1. Introduction:
How
is it possible that an employee from a particular outlet of a retail superstore
can access the inventory information of a nearby outlet in real time? How come
a traveler can successfully enquire about the seating arrangement of a running
train, looking to board it from an intermediate station? How does an inventory
manager get instantly notified of a certain product running out of stock soon?
And how does the manager, without having to travel even a yard, replenish the
stock almost in real time?
The
only answer to the above-stated questions is technology. A simple ERP
(Enterprise Resource Planning) software will do everything asked above, as it
combines different departments of a business organization, thus facilitating
effective real-time communication between departments (Anderson 2021).
While
the steam-powered first Industrial Revolution saw an unexpected communication
boom and the spread of industrial operations in late 18th-century Europe,
business operations nowadays are heavily reliant on smart devices that are
getting smarter with almost every passing day. Hence comes the term Fourth
Industrial Revolution, alternatively known as Industry 4.0.
A
few taps on a smart device such as a smartphone can now initiate a large-scale
operational process in businesses. The overall digitization of the industrial
sector has certainly increased the efficiency level of organizations, leading
to more effective and accurate decision-making based on real-time data
processing and significantly improved production output.
Advanced
technologies such as the Internet of Things (IoT), Machine Learning, Artificial
Intelligence, Cloud Computing, Big Data, and 3-D printing are being
increasingly adopted by decision makers in their day-to-day management of
operations. Seamless IT-OT integration has made factories smarter than ever
before, while 3-D printing is facilitating an increased volume of custom
manufacturing. (‘What is Industry 4.0?’ 2022)
Increased
automation in business operations has already seen instances of machines
replacing humans, especially in the manufacturing sector, a trend more likely
to gather pace shortly. Moreover, every stage of operations is constantly
getting more sophisticated, with enhanced demand for innovation not just in a
firm’s offerings— catering to what, who, how and where aspects— but in its
technology usage. A significant portion of the resources invested in research
and development (R & D) today unmistakably goes to innovating technology
itself. As a result, competition in a technology-driven market economy is
highly intense today, and justifiably so. But even more importantly, the level
of competition now appears to have gone beyond Porter’s Five Forces (1980) -
both the industry participants and vertical participants (consumer and supplier)-
as machines are now often pitted against humans not in the external but within
the internal resource base of the organization.
Technology
definitely offers innumerable opportunities, for which any possible limit seems
to be the sky. But then, opportunity brings with it a considerable threat as
well. This is undoubtedly a cause of concern- may not be in the short-term, but
definitely in the long-term- for any decision makers involved in operations
management. In the subsequent sections of this report, I intend to elaborate on
various contemporary issues in strategic operations management, particularly in
close relation to technological advancement in the industry sector.
2. Strategic
Operations Management and Advanced Technology:
Before
getting deep into how technological advancement in business organizations has
made way for greater efficiency in everyday operations management, with both
short-term and long-term goals in mind, it is primarily important to understand
a few words describing operations management.
Operations
management is a set of activities that include planning, organizing and
overseeing the resources involved in the process of production and
manufacturing to reach the customers with the products and services. This
delivery-centric strategy always focuses on resource management, aiming to
achieve maximum customer satisfaction with an efficient (or minimum) use of
resources.
Operations
managers or employees tasked with this responsibility tend to deal with
different issues in production and service systems. Activities such as
formulating operations strategy, product design and process designs, quality
management, inventory management, capacity building, analyzing operations
performance, production and facilities planning, innovation in products and
services, and managing operations technology fall within the purview of
operations management. An operations manager is expected to sincerely carry out
these functions and gather adequate knowledge about the prevalent condition of
the firm’s internal and external environment so that he or she can make
informed and effective decisions. A much more holistic view is held by modern
definitions of operations management. (Reid and Sanders 2019)
Now,
I am going to present a case study here to further discuss different aspects of
operations management:
2.1 A Case Study:
Automation in Bangladesh’s Readymade Garment (RMG) Sector and Its Implications
in businesses:
Bangladesh
is an emerging economy in South Asia with a per capita income of over $2500, a
three-fold increase over the past decade (The Financial Express 2021). The
country’s economy, however, is not diversified enough, with its foreign
exchange largely dependent on the $30 billion Readymade Garment (RMG) sector
and earnings through foreign remittance that saw hitting a new record of $22.07
billion in 2021. (New Age 2022)
Bangladesh’s
position is just behind China when it comes to exporting garments and textile
products. However, technological advancement in recent years has ushered in a
conscious move towards automation, resulting in considerable job losses. It hit
the sector’s female workforce—who comprises the larger share—even more acutely
compared to their male counterparts, largely due to a relative lack of skills
and education to adapt to automation. (Ullah, Akhter 2021)
As
per ILO and the Bangladesh government’s a2i project, it is predicted that
automation will drive 5.38 million workers out of their jobs in the RMG sector
by 2030, a sector where 4.2 million people are currently employed. Technologies
such as robots will take the place of humans in the production line, while this
large jobless workforce will have no other alternatives as they are not skilled
enough to switch jobs. Moreover, new jobs created by automation will not be of
much value to them, as operating automated production requires some degree of
education and technical skill. While automation is unavoidable in the industry,
it appears to be posing challenges for both employees and employers. (Khan
2019)
Bangladesh
may have a demographic dividend in hand, but it would require significant
investment in training and education for that demographic advantage to be
utilized fully and efficiently. Automation in the RMG sector has already
resulted in a significant reduction in overall production cost while increasing
production volumes by up to 40% for the same amount of investment. Also, this
additional profit is likely to increase further in the next few years as
factories will oversee a significant automation drive, thus, downsizing the workforce
at the cost of machines, which will only incur a one-time fixed cost.
Factories,
however, may well be enjoying increased profit margins due to technological
shifts in production, but they will soon face some challenges as well.
As
we know, the task of an operations manager is to oversee the transformation of
resources from inputs to outputs, thus producing the finished products or
services ready to be delivered to, or exchanged with, the consumers. Resource
inputs are of two kinds: (a) transforming inputs and (b) transformed inputs. In
the case study above, factory owners are reaping the benefits of transforming
inputs in the form of more efficient production facilities and decreasing the
costs of the workforce. But the question that arises here is how long they will
be able to sustain this advantage.
Jay
B. Barney's (1991) Resource-based View (RBV) propounds that a sustained
competitive advantage can be achieved by combining and utilizing a firm’s
internal resources, both tangible and intangible. The above-mentioned factory
owners are also exploiting their internal resource base for the purpose of
enhancing profit and more efficient production. However, what RBV here fails to
recognize can be easily identified from the perspective of Dynamic Capabilities
(DC).
Dynamic
Capabilities (DC) theory, another theoretical perspective of operations
management, was proposed by Teece, Pisano and Shuen (1997). This view focuses
on integrating both internal and external resources, thus, utilizing a combined
resource base for any required reaction to certain changes in the external
environment. This holistic approach, unlike RBV, can better analyze the
condition of the factory owners both in terms of their current advantages and
their future challenges. For factory owners, a shortage of skilled laborers capable
of adopting the automation process could be a future threat because a new
generation of the skilled workforce will seek significantly higher salaries.
Instead, a training program for the unskilled or low-skilled current workforce
could help them avoid a future crisis for which no cost-effective solution is
currently available. However, RBV can help the factory owners formulate
strategies concerning how to use their skills and resources to great effect,
drawing a sustained competitive advantage.
Since
the publication of Porter’s five forces (1980), external resources have
received more attention in relation to strategy formulation. The connection
between internal resources and strategy was neglected for more than a decade
(Grant 1999).
Barney’s
(1991) Resource-Based View theory was significant in bringing wider attention
towards internal resources and their importance in strategy formulation.
Grant’s (1991) characterization of internal resources, also known as VRIN (Valuable,
Rare, Inimitable, and Non-substitutable) has also gone a long way towards
establishing an organization’s internal resources to elicit competitive
advantage.
The
difference between RBV and DC lies in their approaches. While RBV aims to
elicit competitive advantage in the long run and hold onto it, DC administers
an organization’s capabilities towards its competitive survival even in the
face of changes in the external business environment. Although DC is often
considered an extended version of RBV, there is enough evidence indicating just
the opposite. Scholars Eisenhardt and Martin (2000) significantly contribute to
the widening scope of DC, entailing the process of product development and
strategic decision-making.
Economist
Oliver E. Williamson’s (1979) Transaction Cost Economics introduced a
different observational perspective, giving rise to the popularity of the term
"transaction cost" in the literature of economics. To simply put,
transaction costs are the aggregate sum of all economic transactions in a
market. In other words, the costs of exchanging resources- both within the
external and internal environments- are transaction costs. From an
organization’s point of view, the smaller the transaction costs the better.
Transaction
costs can be of three kinds such as Search and Information costs, Bargaining
and Decision costs, and Policing and Enforcement costs (Dahlman 1979). However,
there are four different factors in transaction costs, as proposed by Douglas
C. North (1992), and they are measurement, enforcement, ideological attitudes
and perceptions, and the size of the market. Williamson also proposes four
determinants of evaluative mechanisms: frequency of exchange, asset
specificity, uncertainty, and the threat of opportunism.
3. Operations
Performance and Technological Advancement:
There
are five different parameters to measure the performance of operations within a
firm. They are Quality, Speed, Dependability, Flexibility, and Cost.
Technological advancements like 3-D printing have opened up a whole set of new
opportunities that were never available before. Custom-made designs have never
been as facilitated as they are now thanks to 3-D printing technology. In
addition to such flexibility of manufacturing, issues of quality also rarely
arise in a computerized production capacity. That is the reason European and
North American buyers of garments and textile products are increasingly
demanding that RMG factories in Bangladesh adopt automation as early as
possible. It also facilitates the production, which eventually drives down the
cost and enhances production volume. Speed is another area of measuring
operations performance, and technologies like edge computing and ERP
(Enterprise Resource Planning) facilitate almost real-time data transmission,
and latency time is significantly reduced during operations. Moreover, business
processes powered by artificial intelligence and machine learning are highly
consistent in terms of performance compared to any manual production process.
Technologies like digital twin also allow simulation of a production or
manufacturing operation so that a production manager or people above him can
test a particular process before putting it into practice, thus achieving
greater reliability.
The
cost performance of technology-powered operations is also highly satisfactory.
Following the 4 V’s (Volume, Variety, Variation, and Visibility) of operations
management, the cost performance of operations can be measured to a great
extent.
A
technology-backed production capacity can handle a large volume of products,
thus, creating an opportunity for a larger profit, but the degree to which the
organization can capitalize on that depends on various other aspects, like
winning the trust of consumers, and thus, giving rise to consumer demand. Then,
the variety aspect also works almost the same way for a tech-powered company,
as it is expected to be better equipped to manufacture a diverse range of goods
and/or services. Here too, the success depends largely on the brand positioning
of the organization.
Variation
in demand is highly dependent on external factors, and success depends on
accurate assumptions of changing demands in the market- both the extent and
frequency of such changes. However, technology makes it easier to make
assumptions with tools such as Big Data. Moreover, a production facility
featuring powerful technology must be better placed to adapt to the frequent
changes in demand, though success depends on many factors internal to the
operations.
Visibility,
again, is another area that inherently requires the support of advanced
technology. For example, the product tracking system of an e-commerce site has
internet and communication technology at its core. Visibility issues in the
manufacturing business may not be easy to explore and exploit.
4. A Few Challenges
for Technology-powered Operations:
While
advanced technology ticks almost every box of performance satisfaction, there
are a few glitches to mention here. First of all, a tech-powered production or
manufacturing facility entails a large sum of initial cost, that is, fixed
cost, which- no matter how cost-effective it may be proven in the long run- is
not everyone’s first choice. Small and medium-sized organizations cannot simply
afford large-scale technology setup, thus giving some ground to the major
players in the industry sector.
Another
negative of technology in production is, in fact, one of its positives.
Large-scale machine-made products may meet the high consumer demand while
maintaining quality consistently, but yet, they cannot replace or replicate
hand-made antique products specific to a particular country or location, for
example, traditional hand-woven Muslin saree and Jamdani saree found in
Bangladesh.
5. Conclusion:
Technology
plays a significant role in today’s business operations, and constant
advancement in technology will only see this trend gather pace in the years to
come. AI, Machine Learning, 3-D Printing, and ERP are not the pinnacle, rather
just the part of a process constantly leading towards newer heights. Newer
technologies bring with them greater opportunities, making way for finer
details and enhanced communication. However, for all the advancements and
advantages that technologies are ushering in, there are a few challenges as
well that no one can escape. An industry insider working as an operations
manager, or anyone tasked with similar responsibilities, must keep in mind that
the blessings of ever more advanced technology are also making the market
increasingly competitive, with each and every participant striving for the next
level of sophistication.
While
the market itself is not necessarily a level-playing field for all to grow
equally and uniformly, technology adoption does not follow any form of
uniformity within the market participants. Naturally, a long-established market
player will always have a better capability of adopting technologies compared
to a relatively new entrant desperately looking for its initial footing.
However, small and medium-sized business organizations can make some valuable
ground for themselves, given some smart, innovative, and well-planned moves
towards progress.
Operations
management clearly entails strategic decision making at different levels of
operations, and taking those decisions strategically right goes a long way in
ensuring seamless, efficient and successful operations performance. As
technology is getting ever more influential in business operations, choosing
the right and effective technology setup in accordance with the organization’s
values, needs, capabilities, and, most importantly, goals and ambitions are
also receiving increasing attention in strategy formulation and decision
making. The key is to strike the right balance between the technology chosen,
its practical utility for the operations process, and the organization’s
ability to afford it.
A
few questions may still arise in mind within the context of increasing
human-machine interactions, as evidenced in IT-OT (information technology-operational
technology) integration in many large-scale production processes. Artificial
Intelligence (AI) and Machine Learning (ML) are making machines smarter, and
this will undoubtedly continue in the foreseeable future. The question
intrigued here is whether humans and machines will always peacefully coexist
the way they always have until now, complementing each other. What if an
ever-increasing emotional intelligence in machines might one-day blur the
differences between humans and machines? Will machines ever intend to overpower
humans? If these questions seem too futuristic to ponder upon, a timely
reminder would be of jobs that low-skilled humans lost to highly skilled
machines that are not yet as emotionally intelligent as a futuristic mind might
imagine.
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