Research Paper

Research of the Effect of Operations Management Practices on Performance of SMEs Operating in United States Market

Former Student Research Paper

Table of Contents Background 2 Description of the Problem 4 Main Research Objective 6 General Research Objective 6 Specific Objective 6 Literature Review 6 Research Methodology 8 Research Design 8 Study Population 9 Study Sample 9 Data Collection 9 Limitations 10 Findings 10 Conclusion & Recommendations 11 References 13

The Effect of Operations Management Practices on Performance of SMEs Operating in United

Today, businesses are operating under environments which are highly dynamic because of uncertainties, changing technological trends and scarcity of critical resources. However, demand has increased significantly due to increased concentration on the customer needs during production. Additionally, advancement in technologies has impacted the production of goods and services significantly where some operations are being automated to reduce the operational cost and increase productivity among others. The growth in demand and increase and advancement in technology has resulted in needing for firms to ensure careful optimization of their internal resources in order to established sustained competitive advantage. To achieve these standards, it is important to develop quality control systems and measures to provide the organization with improved feedbacks relating to the operations and use the feedback in management of operations.

Since 1990s, a number of empirical studies has been conducted to help business managers and economists understand the financial performance variance when factors such as corporation, industry, firm and country effects are considered. Additionally, whenever it is assumed that organization’s internal factors are responsible for the performance variation, considerations are made on whether changes undertaken as per the best practices on the infrastructural and structural elements of an organization to help in achieving the set goas. According to Sadikoglu and Olcay (2014), businesses are of performance curves due to the number of resources available for use in production including technologies such as Total Quality Management (TQM), and Joint (JIT) among others can change performance curves of an organization.

Globalization has resulted in the emergence of new business models and techniques which can be used by a corporation to increase their performance to establish a sustainable competitive advantage. The global market has imposed standards that can be considered as being highly efficient and firms that are unable to meet the standards are marginalized quickly. Due to this reason, careful optimization of internal processes and resources is essential for businesses operating in the modern market due to the need to maintain a competitive edge (Sadikoglu & Olcay, 2014). Additionally, achieving the standards has been accompanied by continued enhancement of internal routines. Some of the areas which businesses are concentrating on to achieve the internal routines includes skill enhancement and knowledge management which is essential for Small and Medium-sized Enterprises entering the global market.

According to Zeng et al., (2015), Operation Management (OM) is one of the concepts being used by businesses in the manufacturing sector to create an environment which can help in planning, development, and improvement in the processes essential in the product manufacturing and provision of services. The term Operations Management refers to methodological solutions or procedures which are undertaken by an organization to help in the improvement of efficiency in logistics and production processes for businesses operating in the good manufacturing industry. Additionally, operations management is important not only for businesses operating in the manufacturing sector, but also improvement of functions such as logistics, and creation of new products. The importance of OM in businesses has resulted to acceptance of the concept through creation of new and careful managerial culture which is demanding for integration of operation management in all business practices in order to enhance business performance for SMEs. Therefore, the purpose of this paper is to describe the relationship between some optimization methods used in Operation Management and their effect on the performance of SMEs in the global manufacturing sector. To effectively understand the relationship, the researcher will analyse a dataset containing information of about 50 SMEs operating in the United States market. Additionally, using survey, an in-depth study of different subsets of the databases will be undertaken so that a model will be developed based on Structural Equation Modelling (SEM) approach (Zeng et al., 2015). The method will be used due to its ability to create and validate theoretical models in Operation Management.

Organizational performance has been a major issue when establishing sustainable businesses in the dynamic political and economic factors, technological innovations and changing trends in customer demands. Businesses operating in the modern business world are forced to come up with different practices to ensure they achieve high efficiency hence affecting the performance of the businesses. The SMEs operating in the United States of America (U.S) market has shown a major potential of growing into multinational corporations hence creating major competition in the manufacturing sector (Parnell et al., 2015). Innovations within these organizations have become key due to the growing number of consumers who expected the producers to not only supply goods and provide services but also understand their needs and expectations.

In the United States, SMEs find it difficult to adapt and identify innovative technologies and operational methods due to major weaknesses in their internal resources. Some of the most common internal resources contributing to this issue include low human capital and lack of proper involvement in managerial networks. Due to this reason, it has become so challenging for SMEs operating in this market to effectively improve their performance by establishing a sustainable competitive advantage. For example, most SMEs operating in the U.S market are operating in localized markets and smaller scale hence holding them back when trying to pursue best practices which are essential for the improvement of organizational performance. Under this perspective, it means that if the return to the best practices is universal to such organizations, it means that less intensive use of current management practices may be utilized as sub-optimal.

For SMEs operating in the U.S manufacturing industry, effectiveness in product improvement and Total Quality Improvement are some of the issues resulting in increasing in failure in these businesses. For example, operation management in the manufacturing sector in an important activity where it plays a significant role in the enhancement of productivity ratios. Therefore, operations management will be related with the overall management process and functions due to its role in the improvement of production efficiency in SMEs (Parnell et al., 2015).

Conversely, Total Quality Management is considered as one of the most critical practices for improved performance for SMEs operating in the manufacturing sector where it helps in crisis management by determining which part of production will be improved in order to increase organizational performance. SMEs operating in the U.S manufacturing sector can improve their performance through ensuring there is operational effectiveness in the present, and ensuring there are capacity and foresight to help in preparation and anticipating for the future. Lastly, SMEs operating in the U.S market face major challenges when establishing strategies to enhance their performance due to lack of effective models to guide the managerial function in the management of different operations (Vivares-Vergara et al., 2016). This is because, SMEs operating in the manufacturing industry require enhanced care in various operations and processes starting from outsourcing of raw materials, until the goods are sold to the consumers. Therefore, for these SMEs to improve their performance, there is a need to ensure customer needs and demands are addressed at all time, and establishing operations management strategies which will involve common management tasks such as motivating, staffing, controlling, planning, directing and organizing (Zeng et al., 2015). This means that establishing appropriate operations management practices in SMEs operating in the U.S manufacturing market will benefit the businesses in enhancing their performance and establishing competitive advantage due to effectiveness in resource utilization and addressing customer needs and expectations.

The general research objective of this study is to assess the effect of operations management practices on the performance of SMEs operating in the United States of America manufacturing sector.

The specific objectives of this study are:

i. To find out whether operations management practices affect the performance of SMEs operating in the United States manufacturing industry

ii. To find out whether designing effective operations management practices will affect the performance of SMEs operating in the United States manufacturing industry

iii. To determine the relationship between system operations management and performance of SMEs operating in the United States manufacturing industry

The purpose of this section is to discuss the some of the related kinds of literature addressing the effects of Operations Management on the performance of SMEs operating in the United States manufacturing industry.

According to a study conducted by Krajewski et al. (2015), businesses operating in the modern business world can increase their performance through the use of the ten areas of Operations Management when making decisions on differentiation, feedback and cost reduction in their manufacturing processes. Some of the ten areas of Operations Management which can be considered by managers when making decisions to increase the organizational performance includes product and service design, which is essential in determining the outcome due to the conversion of an input. The importance of product and services design occur where the cost of production, capacity and quality requirements are determined at this level of operations management. The second areas are capacity and process design, an area of Operations Management where volumes are combined to achieve market demand. At this point, the decisions made entail identification of required technologies, selection of processes, expertise, quality, maintenance and systems which are the primary determinants of the basic cost structure in the manufacturing process (Krajewski et al., 2015).

Supply chain management is another areas of Operations Management which can impact the performance of an SME operating in the U.S manufacturing industry either positively or negatively. According to Vivares-Vergara et al. (2016), supply chain management decisions entail determining the movement of raw materials from the suppliers to manufacturers and distribution of finished goods to target consumers. Some of the decisions which can be made using this area of Operations Management practice to ensure there is improved performance include the cost of supplying goods to the consumers, ways of reducing holding cost, and availability of raw materials which are also essential factors in increasing production in the manufacturing sector.

In the last few decades, businesses operating in the global manufacturing industry have continued to form set of quality-related methods, procedures, and techniques aimed at enhancing the performance of their organizations. Various studies have shown that the higher the number of techniques or methods deployed by businesses in enhancing their performance the greater the variable of the firm. Some of the quality practices that can be used in enhancing performance using Operations Management for businesses operating in the manufacturing business include Just-In-Time (JIT) which including understanding the internal JIT and the external JIT. Secondly, the use of ISO standards in the improvement of organizational performance is achieved through the application of ISO 9000 and ISO 14000 in performance improvement for business operating in the manufacturing industry (Vivares-Vergara et al., 2016). Lastly, service outsourcing level is the last quality practice under Operations Management which can be used by SMEs to understand the level of spending in purchasing raw materials from the third party.

The purpose of this section is to describe the choices made by the researcher relating to the cases to be studied. This entails some of the methods used in conducting a survey, the information selected for research design, the selected population and reason for selection, sampling methods that will be used, the selected data collection method, data analysis, and interpretation.

The research study aimed at developing new theoretical models hence survey design was used for this scientific research. There are two main categories of surveys which can be distinguished including descriptive or explorative and relational or explicative survey. For this research study, a descriptive or explorative survey will be used to understand the current state of the operation management among the SMEs operating in the United States manufacturing industry. It will be the first step of the study, and it will entail collecting data to describe the result of the phenomenon under study. For example, a descriptive survey may be used to determine the effect of operations management and its relationship in the improvement of performance of SMEs. Conversely, the relational or explicative survey will be used to determine the relationship between different variables which are under investigation. The use of this surveying method will help the researcher prove the existing relationship between operations management and performance of SMEs operating in the United States manufacturing industry.

Population in research study refer to the people or organizations which will be researched during the study. The target population for this study includes SMEs operating in the United States manufacturing industry. Some of the fields of U.S manufacturing sector which will be studied include manufacturing of rubber goods, metallic products, general machinery and equipment, ceramic products, garments tailoring and footwear, furniture, and automotive parts and accessories.

In the research study, a sample refers to selection of a unit from the target population so that the sample can be studied and fairly generalize the result back to the population they were selected from. For this study, the target population was 3, 000 SMEs operating in different areas of U.S manufacturing sector. The study sample included 50 SMEs which were selected based on size, field, and location among others. The random sampling method ensured the researcher gather facts and record data from each unit of the target population.

In the research study, data collection refers to a process of gather information from all relevant sources in order to find answers to the problem under research and evaluate the outcomes. For this paper, the data collection process will utilize both the primary and secondary methods. For the primary data, a structured questionnaire will be sent to all the operational managers of the selected SMEs using email. The questionnaires will contain two parts with the first part including the general information while the second section will address the effects of operations management on the performance of their enterprises. Moreover, the questionnaire will use both open and closed question in order to offer the operational managers opportunity to offer personal experiences relating to the phenomenon under study. Conversely, secondary data will be gathered through the review of different kinds of journals, case studies, and papers offering supplementary information relating to the study topic. The collected data was cleaned and reviewed for consistency, completeness, accuracy, and uniformity.

Several limitations which may be addressed in future were identified during the study. Some of the limitations include the use of secondary databases for data collection instead of the research at hand. The use of research databases provided contradicting information with some scholars concluding that operations management practices have a major effect on the entire performance of an organization while others were claiming that only manufacturing sectors are affected by operations management practices in a given organization. The second limitations experiencing affecting the effectiveness of the findings of this study include concerns over the stability of the performance in SMEs due to effect by other internal and external factors. For example, whenever a given practice that provides a competitive effect, early adopters will benefit more than the pioneering firms. This makes it challenging to determine the effect of operations management practices on organizational performance. Other limitations included inadequate time and resources required in the collection, sorting, and analysis of research data to ensure accurate results are obtained.

The study results have found a major relationship between Operations Management practices for SMEs operating in the United States manufacturing industry. When carrying out the analysis, the researcher used the maximum likelihood technique. The technique allowed the calculation of coefficient on the causal links. Additionally, the different areas under study were valued based on standardized weights obtained from the SEM. Additionally, the statistics for the goodness of fit for the collected data were as follows: x2 =56.0 where a p-value of about 0.007 was allowed, CFI=0.70 and RMSEA=0.075. After the analysis of the collected data using SEM, the good fit of the study model was able to confirm for all the reported sets of the statistic. With performance and Operations Management practices being the essential casual links in the study, the study found that the significance of Operations Management on performance may not be high because of some specific indicators utilized in determining the performance of a given industry including direct connect of performance with sales and production. However, when other aspects of the supply chain management are not considered, the study indicated that Operation Management has a significant impact on the performance of SMEs operating in the United States manufacturing industry at the level of 0.05.

The research study has depicted the importance of Operations Management practices on SMEs operating in the United States manufacturing industry. According to the study, Operations Management are essential indicators for the performance of these firms. The results indicated that the value of the positive effect of Operations Management and performance of SMEs operating in the U.S manufacturing industry should be taken into account by the management so that it can be possible to implement best practices that will influence the internal efficiency and revenue of the organizations. Consequently, the findings offer a clear input on the diffusion of Operations Management practices culture during the introduction of new policies in the organizations and also in business clusters. This means that our results are consistent with the previous studies which indicated that Operations Management has a significant impact on the performance of SMEs operating in the United States manufacturing market although most of the previous studies concentrated on the specific context of the industry. Lastly, the study has revealed that system operations practices have no significant effect on the performance of SMEs operating in the U.S manufacturing industry. However, the findings have indicated that there is a positive relationship between the performance of an SME and systems operations practices. Therefore, the businesses operating in this sector are expected to improve the inspection and maintenance of products and service delivery in order to benefits from Operations Management practices. Additionally, the SMEs operating in the United States manufacturing industry also need to improve their supply chain management practices, inventory management practices, and scheduling practices in order to increase performance. Based on the findings, the researcher also recommends the SMEs operating U.S manufacturing industry to invest more on innovation and technology as a way of eliminating some of the constraints in the supply chain management and operations management practices. Additionally, the researcher recommends utilization and restructuring of operations management practices so that they can improve the performance of their organizations through effective employees and reduced wastage of resources during manufacturing.

References

Krajewski, L. J., Ritzman, L. P., & Malhotra, M. K. (2015). Operations management: processes and supply chains. New York, EEUU: Prentice Hall.

Parnell, J. A., Long, Z., & Lester, D. (2015). Competitive strategy, capabilities, and uncertainty in small and medium-sized enterprises (SMEs) in China and the United States. Management Decision, 53(2), 402-431.

Sadikoglu, E., & Olcay, H. (2014). The effects of total quality management practices on performance and the reasons for and the barriers to TQM practices in Turkey. Advances in Decision Sciences, 2014.

Vivares-Vergara, J. A., Sarache-Castro, W. A., & Naranjo-Valencia, J. C. (2016). Impact of human resource management on performance in competitive priorities. International Journal of Operations & Production Management, 36(2), 114-134.

Zeng, J., Phan, C. A., & Matsui, Y. (2015). The impact of hard and soft quality management on quality and innovation performance: An empirical study. International journal of production economics, 162, 216-226.