Principles of Operations Management

This document discusses the principles of operations management and their significance in improving organizational performance. It covers topics such as resource allocation plans and strategic risk analysis for McDonald's. The document provides insights into the strategies and techniques used by the company to allocate resources effectively and manage operational risks.

PRINCIPLES OF
OPERATIONS
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 3............................................................................................................................................1
P7. Preparation of a Resource Allocation Plan......................................................................1
TASK 4............................................................................................................................................5
P8. Devising and Carrying out an SRA for McDonald's........................................................5
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Operations Management refers to a complete planning, organising as well as controlling
the operations of an organisation. It is a highly essential aspect which enhances the performance
and competence within the company to achieve its business objectives (Slack and Brandon-
Jones, 2018). The report below is based on McDonald's and is an extension of Part One, which
described the operational activities and management of the organisation. This report covers
determination of appropriate allocation of resources for operations management, along with
strategic risk analysis on operations functions of the company.
TASK 3
P7. Preparation of a Resource Allocation Plan
Resource Allocation refers to the procedure which is adopted by an organisation in
relation to assigning the assets and resources of an organisation in a way which help in achieving
the operational requirements and strategic objectives of a company. All the tangible assets which
are possessed by the firm are covered within this plan which help in a sequential and effective
allocation of the right resources with the right activity.
In context with McDonald's, the company performs several operational activities, such as,
Location Strategy, Layout Designing, Quality Management and Supply Chain Management.
Hence, there are certain operational requirements of each and every activity which is needed to
be addressed by the company (Slack, 2018). Hence, in this context, the resource allocation plan
for the company is discussed below:
RESOURCES REQUIREMENT TASKS STARTING
DATE
DATE OF
PROJECT
END
Human
Resources
Infrastructure The very first operational
requirement of the firm is related
to its infrastructure, which would
support its Location Strategy.
Human Resources would
accomplish this requirement
through effectively searching
15th
December,
2019
20th June,
2020
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prominent location fr the
company through market
research upon which McDonald's
would be building its layout.
Financial
Resources Layout
The layout design would be
requiring a prominent investment
to ensure appropriate
architectural development.
Hence, these resources would
appropriately be needed to be
allocated for this requirement as
it would help the company in
developing layout and design as
per customer preferences (Reid
and Sanders, 2019.).
22nd June,
2020
4th August,
2020
Artificial
Intelligence
Technology
Quality
Quality is one of the most
important operational
requirements of a company.
hence, within the food
manufacturing, delivering,
packaging and customer service
operations, McDonald's could use
this resource quite appropriately
in relation to use Artificial
Technology effectively in context
of ensuring perfection within
certain operations of the
company.
18th August,
2020 -
Transportation Logistics An essential operational
requirement of McDonald's is
18th August,
2020
-
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logistics, as it indulges in
everyday acquisition of raw
materials and supply of its
finished food items. Appropriate
transportation would help the
company in facilitating the
supply and acquisition which
would be prominent for time
management and effective
logistics and inventory supply
(Hitt, Xu and Carnes, 2016).
Strategies for Supporting Resource Allocation Plan along with its critical analysis
There are several appropriate strategies which are required to be implemented by the
organisation that would be supporting the overall resource allocation plan and enhance efficiency
of the company. In this context, several appropriate strategies are discussed below: Training and Development: One of the most prominent strategies for fulfilling the
requirement of infrastructure is training and development. Employees associated with
development of the infrastructure are required to appropriately and effectively trained by
using different methods, such as simulations, which would allow them to enhance their
competence in context of handling the infrastructural activities quite well and develop
appropriate location strategy, which would be fulfilling this requirement in a better
manner (Mahadevan., 2015). The biggest advantage associated with this strategy is that it
would enhance the competence and productivity levels of the employees towards
development of the infrastructure and supporting the operational requirement of the
organisation. However, each employee has different learning style which would require
the firm to adopt flexible and multiple methods for appropriately training each employee
within the company. Capital Budgeting: This strategy would be utilised to support the financial resources of
the company that would be invested within the firm towards development of the design
and layout of the outlets. It would help the company in relation to determine all the fixed
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assets that must be purchased by the firm, such as its logo, product development
machinery, etc., and which assets are required to be declined by the company. which
would further assist the firm in taking smart investment decisions. Its biggest advantage
is that all the risk involved in investment opportunity is quite effectively analysed by this
method which allows the company to take calculative decisions related to layout and
design. However, assessment of such risk could lead to several wrong application of the
investment decision due to inappropriate analysis. Hence, in relation to adopt this strategy
appropriately, risks must be assessed internally at first and then decisions must be taken
in relation to design and layout (Hosseinian-Far, Ramachandran and Slack, 2018). Total Quality Management: This strategy must be adopted by the firm while the
organisation fulfils the requirement of quality management. This technique focuses on
adopting methods and processes that keep up the consistency of the firm where the
quality is concerned. One of the biggest advantages of the company is that it helps them
deliver quality products and services to the customers which is a core requirement of the
firm. However, there could be chances where the company could adopt methods,
equipments or techniques that incur high end costs for the organisation, which could be
disadvantageous for its other operations that are dependent on its monetary support.
Hence, in order to appropriately use the same, the firm must first evaluate the alternatives
in terms of both cost and quality and then must acquire resources that are both cost
effective and quality assured. Just-In-Time Inventory Management: In this inventory management technique,
McDonald's would be undertaking the supply as per the order. This would be supporting
logistics requirement of the organisation through including the quantity that would be
required by the firm at the end of the day, which would save time and efforts of
channelising more transportation channels. Its advantage relates with the fact that it helps
the firm in cutting down the cost and ensure effective relations with its supply chain
management. However, the demerit of this method is that since McDonald's is a fast food
outlet, it is not necessary that only set quantities would be used, as it could have
spontaneous demand throughout the day or weekends. Hence, the firm must adopt certain
effective techniques which appropriately and effectively ensure appropriate stock level to
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be used throughout the day and fixed number of transport vehicles to ensure effectiveness
within the same.
Resource Based View (RBV) and VRIO Model:
Resource Based View refers to an appropriate approach which is applied by organisations
in relation to getting an effective competitive advantage. There are several proponents that are
included within the company in relation to ensuring that the firm exploits several internal and
external opportunities with its existing resources. Below are several type of resources which
McDonald's possess: Tangible Resources: These are the resources which are quite tangible, such as machines,
equipments, building, etc. In context with the firm, transportation, financial and human
resources.
 Intangible Resources: These are the ones which does not possess physical characteristics,
such as the firm's goodwill, intellectual properties and so forth. For McDonald's, it is
related to the technological resources possessed by the company and its brand image.
VRIO Model
One of the most essential aspect of RBV is VRIO framework, which appropriately
describes and evaluates several resources that helps a company in gaining competitive
advantages quite effectively. In relation to McDonald's, this model is applied below in relation to
several resources mentioned above:
RESOURCES VALUABLE RARE INIMITABLE ORGANISAB
LE
COMPETITIVE
ADVANTAGE
Transportation Transportation - - -
Temporary
Competitive
Advantage
Financial
Resources
Financial
Resources
Financial
Resources - -
Partial
Competitive
Advantage
Technological
Resources
Technological
Resources
Technological
Resources
Technological
Resources
- Partial
Competitive
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Advantage
Human
Resources
Human
Resources
Human
Resources
Human
Resources
Human
Resources
Sustainable
Competitive
Advantage
All these resources are very much capable of getting the firm a competitive advantage.
However, their importance and contribution within the same are mentioned below: Valuable: All the resources of the firm are quite valuable. For instance, transportation
helps the firm in acquiring supplies on time, whereas financial resources helps them in
investing in effective opportunities for future growth. Furthermore, technological
resources are the ones which help them in reducing scope of errors and produce finest
quality food products. Along with this, human resources of the company helps in
planning the strategies and executing the same effectively. Rare: There are very rare companies which have such financial capacity like McDonald's
and hence, these resources are quite rare. Moreover, technological resources with the firm
are rare because not much firms have appropriate R&D capacity. Not much employees
within the market have dedication and intellect like the ones in McDonald's which make
these human resources rare. Inimitable: The technological resources are patented, which provides protection to
technologies used by the firm and hence, are inimitable. Moreover, it is almost
impossible to imitate mindset of human resources of the firm, which enhances uniqueness
within the employees.
 Organisable: The workforce of the firm is trained effectively and are organised
appropriately to suit the strategies and operations of the company. Thus, out of all the
resources mentioned above, human resources are the ones which could provide maximum
competitive advantage.
Both the models mentioned above provides the firm with an insight in relation to their
resources as well as the competence which each of these elements hold. This allows the firm to
positively exploit each of the resources in ways which contributes in enhancing their productivity
and help the in generating high revenue.
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McKinsey's 7s Model:
This tool is an appropriate framework which helps in analysis of a company's design
through focusing upon several key elements which assists an organisation in achieving its
objectives effectively. There are two types of areas covered within this model which are Hard
and Soft. For instance, Structure, Systems and Strategies adopted by the firm are the hard
elements and Staff, Skills, Style and Shared values are the soft ones which supports the other
factors. Hence, in relation to McDonald's, this model is applied below:
 Strategy:
It refers to the plan which is implemented by the company in relation to gaining a
competitive advantage. For instance, the firm' s effective strategy of global expansion is highly
effective in relation to contribute in growth within their revenue and profitability.
 Structure:
This refers to the aspect which is associated with organisation of the business units of the
company. Divisional structure is adopted by the company to suit the strategy which is effective
in relation to ensuring accountability and effective communication that is required in expansion.
 Systems:
Daily activities of the business and other procedures are referred to as systems. This helps
managers in managing change within the firm. Hence, during global expansion, the activities
adopted by the firm include training, market research and effective layout set ups which supports
their strategy.
 Skills:
This is the competence and capabilities within the employees of McDonald's. For change,
the firm ensures that skills like adaptation, flexibility, consistency and analytical abilities are
possessed by the firm's employees.
 Staff:
The firm focuses on having local employees as per the market which helps them in
enhancing the scope of sales and better customer engagement. For training, on-the-job training
methods are utilised by the firm.
 Style:
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it is related to the top level management. For McDonald's, since the firm is changing
itself constantly, transformational and democratic style of management is prevailed within the
firm.
 Shared Values:
These are the standards and norms which are utilised by the organisation in relation to
ensuring that employee behaviour is guided. Values like honesty, transparency, integrity and
accountability is very much promoted to support the strategy and systems.
TASK 4
P8. Devising and Carrying out an SRA for McDonald's
Strategic Risk Analysis (SRA) refers to appropriate and effective assessment of certain
risks that could put the strategies and operations of a company into jeopardy. Moreover, their
assessment is highly required due to the fact that it would help the company in developing
certain essential plans that would be minimising these factors and enhance the firm's
performance (Basu, 2017).
Therefore, in context of McDonald's, the Strategic Risk Assessment is discussed below:
RISK SEVERITY RESPONSIBILITY CONSEQUENCES AREAS
AFFECTED
Equipment
Failure HIGH Quality Manager
The consequences of
of equipment failure
would first of all affect
the overall quality of
products and
manufacturing
processes. Moreover,
it could also lead to
lower productivity and
could even lead to risk
of safety of
employees.
R&D and
Manufacturing
Department
Changes in MEDIUM Inventory Manager The biggest impact of Logistics
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Supply Chain
Regulations
this aspect would be
experienced by the
logistics and supply
chain management of
the company. Changes
within regulations
might risk in
enhancing cost of
acquiring supplies,
along with timely
delivery of the finished
products of the
company.
Department
Employee
Disloyalty
LOW HR Manager Disloyalty within an
employee would
negatively impact the
organisation in relation
to demoralising and
demotivating other
employees due to
internal tensions
within the firm.
Moreover, disloyalty
would also enhance
conflicts and
ineffectiveness within
the organisational
structure that might
cause lack in
productivity and
profitability within he
Marketing,
Sales and
Manufacturing
Department
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firm.
All the risks mentioned above could have severe disadvantages to the company and its
performance. Moreover, it could also cause complexities when it comes to accomplishment of
the operational requirements of the organisation. In addition to this, the strategies and functions
of McDonald's could also experience a setback in achieving a competitive advantage and
sustainability within the organisation (Munjal, Requejo, and Kundu, 2019).
Contingency Plans:
However, for a company like McDonald's, it is highly essential that several contingency
plans are very well formulated, as well as implemented within the organisation, which assists the
company in handling, managing and minimising the risk associated with the functions of the firm
effectively. Hence, for McDonald's, the contingency plan is analysed below:
RISK STRATEGIES / ACTIONS PERSON IN-
CHARGE TIME FRAME
Equipment Failure
In order to appropriately address
the risk of equipment failure, the
organisation could implement
in-house testing which would
help the firm in enhancing the
scope of higher performance by
the tools and equipments of the
company.
Quality
Improvement
Manager
2 Months
Changes in Supply
Chain Regulations
The firm must develop effective
relations from the supply chain
of the company, which will not
be experiencing negative impact
at times of changes in
regulation. Moreover, suppliers
would also be formulated on
contractual basis which would
Public Relations
Manager
6 Months
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further provide authenticity to
the supply chain management of
the firm.
Employee Disloyalty
Performance of each and every
employee must be monitored in
a way which provides adherence
to ethical framework for the
organisation and ensure effective
working from their side.
HR Policy
Manager 12 Months
Hence, these contingency plans would provide enhanced and effective support to the
company, along with guidance in order to minimise the risks that are associated with the
operational functions of the company.
Strategies and Justifications:
The strategies mentioned above are very much appropriate in relation to ensuring
effectiveness in minimising the risk associated with the company. However, all the strategies
above must be justified at certain levels that are mentioned below:
 Monitoring (Operational Level): One of the most prominent strategies devised above is
monitoring employee's performance on ethical framework. This is very much appropriate
at operational level as it would be providing stability in context of carrying out the
operational functions of the organisation. In addition to this, monitoring would also help
in developing sustainability in the operations and effective growth towards the
accomplishment of objectives of the firm. In-House Equipment Testing (Tactical Level): On tactical level, this strategy would help
in an effective manner as this would assist the company in keeping up with the
consistency of operations. Moreover, another positive impact of the overall strategy is
associated with assisting in effective time management. Hence, such performance would
help McDonald's in becoming tactically strong. Contractual Relations (Strategic Level): Supply chain management for a fast food outlet
like McDonald's is very much important as their daily operations and quality in
performance depends upon the consistency and effectiveness of the supply chain.
Contractual relations would develop a legal bond of the firm with all its major suppliers,
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which will provide the firm with legal protection even if the regulations change.
Moreover, such high end method would provide the organisation with a firm competitive
advantage in the marketplace, which would allow the firm in conducting its strategies and
operations in a prominent and enhanced manner.
Risk Management Standards and Benchmarks:
There are several standards and benchmarks for the management of risks effectively. For
instance, for managing the risks, there are several standards and benchmarks that are explained
below: KPI: There are several indicators for the risks above, such as, internal audits, risk
treatments and so forth, which are required to assess the risks and its severity in a better
manner. Benchmarking: Several benchmarks related to risks, such as adherence to safety policies,
inclusion of appropriate equipment and machine testing are required by the company to
enhance the scope of risk management within the firm.
SWOT Analysis
STRENGTHS WEAKNESSES
 Appropriate Brand image is one of the
most prominent strengths of the
company.
 Another strength of the firm is related
to its wide product portfolio.
 The company is yet to enhance its
customer service practices to ensure
effectiveness in working.
 Another weakness of the company is its
organisational structure.
OPPORTUNITIES THREATS
 Enhancement in technologies are one of
the effective opportunities which must
be ceased by the company.
 New markets are being explored that
are required to be mapped by the firm
appropriately.
 Competition from firms like Starbucks
and Subway is causing the company
major threats in the market.
 Customer preferences are changing
constantly which is another prominent
threat of the firm.
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CONCLUSION
Hence, it is concluded from the report below that operational management is crucial for
an organisation which is necessary in accomplishment of several operational activities of a
company. Resource Allocation Plan is necessary to be developed so that the firm could
effectively allocate resources in ways which helps them in satisfying the operational
requirements of the organisation. Lastly, Strategic risk analysis is highly crucial for a company,
which relates with several risks associated with carrying out the company's operational activities
and ensure protection against several contingencies which could hinder the organisation's
performance.
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REFERENCES
Books and Journals
Basu, R., 2017. Managing project supply chains. Routledge.
Hitt, M.A., Xu, K. and Carnes, C.M., 2016. Resource based theory in operations management
research. Journal of Operations Management. 41. pp.77-94.
Hosseinian-Far, A., Ramachandran, M. and Slack, C. L., 2018. Emerging trends in cloud
computing, big data, fog computing, IoT and smart living. In Technology for Smart
Futures (pp. 29-40). Springer, Cham.
Mahadevan, B., 2015. Operations management: Theory and practice. Pearson Education India.
Munjal, S., Requejo, I. and Kundu, S. K., 2019. Offshore outsourcing and firm performance:
Moderating effects of size, growth and slack resources. Journal of Business Research.
103. pp.484-494.
Reid, R.D. and Sanders, N.R., 2019. Operations management: an integrated approach. John
Wiley & Sons.
Slack, N. and Brandon-Jones, A., 2018. Operations and process management: principles and
practice for strategic impact. Pearson UK.
Slack, N., 2018. Essentials of operations management. Pearson UK.
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