Operation Management in Business

Introduction 2
Strategy 2-3
Operations management: Definition and importance 3-4
Key elements of OM 4
How cost, time quality and legal criteria is met during production 5
Using OM to achieve strategic objectives 5
Diagrammatic representation of some WH Smith operations 6
Implementation of 3 E s in business 7
How to minimize cost and maximize quality 8
Contribution of performance management to OM 9-12
Role played by operational planning and system control 12-13
Linear programming 13-14
Network plan, CPA ,Definition of quality and its maintenance 14-15
SWOT AND PESTLE 16-17

Introduction
The mission of WHS is to be the leading books seller, stationer and newsagent in Britain through provision of high quality products and services. WHS has its history back in 1792 when Walton Smith with his wife opened a news vendor shop in London. Since then it has shown tremendous growth with its major operations being travel and High Street business. It has approximately 15,000 staff many of whom come from U.K. WH Smith is part of FTSE and is also listed on London Stock Exchange. WH Smith continues to ranked high among business community due to exemplary performance.
Over the past decade, it has risen from losses amounting to £135m to a profit margin of £106m in 2013 (the guardian, 2013). This was through the efforts of former CEO Kate Swann who employed new techniques of operations management (OM) to drive the company to new heights. WH Smith has used many strategies that show the power of OM in transforming businesses. These include the three Es, linear programming in making right choices of business activities, network plans and quality maximization.It is by these initiatives that it has its way to be among top ranked retailers in U.K

Strategy
According to WHS PLC website (2013), WHS plans to extend its position as an outstanding U.K stationer, bookseller and newsagent by embarking on its strengths of travel businesses and High Street plan delivery. The overall goal is to increase the rate of profitability in the company, increase generation of cash flow and providing sustainable and enough returns to all the shareholders.
The role of the travel business it to provide value to existing shareholders by ensuring that there is organic growth in all outlets, winning contracts, formulating new formats, raising average value of transactions and overall improvement in trading efficiency.
The High Streetinitiativeplan focuses on establishing authority in all categorical hubs of the business, optimize the margins, control of costs and continuous delivery of all basics in retail business. Through these fundamental elements, WHS will act responsibly to its suppliers,stakeholders, clients.
Customers of WHS expect a professional and responsible services and in doing so WHS offer a variety of services at unbeatable price. At WHS there is a policy to regularly listen to a customer needs, feedbacks and suggestions. Each year there is an independent satisfaction survey. Regarding to the suppliers WHS is engaged in training programs and face to face meeting. Employees of WHS expect to be fairly treated and to be safe at work, meaning safe working environment. In order to do that WHS communicates frequently with their employees via newsletter.

OM: Definition and importance
Businesses that excel utilize a variety of principles one of them being operational management (OM). It refers to all administrative processes of business activities aimed at creating the highest degree of efficiency that can be achieved in an organization. OM targets the conversion of labor and available materials into goods and services using the most efficient methods with the aim of maximizing profit generated by an organization (Shim & Siegel, 1999). For example, an organization may choose to use cheap raw materials or major at specialization of its human resources in order to get maximum benefits out of it.

Elements of OM.
The key elements of OM are: Inputs, Outputs, Process

There are concepts like planning and organizing, and the involved conversion process. Inputs include land, labor, technology, etc., and outputs include products and services. Then, there is the conversion process involved that converts inputs to outputs.
Additionally, there is another process called planning. Planning involves seeing ahead and making optimal usage of available resources. With proper planning, the controlling and organizing aspects of production and operations management become more efficient to manage.
(http://www.rahulgladwin.com/noteblog/business/POM/objectives-and-elements-of-production-and-operations-management.php)

How cost, time quality and legal criteria is met during production

For excellence in business, organizations must produce goods and services on time at to cost in order to win comparative advantage over other firms in the industry. In doing this, it must maintain the quality of goods and services that they offer to the customers in order to continue performing in the market (Kumar, 2006). In all its undertakings, it must work within the set laws in order to avoid interference by legal bodies that may result to its termination. For example, every supplier selling raw materials must fill a form to ensure that all the products meet the set legal platform.
Using OM to achieve strategic objectives
Operations management plays a critical role in achieving strategic objectives because it overlaps with all other functions such as financial roles, management of HR and marketing. Each of these components has a strategic role aimed at maximizing profits. This is done by focusing on two fundamental aspects: Income or revenue and cost or expenses. WH Smith justifies this by reviewing its strategic plan which targets travel business and High Street Plan. Element of product differentiation is also essential in hitting the strategic objectives which is achieved through OM. This helps in increasing the number of units that are sold (Maxi Bone, 2012). For example, the operation chart below indicates increase in brands sold for WH Smith. Policies must also be followed in line with code of ethics. It is also ETI member which ensures that all its activities fall under corporate codes governing supply chains. (WHSMITHPLC, 2013)

Diagrammatic representation of someWH Smith operations
The diagram shows a typical case of responsible sourcing which is a feature made possible by operational management. From 2010 to 2012, there is significant rise in the number of units sold which translates to increase in profits. Every supplier selling raw materials to WH Smith is expected to fill a questionnaire that gives details of the source of raw materials to ensure that all non-recycled ones come from legal sources as dictated by the law. This helps inconservation of available forest resources.

Implementation of 3 Es in business
In order to measure and make improvements in business performance, economy, efficiency and effectiveness model is necessary. This is what is referred to as three E’s model.Effectiveness is defined by what the business achieves. It is a measure of whether the business hits its targets or not. The manager should ensure that there is proper team coordination (Gemuenden, 2012) For example, an organization may comprise of a very hardworking team but if the team fails to meet the targets of the organization, then it is ineffective. In WH Smith, the major goal was to move from the major losses incurred there before and start enjoying the profits. Since this was achieved, the element of effectiveness is met. Effectiveness is purely measured by comparing the results with the set objectives.
Efficiency is a factor of inputs that are necessary for generation of outputs. It is about the methods used for work to be completed. It is the role of operations manager to devise ways aimed at enhancing efficiency. For example, if WH Smith used less papers and labor to produce its products, then there is improvement in efficiency. It is measured at every part of the business processes.
Economy covers financial elements of operations taking place in the business. It is argued that this is one of the factors that should be considered when making improvements in efficiency. However, due to its critical role in today’s businesses, it is considered separately. It is measured by getting the value of the resources that are being consumed compared to output value.
How to minimize cost and maximizequality
Organizations that have high performance have a well laid out strategy that ensures that costs are minimized and quality maximization. WH Smith believes in maintenance and improvement of reputable standards for their customers with regard to quality of products that it delivers which is critical in creating appropriate business sense. To ensure that this is met without incurring losses, it cuts down the costs by using raw materials like recycled products to ensure that it does not incur unnecessary cost that would make them charge more leading to reduction of market for their products. This reflects the level of commitment towards quality delivery to WH Smith customers. However, there is great tension between minimizing cost and maximization of quality largely because there high quality usually comes with additional costs. It is a big challenge considering the fact that there are other firms in the same industry with which the business competes with to win more customers. Minimizing costs must go together with economies of scale which can be achieved through centralization of activities of a business (Kumar, 2006). Globalization also helps to counter the challenge that comes with minimization of cost while maximizing quality since because the organization can get raw materials from many parts of the world at favorable prices unlike a small business that may not be in a position to expand their sources. Firms can also apply flexibility concept of operational management by importing semi-assembled or processed materials which again cuts the costs further without compromising the product quality. This is exactly what Kate implemented in WH Smith to make high profits.
Contribution of performance management to OM
In business work place today, performance management is very important. Pressures in businesses keep increasing every day which calls for more effectiveness and efficiency, proper methods of executing business strategy and ensure that it can achieve greater goals with fewer resources in order to remain a potential competitor. Operation management faces many challenges when performance management is not properly implemented due to internal obstacles. This is a result of negative views that many people have towards performance management. With this in mind many companies that have well-set future prospects are putting more effort in this sector in order to make them among the leading companies in the future. To achieve this, they come up with rigid guidelines and effective practical steps that ensure that performance management is significantly improved.
According to Kumar (2006) there are five fundamental performance objectives that relate very closely to operation management. These five are critical in aligning customer needs. In fact, WH Smith majors in achieving them which has made it excel over the past ten years of Kate’s leadership. They include: quality, dependability, speed or time, flexibility and costs.
Quality revolves around use of the right human resources and materials that ensure that the organization does not incur unnecessary costs. A typical case is where a firm uses properly trained labor to ensure that the level output is high. Quality deals with doing things the correct way in order to fit a certain purpose as per given specifications. This poses a challenge during OM strategy because it is influenced by other factors such as labor. For example, a company cannot produce quality products and services if it does not have appropriate labor. WH Smith ensures that there is conducive environment to enable employees produce quality goods and services. To do this, everyone treated fairly, respected, involved and listened to. People get satisfaction based on their accomplishments, friendship and joy they get from their work place.
Speed ensures that things are done fast in order to reduce lead time which overall effect of minimizing lag. For many enterprises, degree of turnaround time is the basic factor that differentiates them from other competitors. Operations manager must look into internal chains in order to increase value and efficiency and hence minimize lag in the system. For example, in the production cycle where there is specialization, every employee must meet specific speeds in order for the process to run smoothly. There are many tools that operations managers can use to measure this.
Dependability has to do with specialization where by an organization ensures that all the tasks are not done by one person. Some of the employees may be purely marketers whereas others may major in production line. This ensures that all members need each other for the business to excel. Dependability is the aspect that involves completing tasks on time and keeping promises made to suppliers and customers. This is a vital element since it determines reputation of the organization. This is achieved by making bold promises and ensuring that they are meant. At times, it becomes a major challenge in operations management because lack of this significantly ruins reputation of business and may take long time before it recovers. Going by history of WH Smith, 10 years ago its reputation was significantly affected which is one of the reasons that made it incur major losses. However, with commendable leadership of Kate, its reputation took a positive path making it among the best retailers in U.K.
Flexibilityallow an organization to venture into other businesses in order to get more profits. Firms must be flexible to ensure that their products meet varying needs of customers that are ever changing. Static firms are likely to lose major share of marketplace to other competitors who are ready to offer exactly what customers call for. Today, there are many companies that tailor products specifically for certain target clients. For example WH Smith majorly targets young women and teens and without producing items to meet these consumers’ needs, then the company can never fit in the market or even make profits that it enjoys today. Similarly, the business must ensure that it produces different brands because even the target market has varying needs. For example, young women may like to buy a certain design of clothes but not all go for the same color. These variations exist and the performance and operations management sectors of the business must be aware of this in order for the firms to thrive.
The final element which is very important is cost of product and services. These two should be provided at cost such that the enterprise can show their margin in the market. There are two approaches used to achieve this. First is by economies of scale which enables a firm to produce in large scale making it possible for them to provide services and goods at prices that relatively low. The second approach is that of competitive advantage through personalization and customization. This increase the possibility of increasing profits making it possible for the firm to cope with overheads that may arise during production process.
WH Smith chief executive officer Kate Swann applied these unique principles of operational management which made the organization achieve great success within a decade. When Kate arrived at WH Smith back in 2003, the organization was facing major challenges with losses recorded at £135m. Through Kate’s new strategies, the losses have from then been turned to a profit margin of £106m in 2013 (the guardian, 2013). This was through application of the principle of cost. Equally the shares languished at 250p before Kate entrance and are currently getting to 650p. Today, Kate ranks among the best regarded retailers who are highly paid.
Kate approached the retail business with different views from the existing ones that were traditionally used. One of the first principle of operational management that Swann used was flexibility where she decided to pull out of DVDs and music business after noting that the profit margin was significantly low in that specific business. This was viewed by rivals as an inappropriate move but the fall of HMV and Zavvi justified her bold move. She focused on the most profitable businesses followed by significant cut down of the cost. This was a brilliant management principle to use.
Unlike other retailers who have intensified their investments in digital world, WH Smith strategized on Funky Pigeon site to cut the unnecessary costs further. Kate has the plan of opening more shops to sell the same.

Role played by operational planning and systemcontrol

Planning and control of operations in business involves control and scheduling of materials, capital input and labor in order to give expected quality and quantity output using efficient means. Operational planning with control aims at forecasting future demand for system outputs.This method is very clear for WH Smith where the firm abandoned business in music and DVDs after making projections that these would not contribute towards achieving its goals. However, no matter what kind of forecasting methods a business apply, it is usually a major challenge to meet demand of products using the capacity that the firm uses at some defined time. In fact, new changesin market and changes in levels of competition can render the forecasts invalid plus changes in capacity. In such cases, there is need for shorter term decisions on the side of management in order to meet changing demands.

Linear programming in business
Linear programming in an optimization technique that aims at maximizing profits whilst minimizing costs of operation. This technique analyzes variables, functions and constraints of a given business to produce an ideal model that can be used to improve performance.Process of linear programming requires that the analysts study variables that are bound by defined constraints since they keep changing. The analysts try to map low inputs to the business to produce high outputs. For example, a firm may use this concept to determine the optimum number of employees that can give favorable output
Linear programming is achieved using mathematical equations that determine outputs when given the inputs. In this mathematical model, variables such as inventory costs, materials, marketing costs,must be put into consideration. Linear programming offers a way of creating and implementing economic strategies that will give the best optimization to enable them succeed. Actually for all problems, a linear programming model can be developed to help make predictions (Bender et al., 1992)
For WH Smith, concept of linear programming can be seen. The company used a lot of resources in music business that came with a lot of operational costs but had very low profits. Through leadership of Kate, linear programming was used to analyze the situation where it was noted that it was not a profitable business to invest in. Comparing the inputs that were required with the outputs it was literally impossible to make desirable profits. That is what accelerated the process of quitting it.
Importance of Network plan and CPA
Business network plan is an effective marketing method used to develop opportunities for sales and contacts based on introductions and referrals. It can be achieved through meetings, websitesor any other method of creating contacts. WH Smith has over 673 travel outlets that make its cover wide regions by creating many networks. Critical path analyses is a way of planning complete project. It give us an option to find those parts in project that cannot be delayed and those where “slack” time exist. It forces managers to think in logical manner. Critical path is the longest path through network. Any delay in critical activity will automatically delay the project.

Definition of quality and its maintenance

Quality refers to features and characteristics of a product that determines its ability to meet needsof consumers. It can also be viewed as progressive process of creating and maintaining relationships by assessing, making predictions and satisfying needs of customers. Quality in a business is maintained by operations department because it is the one that determines type of products to be delivered to consumers. The first step towards maintenance of quality is by considering the inputs of production. Typical examples include raw materials, integrity of machines being used, dependability and quality of work force and any other component that forms input (Kumar, 2006). For example, in WH Smith, such inputs include paper and machines. For maintenance of quality, these have to be controlled.
The second step is monitoring the entire process to ensure that no hiccups occur in the process and when they do, they are rectified appropriately. A streamlined process leads to maintenance of quality products and services. The third step involves the outputs whereby there must be a mechanism that acts as a feedback to ensure that set standards are maintained in the entire process. In many firms, this is done by using random output samples from which a generalconclusion is made regarding quality of outputs.
SWOT Analyses

Strength Weakness Opportunity Treat
Established long time ago Smaller stores have insufficient range and depth To be the first choice retailer in several key categories Increase of free newspaper and magazines
Presence in almost every Top High Street Dependence on less suppliers To develop better services for clients Supermarket like Tesco
Brand is a serious name No TV presence To target some market in Europe and Far East Direct competitors Staples and Waterstones
Involvement in Charity Piracy growth
Large customer base Online stores-Amazon
Experienced Staff Specialist card retailer like Moon pig
Opportunity. WH Smith is expanding internationally and plans to open 30 kiosks in China. (BBC-22108188)

PESTLE

Political – Because government change the taxation law and constantly changing taxes for the best possible control, each time that happen WHS get affected. This connection between WHS and the Government is normal, but every change affect the company WHS have to follow the laws.

Economics- The business continues to be highly cash generative and delivered profits up by two percent. We continue to invest in the High Street estate and opened 39 new stores during the year, including the stores acquired from the British Bookshops and Stationers chain. WHS have been examining currents trends to be sure there is plan B or Backup plan. As the current climate is uncertain it is good time to look into other strategies as WHS are still doing well.
Walker Boyd Chairman 13 October 2011
(WHS2011 Annual Chairman Statement)
Social- Due to illegal copies and piracy WHS discontinued selling cd’s, DVD’s and games. Also because of the growing aging of the population WHS have to take into consideration their spending habits because of the tax rates and inflation. Over 55’s obtain the most purchasing power and in the changes in society this demographic will became the main target audience.

Technology- Already mentioned WHS stop selling games and DVD’s and because of that they try something innovate called Love Film. This is a services which let the consumers to watch a movie online or to rent movies or games which are send trough the post services. WHS also launch an e-reader device called KOBO to be direct competitor to amazon Kindle or IPad.

Legal- Government can increase the prices for oil and that could affect WHS meaning they have to raise the prices because of their delivery charges.

Environmental- WHS have lowered their carbon footprints and the idea is to continue doing that (WHS 2011)

References
http://www.bbc.co.uk/news/business-22108188
Bender, F., Kahan, G., & Mylander, C., (1992) Optimization for Profit: A Decision Maker’s Guide to Linear Programming. Philadelphia: Haworth Press.
Gemuenden, D., (2012). The 3 E’s for True Business Process & Tech Integration. Field Marketing Manager Strategist & Services Brand Manager, Dell Services. Retrieved from http://www.enterpriseefficiency.com/author.asp?section_id=2157
Maxi, B.,(2012). Strategic Role of Operations Management. StudyMode.com. Retrieved 03, 2012, from http://www.studymode.com/course-notes/Strategic-Role-Of-Operations-Management-945907.html
Our company. (n.d.). About WHSmith. Retrieved December 1, 2013, from http://www.whsmithplc.co.uk/about_whsmith
Shim, K., & Siegel, G., (1999). Operations Management. New York: Barron’s Educational Publishers
Kumar, S. (2006). Production and Operation Management. New Delhi: New Age International
http://www.rahulgladwin.com/noteblog/business/POM/objectives-and-elements-of-production-and-operations-management.php
(2013).WH Smith: Kate Swann turns £135m losses into £106m profit in a decadethe guardian (web log). Retrieved Jan, 2013 from http://www.theguardian.com/business/blog/2013/jan/23/wh-smith-kate-swann-profit

http://www.whsmithplc.co.uk/docs/reports/WHSmithCR11_FINAL.pdf (page 6 carbon footprints)

http://www.whsmithplc.co.uk/docs/reports/WHSmith_AR2011_FINAL1.pdf CHAIRMAN STATEMENT (page 4)
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