Download How Operation Management Can Have A Profound Effects on Reducing Cost incurred by an Organisation

How Operations management can
have a profound effect on reducing
costs incurred by an organization.
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Executive Summary
Operation management has become more and more important as a critical part of any business
today due to the ever-rising complexity of how a business operates nowadays (Choi, Cheng
and Zhao 2016). Operation management is changing and evolving every day. New technology
and practices were being discovered that has revolutionised the supply chain industry.
Companies need to implement and keep up to date with the new technology or practices
especially in their operation management business function to be competitive in their
marketplace by increasing profit and reducing cost (Stevenson, 2014). More specifically in the
principles of Strategic Operation Management (SOM), Managing Service Operations, and
Supply Management, companies need to apply these three principles to better propel
themselves in facing such a turbulent and dynamic business environment nowadays.
This report provides readers with a deeper understanding of how companies could apply the
three operation management principles mention above to maximise a company's return on
investment and profit by reducing operation cost, especially during the pandemic.
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Table of content
MGMT6049: Individual Report (Assessment 1) ............. Ошибка! Закладка не определена.
Executive Summary .......................................................................................................... 2
Table of content ............................................................................................................... 3
Issues & concepts ............................................................................................................. 4
Strategic Operation Management (SOM) .......................................................................... 5
Managing Service Operations ........................................................................................... 7
Supply Management ........................................................................................................ 8
Conclusion ........................................................................................................................ 9
Reference List ............................................................................................................ 10-11
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1. Issues & concepts
The company that the report will be discussing is Top Glove Corporation Berhad. Top Glove
is currently the world's largest manufacturer of disposable rubber gloves in the world by
capturing more than a quarter of the world's market share for rubber glove production (Top
Golve, 2020). Top Glove was first established in Malaysia and now has 4 manufacturing site
around the south-east Asia region and around 200 countries in the world purchase rubber glove
from Top Glove. Other than rubber gloves, the company has been extending its product
extension line to other non-glove segment products such as household product rubber product,
condoms, exercise bands and most importantly face masks during the COVID-19 outbreak
(Top Golve, 2020).
Top glove was quick to react to the market needs and was able to mass-produce face mask
production when there is a market gap for a face mask during the beginning of the pandemic.
While Top Glove was one of the beneficiaries' gainers from the pandemic due to the rise in
demand for a face mask and disposable rubber gloves, it still faces quality issues from
importing countries who procure from Top Gloves. For example, Top Glove faces quality
issues detention by the US (FDA) for importing unqualified rubber gloves due to the failure of
the pinhole test (Wong, 2020). But the issues have occurred occasionally before the pandemic
hits, and before the demand for its product surges. There was also news reported that the
company was conducting daylight slavery in the 21st century. The company was being reported
for conducting forced labour, extensive overtime work, abusive of both working and living
conditions for its foreign workers (Julie, 2020). One of Top Glove's major customers, which is
the National Health Service (NHS), is one of the largest healthcare systems in the UK. They
were under heavy pressure for procuring gloves and masks from Top Gloves who was accused
of performing heavy human exploitation on its manufacturing workers (Feinmann, 2020). NHS
procure around 80 million pounds from Top Glove annually before the pandemic hits. Top
gloves were accused of importing illegal immigrant labour workers from mainly Bangladesh
and Nepal to work in their factory. By withholding worker's passport, Top Gloves was able to
withhold worker's wages and ensuring that they would not be leaving the harsh working
condition in their manufacturing plant (Feinmann, 2020). This has no doubt taken a big hit on
the company's overall reputation and its share prices at the Malaysian stock exchange.
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Although there is no direct linkage of defective product produced due to the unsustainable
harsh working condition of the wellbeing of its workers, operation management of the company
needs to do better to avoid costly mistakes like these to happen in the future again. Let us
examine how operation management could apply operation management principles of Strategic
Operation Management (SOM), Managing Service Operations, and Supply Management in
assuring that the company could keep their promise by providing top-quality rubber glove to
the market at the same time reducing cost by not affecting the wellbeing of its employees in
the manufacturing sector.
2. Strategic Operation Management
(SOM)
The 1st important principles that Top Gloves need to implement in their operation management
is Strategic Operation Management (SOM). Strategic Operation management is vital for any
organisation when facing such a competitive and dynamic marketplace. Mišanková and
Katarína (2014) state that three interlink processes need to work together and complement each
other for strategic operation management to achieve its overall strategy, which are strategic
planning, strategic implementation and finally strategic control. The article discusses by
Mišanková and Katarína (2014) believes that the implementation part is the core competency
and most important part of strategic operation management. This is because a successful
strategy is useless unless it was being executed and being brought into life. The successful
implementation of strategy is also highly dependable on the task being performed by the
managers, employees and the company's overall organisation cultures (Mišanková and
Katarína, 2014). Customers nowadays do not just expect to receive low cost, high quality and
delivery on time from their suppliers anymore. In today's marketplace, customers also expect
a shorter product life cycle, shorter time to market and innovativeness. Companies that procure
from Top Gloves and Top Gloves themselves are adapting to the rapid uncertainty market
especially during the pandemic and the emergence of the global economy (Momme, 2002).
To become the world largest surgical glove manufacturer in the world, Top Glove needs to
grow steadily in terms of production and capturing the current market share. Instead of building
a new factory elsewhere, Top Glove has chosen to grow its business inorganically through
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multiple acquisitions and mergers. Most recently in 2018, Top Glove has released a press
release statement announcing that it will be acquiring Aspion Sdn Bhd. Also based in Malaysia,
Aspion is also one of the largest surgical rubber glove manufacturers in the world (Top Glove
2018). Although the merging looks good on paper where Top Glove can increase its production
manufacturing capabilities when facing an increase in demand, Top Glove is outsourcing its
production to Aspion by putting Top Gloves' logo on it. Top Glove would have no control over
its quality assurance because Top Glove is trusting that Aspion will do its job by producing
surgical gloves using its machinery, technology and labour force. The difference in
management style and company culture would need some time to be aligned and gel with the
ones that Top Glove stands for.
So, the question here is that whether it is in the best interest for Top Gloves to acquire another
manufacturing organisations when Top Glove is arguably one of the best rubber glove
production in the world? The strategy that Top Glove should be implementing is to produce
and manufacture surgical rubber glove house where they have the core competency of
producing the best quality rubber glove in the world. By producing everything in-house and
expanding its operation through organic growth, Top Glove would have better control over its
product quality. Although Top Glove would still have control over its mergers over the
production but producing the best quality of surgical gloves required special skills which
require a mixture of people skills and operation management (Tayauova, 2012). As mention
above, Top Gloves faces a quality assurance problem due to the rapid expansion of growing
too fast and faces quality control over its merger's product. Top Glove should apply Strategic
Operation Management of building everything in house to focus on its core activities and
increase its value proposition and outsource other subsidiaries business function of its business
to professional third parties to avoid any more quality issues created by its subsidiary's
manufacturers.
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3. Managing Service Operations
Although Top Glove is operating as a large-scale manufacturing sector, this does not mean it
does not involve in its service sector as well. Top Glove was unable to keep up with the demand
and send its product such as face mask and rubber gloves to its customers during the pandemic
(Havovi and Amelia, 2020). This has resulted in a decrease in customer satisfaction where
there is only a limited supply of product in the marketplace. Heavily reliance on the labour
workforce has limited its production capacity where the company could not import more
foreign workers into their factory due to the travel restriction and trying to avoid the risk of
infection cases in its manufacturing hubs.
Top Glove has always been a heavy reliance on cheap labour cost to minimise its operation
cost as part of its strategic operation management goals. Before importing foreign workers
from nearby Southeast Asian countries, Top Glove 1st started its manufacturing factory with
Malaysian workers in their factory. However, when Malaysia was developing into a developing
country, the wage cost was unsustainable for the company to make a profit. Therefore, Top
Glove starting moving manufacturing hub abroad starting with China due to the low labour
cost. Soon Top Glove move back most of its production to Malaysia again since China has
started rising rapidly in recent years and the rising labour cost has made Top Glove
uncompetitive again (Biswas, 2016). More problem arises when Top Glove import Cheap
Labour forces mainly from Bangladesh and Nepal to do the hard labour-intensive job earning
less than US$300 per month. Top Glove receives unnecessary bad publicity during the
pandemic for failure to manage the high demand from the market at the same time following
government guideline for the safety protocol required during the virus outbreak. Photos taken
by its workers emerge on the internet showing no social distancing between each worker and
compact living condition has made it almost impossible for Top Glove to manage more than
20,000 workforces under the local standard operation procedures (Nivell, 2020).
Facing so many difficulties with its labour force while trying to navigate through the pandemic
has taken its toll. To tackle this obstacle, Top Glove has decided to invest more than US$700
million to modernise its manufacturing hub to improve its production capacity at the same time
reducing the reliance on the labour workforce (Takashi, 2020). Once automation takes place,
artificial intelligence and robotic process automation will be able to increase the capacity
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output by almost 80%. If Top Glove were to invest heavily in automation and not heavily
reliant on its labour workers, Top Glove would have a minimum problem navigating through
the pandemic. Devarajan (2018) talked about how automation would reduce human errors,
increase productivity, reduce daily operation expenses, and most importantly improving
customer satisfaction in various sectors including the manufacturing sectors. Top Glove would
also be able to gain a competitive advantage through automation where product produce is
accurate, consistent, reliable, scalable, boost employee morale, improve transparency, and cost
reduction (Devarajan, 2018).
4. Supply Management
Supplier plays a more important role contributing to a firm's competitiveness these days. For a
long time, purchasing was treated as a single functional unit of a firm and no strategic
relationship was developed with its suppliers. However, the supplier has been recognised for
generating more and more values for a firm and its customers. Therefore, the strategic
importance of supplier has drastically played a more important role in an organisation operation
management (Sabine, Martin and Sonja 2006). Proper managing a firm's supply chain could
minimise risk and uncertainty, especially during a pandemic. Consistency of supplier
navigating through turbulent times could also aid firms to satisfy customer needs at the same
time attain a good profit margin (Park et al. 2015).
Top Glove needs to collaborate more with its supplier to improve its operation management.
Based on the current situation, Top Glove needs to apply a supply management strategy of
collaborative planning, forecasting, and replenishment (CPFR) which aims to integrate
suppliers into the supply chain to be able to forecast the unforeseen demand (Park et al. 2015).
According to Ireland and Robert (2000), CPFR is a total value chain collaboration among all
trading partners who touch or affect the value of the product to the end customers. CPFR has
consistently increased the level of effectiveness of supplier relations, value creation and
competitive advantage in the marketplace. Ireland and Robert (2000) also believe that the faster
an organisation implement and roll out CPFR, the more competitive advantage an organisation
will gain. Examples of software that are available in the marketplace that will support CPFR
are Syncra, Logility, Manugistics and many more. The only issue that holds on the
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implementation of CPFR is the lack of trust, understanding and openness that is critical for
CPFR to work. Top Gloves need to find a way so that both Top Glove and its suppliers could
be benefited from this partnership while applying CPFR to ensure that customers demand are
always met even during the pandemic (Ireland and Robert 2000).
5. Conclusion
In conclusion, this report gives readers a better insight into how an organisation such as Top
Gloves which is facing difficulties in meeting customers demand and managing qualities issues
in their manufacturing hubs to better navigate themselves through operation management
principles of Strategic Operation Management (SOM), Managing Service Operations, and
Supply Management. Companies need to conduct strategic planning, strategic implementation
and finally strategic control for strategic operation management (SOM) to work. The report
suggests that the organisation should focus on expanding its manufacturing hub organically
through internal growth instead of outsourcing and acquisition to ensure that the quality of
products is on par with company standard. Next, to increase customers satisfaction, the
manufacturing hub should invest in up-to-date automation machinery to replace hard labourintensive work that will help an organisation in increasing product quality, reducing cost and
increase customer satisfaction in the long run. Finally, the report talks about the role of
suppliers in gaining an organisation competitive advantage. Companies are encouraged to
implement CPFR software to integrate suppliers in an organisation's supply chain networks
instead of just purchasing raw material on a day-to-day basis.
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Reference List
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Feinmann, Jane. 2020. "The scandal of modern slavery in the trade of masks and
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Julie, Zaugg. 2020. “The World’s Top Suppliers of Disposable Gloves are Thriving Because
of The Pandemic. Their Workers Aren’t.” CNNBusiness.
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Mišanková, Mária, and Katarína Kočišová. 2014. "Strategic implementation as a part of
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Momme, Jesper. 2002. "Framework for outsourcing manufacturing: strategic and operational
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Park, Jongkyung, Kitae Shin, Tai‐Woo Chang, and Jinwoo Park. 2010. "An integrative
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