Operations Management in the Black Box

Historically, operations has been viewed as the black box wherein inputs are converted to outputs. For any organization to remain viable it is necessary that the total cost of the inputs and this conversion process is less than the resulting income from the sale of the outputs. (Cost Accounting 101). The model works whether we are speaking of manufacturing (raw materials, transformation, finished goods), service (request, transformation, service) or public sector (taxes in, transformation, services out). This course is going to allow you to look at differing theories of Operations Management and try to determine if there is truth in any or all of them.

Over the past several years it has become obvious that no part of an organization or, for that matter, any organization itself operates in a vacuum. The traditional functions of any organization (accounting, quality, manufacturing, human resources, etc.) have resulted in silos of functionality with little regard to the process. When these functional silos are married to management by objectives the result can be almost humorous if it were not so debilitating.

One of the classic examples of this can be found in almost any manufacturing operation. The "manufacturing silo" will be tasked with improving performance over the course of an operating period (usually a year). One of the surest ways for the goal to be reached is through large lot size runs with few changeovers. By avoiding changeovers manufacturing can show increases in productivity (and efficiency) since there will be more output per labor hour and less idle time for changeover. Of course there is an attendant increase in inventory. Meanwhile, in the "materials management silo" the production scheduling manager is assigned the responsibility of reducing work in process inventory over the course of the coming year. One way for this to be accomplished is through the scheduling of small lot sizes and frequent changeovers. So here we have an organization using management by objectives creating an internal conflict between two silos. In this case we have a zero sum game and at the end of the year both will fail to reach their individual objectives and will be roundly chastised.

Current operations management dogma indicates that any organization needs to be viewed in terms of system theory. According to Vonderembese & White (1996 Operations Management: West Publishing Co. Minneapolis/St. Paul) "A system is a group of items, events, or actions in which no item, event or action occurs independently." (pg. 13). The interdependency among the primary functions in any enterprise becomes quite evident with the most cursory of examinations. In your own experiences with the working world you've undoubtedly encountered conflicting goals between or among functional areas. Accounting procedures that hinder manufacturing. Human Resources hiring criteria that limit the number of potential candidates who might be interviewed. Purchasing algorithms that cause rescheduling of the manufacturing floor. In every case the rules proclaimed are for the aggrandizement of the silo that promulgated them. It is only within the past ten years that the debilitating effect of these functional silos has come to the fore.

1. Describe the inputs, transformations and outputs of the operations where you currently (or previously) worked.
2. In my lecture I mentioned that we need to view organizations as systems rather than isolated functions. Can anybody relate an incident where they've seen a function's efficiency increase to the detriment of the rest of the organization?