that is primarily concerned with management, configuration and re-configuration of business operations related to the production and manufacturing of goods and services (Lowson 2002, p. 5). Operations management brings in an element of efficiency in the business operations by looking to it that that business operations rely on an optimal exploitation of resources and tend to meet the consumer expectations in an efficient and satisfactory manner (Lowson 2002, p. 10). Operations management pertains to the management of all the processes associated with the conversion of inputs like finances, raw materials, energy and labour into the intended outputs like services and goods (Bassett 1992, p. 20). In an operational context, the efficiency in operations management has a lot to do with the policy decisions made by the senior management. It is usually the top management in the organizations that plans the strategy in operations management and tends to revise it as per the altering needs and requirements, while the line managers assure that the policy decisions get implemented in an accurate manner by taking the apt tactical decisions. Operations management in the area of retail is pivotal to the influx of improving productivity. Operations management in retail requires an optimal management of varied associated operations like cost control, logistics and merchandizing associated with the movement of products from production facilities and stores to the hands of the consumers (Nersesian 2000, p. 153). Primarily retail is about curtailing costs so as to extend to the customers the required goods and services at most competitive prices. Operations management in retail has to do with managing and controlling the operating costs within the affiliated organizations (Nersesian 2000). It encompasses all the related and affiliated activities that have to do with the production, distribution and delivery of services of goods and services in a retail organization (Nersesian 2000). Current Characteristics of retail Industry Retail industry is an area of business that has quiet a wide spectrum. It involves small stores serving the select neighbourhoods to behemoth stores catering to the needs of large urban hubs. By its very nature, the retail industry tends to be immensely dependant on consumer spending. This is more so, considering the current economic meltdown, which has greatly compromised the spending ability of the consumers. The small retail stores are already a thing of the past because they failed to meet the customer aspirations in a cost effective and efficient manner. The internet, which has emerged as a ubiquitous medium for conducting retail transactions has added one new dimension to retail. The big departmental stores are also losing their appeal and they are trying hard to reposition themselves. The big departmental stores are under immense pressure to reposition their product lines to meet the fast changing consumer aspirations and preferences (Miron 2002). The emergence of discount stores in the retail scenario is one more salient trend that is poised to stay (Davies & Ward 2002). Discount stores offer varied incentives to the consumers like competitive low prices, money back guarantees, etc. This is combined with varied other features like floor help and an easy access to the merchandise. The coming of Category Killer retail stores is one other major development. Category Killers concentrate their focus on a specific product category and try to outrun their competitors in that category by appropriating a lion’s share in that category (Davies & Ward 2002, p. 105). Category Killers have appropriated a major share of the retail segments in which they are operational and have drastically reduced the number of players in these segments (Davies & Ward 2002, p. 105). Courtesy the direct marketing, the retail chains have found new and ingenious ways of reaching the customers sets they intend to target (Davies & Ward 2002)). This segment includes the catalogue and direct retail marketing. Though, still a major proportion of the consumer needs are met by retail stores, the non-retail stores are also fast cutting into the market share of retail stores (Davies & Ward 2002). Retailing is a business sector that is expanding at a gargantuan pace. It goes without saying that demographic changes also do have a direct impact on the retail demand (Davies & Ward 2002, p. 81). The retail stores the world over are keeping an eye on the impact of demographic changes on the retail demand and are fast adapting to respond to these changes (Davies & Ward 2002, p. 252). The other big factor that is influencing the retail sector is that the retailers who are competitive are resorting to a strategy of mergers and acquisitions. Cost effectiveness and efficiency are the current buzz words in the retail industry and operations management is the speciality that is bound to have a direct impact on the efficiency and productivity of retailing businesses. Retail-Challenges Ahead It goes without saying that the retail industry is primarily a consumer driven industry. The recent economic meltdown and the commensurate alignment of market forces have ushered in many challenges in the retail industry (Gordon 2010). The current economic recessions has made the consumer trends more volatile and had an accelerating impact on the consumer trends. The retailers today in a quest for survival, profitability and productivity are required to fast adapt to the changing market scenarios and consumer trends. A plethora of reasons like the expanding operating costs, a shrinking consumer loyalty, saturation of markets with fast expanding new stores and online retailers, the impact of digital media on consumers preferences and shopping practices, the influx of multi-channel buying, a shrinking purchasing power at the disposal of consumers, and a fast aging population are bound to constrain the expansions potential of retailers the world over and will have a drastic impact on the overall profitability of the retail business (Gordon 2010). In order to retain productivity in the fast changing business environment and to cement their future success, the retailers need to resort to innovative solutions to create value for customers. They need to have a serious look at the operations management aspect of their business to dilute the incumbent risks and to effectively cut down on high operating costs. Effective operations management is central to augmenting productivity in the retailing industry in the current times. Operations Management Operations management is primarily about astutely managing the processes that go into the distribution and production of goods and services (Bassett 1993, p. 147). Time and again it has been seen that the small retail businesses do not discernibly talk about operations management, yet they time and again engage into the activities that are mostly classified by management schools as operations management. The major activities that primarily involve operations management are product creation, product distribution, product development and product manufacturing (Bassett 1993, p. 148). Not to say that most of these activities have to do with services and product management. Hence, operations management primarily ascribes to most of the operations carried out in a retail business. So, there is no denying the fact that the discipline of operations management is of pivotal relevance and importance in the retail industry, as far as the objective of improving productivity is concerned. These activities may ascribe to the management of supplies and purchases, logistics and supply chain management, inventory control and management, warehousing and storage, and quality control (Bassett 1993). In retail, operations management is important because in this sector more than average stress is laid on assuring the effectiveness of processes and inculcating efficiency into the system. Hence, it goes without saying that in retail, operations management may many a times include an accurate measurement and a professional analysis of varied processes that are internal to an organization. Eventually, the nature of overall operations management is determined by the nature of products sold and activities carried out by a retail business. In retail, operations management may help immensely in revenue growth and in the improvement of margins, in the reporting of risks and in assuring compliance and control, and in the overall cost management, which not to say are the activities that are usually the key to improving productivity (Bassett 1993). The Retail Sector, Operations Management and Productivity Over the years, the retail industry has been subject to a series of changes and no doubt this sector is fast moving to global supply chains having a direct impact on lead times and overall supply chain management (Varley 2001). Retailing is an industry that is marked by great variations in the overall financial performance of organizations that gets reflected in their stock prices and the operating efficiency of firms having a direct influence on gross margins, returns on assets, inventory turns, and the gross margin return on inventory (Varley 2001). In retail, the operation managers are required to make decisions at varied levels that have a direct impact on the productivity, are they strategic decisions, tactical decisions or operating decisions. These decisions have an impact on varied aspects of a retail business. It is always a challenge for the retail managers to reach the customers at the right time, which involves a continual checking of stocks (Varley 2001). Astute operations management has a direct impact on logistics productivity in the sense that it takes care that the a retail organization ascribes to safe, reliable and affordable transportation, that the organization remains in constant touch with the supply and distribution networks, and that the organization enters into effective partnerships transportation firms to assure an optimal sharing of the costs of transportation (Varley 2001). ` The operations managers also play an important role in productivity enhancement through the selection of apt suppliers and effective product decision making (Lowson 2002). The supply chains in the retail business tend to be very complex as compared to any other business (Varley 2001). Often the supply chains are long and include the participation of diverse players. Hence, on the part of the operations managers much effective decision making is required in the context of supply chains so that the lag times may be reduced and quick responses may be accrued. Hence, it is the operations management that allows the retailers to strike the optimal balance between price, cost cutting, innovation and adaptiveness to assure productivity and success in today’s complex business environment (Bassett 1992). Operations management also helps the retailers to test the new products in the markets and to test the winners amongst them. Operations management enable the retailers to select the suitable manufacturers allowing for a considerable negotiation on prices, deliver timing and quality, and making way for the centralized buying (Lowson 2002). With the increasing influx of globalization in retail, the operations managers are also required to deal with many intermediaries, while importing and exporting the goods (Varley 2001). It goes without saying that retail being a business characterized by a short lifecycles, high impulse purchases on the parts of retailers and customers, minimal predictability and intense volatility, in retail it is next to impossible to strike profitability without resorting to effective operations management (Harwell 2006)). Not to say that retail being a business directly dependant on consumer response, managing of relationships with the customers and suppliers happens to be a key issue facing the operations managers (Varley 2001). One other factor that justifies appropriate operations handling on the part of retailers is the shifting of the manufacturing facilities from the developed economies to the low wage countries (Lowson 2002). The retailers aspire to benefit from the low wages in the developing economies to assure price competitiveness and to be able to offer big discounts (Varley 2001). However, procuring from developing economies means that the retailers are to contend with long lead times and hence are required to make accurate long term forecasts that are next to impossible without effective operations management (Lowson 2002). Accurate operations management allows the retailers to use time as a leverage to boost competitiveness and productivity. Conclusion In a futuristic context, the key to success in retailing is largely dependent on the ability of the retailers, to opt for heightened understanding and trust in the supply chains through the sharing of risks, to respond promptly and accurately to the consumer preferences, to optimise the total cost associated with value chains and to enhance the benefits for both the consumers and the suppliers by improving communication. Pragmatically, such an endeavour certainly calls for effective operations management. Reference List Bassett, Glenn 1992, Operations Management for Service Industries, Quorum Books, Westport, CT. Bassett Glenn 1993, The Evolution and Future of High Performance Management Systems, Quorum Books, Westport, CT. Davies, Barry & Ward, Phillippa 2002, Managing Retail Consumption, John Wiley & Sons, Chichester. Gordon, Edward E 2010, The 2010 Meltdown, Praeger, Westport, CT. Harwell, Jack 2006, ‘Sales and Operations Planning in Retail Industry’, The Journal of Business Forecasting, Vo. 25, Issue 2, pp. 4-7. Lowson, Robert 2002, Strategic Operations Management, Routledge, London. Miron, John R 2002, ‘Loschian Emerging Competition in an Emerging Retail Industry’, Geographical Analysis, Vol. 34, Issue 1, pp. 34-40. Nersesian, Roy L 2000, Trends and Tools for Operations Management, Quorum Books, Westport, CT. Varley, Rosemary 2001, Retail Product Management, Routledge, London. Read More