Abstract:
To gain sustainable
competitive advantage operational decisions should be according to your
business strategy. This study tries to explore that how operational decisions
in Boeing Corporation an aero space and defense manufacturing firm and Arnold Palmer
Hospital
Introduction:
Organizations consist of people
gathered for a common purpose that can be profits or the welfare of human
beings. They transform some input into output for this purpose. Activities that
are needed to transform input into the out put for the purpose of creation of
goods and services came under the field of Operation management (Heizer, p4). In the literature researchers
are agreed that operations management is one of the most important contributor
to the success of an organization and we can achieve competitive advantages if
we made operational decisions in accordance with our business strategy (Hayes
and Wheelwright, 1984; Skinner, 1986).
Hayes and Wheelwright (1984) divided
operational decisions into
- long-term
structural decisions
- Intermediate
infrastructural decisions and
- Other
productivity improvement programs such as quality management and
continuous improvement
Significant area of studies in
Structural decision are location management, facility provides, capacity
planning, and process management. These strategies play as the mortar role in
the organization and are seen as one of the most significant component in a
long-term strategy frame work (Hayes and Wheelwright, 1984). On the other hand
production planning and control, workforce management, organization design, and
quality assurance came under the concept of Infrastructural operational
decision making. Having technicalities in itself Infrastructural operational
decision making is also very important and can be costly and difficult to
change (Hayes and Wheelwright, 1984).
Operations
management is not only important in manufacturing sector for the creation of
goods but also in service sector. Today service sector is seen as heart of
economic activities and it is a matter of fact that every economy needs
infrastructure provided by service sector in the form of health care,
transportation and education.
So researchers have also started to study the practices of operations
management in service sector (Fitzsimmons and Fitzsimmons, 2000).
This study tries to explore the
operational decision making to gain competitive edge in two different
industries i.e. service and manufacturing sector. Arnold Palmer Hospital as a service provider and Boeing as a
manufacturer of jetliners are studied in operational perspective that how they
can achieve competitive advantage through their operations by fulfilling their
customer’s need.
History
of Boeing:
As an airplane manufacturer Boeing
started its business in 1916. It was William Boeing and George Westervelt who
bring this company in to existence. It was 1952 when Boeing launched its first
short range jet plane with the name of Boeing 707 (Boeing, First flight). After
that Boeing continued its journey and makes a number of joint ventures,
mergers, acquisitions and many contracts with many Governments and suppliers
and became one of the largest Aircraft Jetliner manufacturers in the world. As
one of the largest exporter in USA Boeing has a wide range of products. Boeing
manufactures and design commercial jetliners and military aircraft combined,
rotorcraft, electronic and defense systems, missiles, satellites, launch
vehicles and advanced information and communication systems and also is one of
the major service providers to NASA in operating Space Shuttle and
International Space Station (Boeing, about us). Boeing is divided its
operations into two business units (1) Boeing Commercial Airplanes (2) Boeing
Defense, Space & Security. Today having almost 200,000 people employed in
almost 70 countries Boeing is serving to its customers in more than 90
countries all over the world. (Boeing, about us)
Product
and Design for competitiveness:
Good products always provide
competitive advantage to their firm. Good firms try to focus on only a few
products instead of a very large product line and concentrate on those products
only. One of the strategy managers adopt is to concentrate on established
customized product family. This provides option for customers to choose the product
they needed (Render and Heizer, p158). Walsh
et al. (1988) define product design as “the configuration of elements, material
and components that give a product its attributes of function, appearance,
durability and safety”. He also discovered that product design is more significant
than price alone for gaining competitive advantage of the firm and it also
differentiate a firm to its competitors (Walsh et al. 1988). Better product
design than competitor is also one of the value adding activity that leas to a
competitive advantage for that firm (Porter, 1985).
Boeing
is also focusing in providing customize family product. Today main Boeing’s
products are family of Boeing 737, 747, 767, and 777 along with Boeing Business
Jet. Boeing is also focusing on new product development efforts for Boeing 787-8
Dreamliner and the 787-9 Dreamliner. Boeing also provides option for their
customers for a particular category i.e. Boeing 747 include 747-400, 747-400
Domestic, 747-400 Combi, 747-400 Freighter, 747-400 ER, 747-400 ER Freighter
with different engine capacity. Almost 12,000 commercial jetliners are in
service around the world, which is about to 75% of the world fleet (Boeing, Boeing
in brief).
A
general concept is evidenced among researchers that firm’s internal resources
is an important factor that lead to a competitive advantage. According to
resource based theories firms having capabilities of no substitute and
difficult to copy in their internal resources like unique product or efficient
process leads to a sustainable competitive advantage. Boeing’s new product 787
Dreamliner provides unique features for its customers. Wide range of facilities
and technology with new engine design and airframe including super lightweight
titanium graphite laminate, carbon fiber and epoxy and composites is provided
in this new jet plane to meet current needs of their customers. 787 Dreamliner
also contain innovative electronic monitoring system which increases the
efficiency of plane to report maintenance requirements to ground base computer
system. 210 - 250 passengers could travel with 787-8 Dreamliner on routes of
14,200 to 15,200 kilometers; while on 787-9 Dreamliner 250 - 290 passengers can
travel on routes of 14,800 to 15,750 kilometers. Working with General
Electronics and Rolls-Royce Boeing manufactured engines with fuel efficiency
and friendly environment. 787 Dreamliner has fuel 20 percent less fuel consumption
as compare to today's similarly sized airplane and also having similar speeds
to today's fastest wide bodies, Mach 0.85 that will provide to enjoy more cargo
revenue capacity. (Boeing, 787 Dreamliner).
So
this new product development and wide range of product family provides their
customers a variety of options and fulfill the customer’s need that lead to
competitive advantage for Boeing.
TQM
practices:
The ability to meet customer’s need
is called the quality of that product (Render and Heizar, p194). Firms can
reduce cost through quality management practices and increase their sales and
ultimately the firm’s profits. By attaining the utmost efficiency through cost
reduction and improvement in customer satisfaction TQM practices leads to
develop sustainable competitive advantage (Deming, 1982). Boeing
follows the quality guidelines provided by international aerospace agency as
ISO 9000 series is not enough for airline industry.
Six
Sigma Award and continuous improvement:
“Lean Six Sigma for services is
a business improvement methodology that maximizes shareholder value by
achieving the fastest rate of improvement in customer satisfaction, cost,
quality, process speed, and invested capital” (Lean Six Sigma, 2009, 2). In
October 2008 a Boeing team working on B-C17 project was awarded with Gold from
the International Team Excellence Program for their efforts to implement the
practices of Lean Six Sigma production. “The Gold Award-winning team used data
and tools to learn where improvement could be made to processes in the
production of its Boeing C-17 aircraft. Key tools for project selection
included: lean value-stream mapping, trend analysis of performance metrics, and
brainstorming sessions with stakeholders” (Jacobsen, 2008, p. 30). Boeing
also follows continuous improvement model strategic looping action of PDCA
(plan, do, check, act) for upgrading their quality standards (Boeing,
Customer Input, 4).
“As
part of the continuous improvement cycle, Boeing has four initiatives designed
to support customer, competitive analysis, corporate direction and Boeing
operational goals, and strategies. These activities include the advanced
quality system and a closed-loop corrective/preventive action system (Boeing,
Customer Input, 4).
Boeing
also uses information technologies in their operations like computer aided
design (CAD) and computer aided manufacturing (CAM )
which leads to increase their quality. CAD makes easy and reduce the time for
design stage and also increases the probability of success of design. Boeing
also uses CAD and CAM to design and produce
their aircraft, such as the B-777 (Making of the Boeing 777, n. d.). By
recognizing the power and needs of information technology Boeing uses an e-tool
called a capability maturity model which measures different facets of Six Sigma
and customer quality satisfaction (Little, 2003). These quality management
practices lead Boeing toward a competitive advantage for Boeing.
Supply
Chain Management:
“Supply chain management integrates
the activities that procure material and services, transform them into
intermediate goods and final products, and deliver them to customers” (Render
and Haizer, p432). Firms can gain competitive advantage by using supply chain
management practices to their operations and strategies. In
this time of globalization firms are trying to improve their performance and
through outsourcing firms get a chance to look across their traditional
boundaries that support innovation to get that performance
(McIvor et al, 2009). Having suppliers all over the world company has
developed good relations with their suppliers. Boeing is relying on outsourcing
strategy and a number of parts are provided by its suppliers. In making 787
Dremliners Boeing is working with more than 20 international allies. For Being as
an innovative organization that brings new ideas with new features in their
products to meet their customers’ need it is very difficult to manufacture all
of its products on its own alone. As a big portion of Boeing’s products are
outsourced, so it is very important to maintain the required quality and on
time delivery for their productions. To cater this problem Boeing also leveraged
their skilled and brilliant employees to their customer who train their
suppliers about their customer’s needs and how to maintain quality of their
supplies
HRM
practices:
Having more than 158000 employees in
70 countries all over the world Boeing represents the most diverse personals.
Biggest strength of Boeing is the employees more than 123,000 having college
degrees which include 32,000 advanced degrees work force. Code of Basic Working
Conditions and Human Rights is been plasticized in Boeing that lead Boeing to an
attractive place to work. Boeing also believe to select and retain the best
qualified people available without any kind of discrimination in regard of
race, color, religion, national origin, gender, sexual orientation, gender
identity, age, physical or mental disability, or veteran status not only in
recruiting and hiring, but also in transfers, promotions and terminations,
compensation and benefits.
These
things are very vital and motivate the employees that ultimately increase the
quality of that product. Continuously for previous five years, Boeing has been awarded
by the Human Rights Campaign Foundation as a firm that provides nondiscriminatory
workplace and stood at the top rating of the Corporate Equality Index. Many
other awards Boeing has won for HR practices which increases the motivation
level of their employee.
Boeing’s
competitiveness:
These
strategies of Boeing to achieve competitive advantage differentiate it from its
competitors and bring at the top of aerospace industry. Boeing’s innovative new
product developments, its suppliers’ capability , it standards for quality to
meet their customer need along with its human resource power is a complete
package that make it different from its competitors in its industry.
Vision
A trusted leader inspiring hope through the advancement of
health
To improve the health and quality of life of the
individuals and communities we serve.
As only one of “America ’s Best
Children’s Hospitals” in Central
Florida Arnold
Palmer Hospital Arnold
Palmer Hospital
TQM
Practices:
According to Render
and Heizer almost all quality management techniques which they present in their
book is been practiced in Arnold
Palmer Hospital Arnold
Palmer Hospital
Employees are
empowered to cater the problem, they found and they got training for this. They
have the power to serve with gifts to their patients if they found someone
displeased with their service. There are about 2000 organizations that are
belonged with the hospital and monitor the hospital in many areas for standards
and submit monthly report which contain the feedback with problems and
solutions. Inventory is also be maintained on JIT (just in time) basis that
allows the hospital to solve quality problems along with low cost. (Render and
Heizer, p217)
Children's
Bill of Rights at Arnold
Palmer Hospital
A
stork board is been used in hospital which is a visible status chart containing
the information about the Deliveries which keeps up to date all doctors and
nurses. Pareto charts and flow charts are also been used to monitor processes
and these charts help to identify problems with their possible solutions.
(Render and Heizer, p192)
All these
activities and behaviors help Arnold
Palmer Hospital
Process
Management:
As a largest neonatal intensive care
unit and the 4th busiest hospital
of US
Capacity
Planning:
As a busiest
hospital in Florida
Arnold Palmer
Hospital
Hospital was
found difficult to fulfill the demand that every day was increasing for their
obstetric, gynecological and children’s services and hospital decided to go for
expansion to cater this over capacity problem. A team of 35 members was
established and a new expansion plan was developed. Hospital decided to go for
a new eleven-story building having 273 additional beds (Render and Heizer, p
307).. Hospital divided its operations into two specialized units with the name
of Winnie Palmer Hospital Arnold
Palmer Hospital Winnie
Palmer Hospital Arnold Palmer
Hospital Arnold Palmer
Hospital
Along with new
building hospital also expand its operations for children at vacant space after
separation and start pediatric services. Today hospital is providing many
healthcare services including acute care, a Congenital Heart Institute,
pediatric intensive care, emergency medicine, trauma service, nephrology,
neurology etc to meet the demand.
Supply Chain
Management:
In 2003 Arnold Palmer
Hospital Florida
formed an alliance corporation with the name of Healthcare Purchasing Alliance Corporation.
This small but powerful alliance having purchases of $200 annually was the
result of lack of negotiation with local manufacturer to get the best bid
price. This alliance saved $7 million on 1st year and divided it
into eight members. They also make contracts for 3-5 years instead of one year
with a guaranteed and committed volume. This alliance dominates on supplier and
help to reduce cost and increase the profitability of a firm that leads to a
competitive advantage.
In spite of
collaborative strategy between supplier and buyer for new innovative products,
the approach is different in the case of service industry. At Arnold Palmer
Hospital
Inventory
Management:
Inventory
management is also one of the critical issues that need full attention in
achieving competitive advantage. Arnold
Palmer Hospital
“JIT systems
are designed to produce or deliver goods just as they needed” (Render and
Heizer, p 201)
Reduced cost
along with improved quality is the concept behind JIT. Hospital spending is
about $30 millions per year and thousand of stock keeping units. An account executive
along with two service personals is employed to manage daily deliveries from
McKesson General Medical, a major distributor partner of Arnold Palmer
Hospital
By adopting JIT
hospital reduces its cost and avoid expensive bulky orders storage cost along
with high quality standards and this strategy leads hospital to a competitive place where it
stands today.
So these
strategic decisions in their operations lead Arnold Palmer
Hospital
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