Understand how operations transforms resources into goods or services while balancing cost, quality, productivity and business objectives.
RDM is a family-owned healthcare-device manufacturer in Lobjanec, Czech Republic. It formerly employed about 500 unionized workers, mass-produced stoves and sold through wholesalers. Because of globalization and fierce competition from Asian manufacturers with lower cost structures, Jan introduced a highly automated manufacturing process in 2006, operational by 2009. Customers enter product specifications into an online template; an engineer reviews the request, may contact the customer and improve the design, and then sends the approved specifications to accounting and marketing, which determine the price. Robots configure tooling, load raw materials and manufacture the order, while highly trained engineers monitor the process. Automation lowers long-run costs, improves responsiveness and allows customized products, including new products such as aluminium water bottles. The change also affected human resources: in 2019 RDM employed 117 people, mainly engineers and computer experts recruited from universities across Europe rather than the local vocational school. The organization changed from hierarchical management to cross-functional teams composed of individuals from all business functions. These changes altered the relationship between operations and human resources, marketing, and accounting and finance, and changed the interests of employees, managers and the family shareholders.
With reference to RDM, describe how changes in operations management altered its relationship with two other business functions.
The shift in operations management from a traditional industrial manufacturing process to an automated process altered its relationship with the following business functions:
- Human resources: RDM changed its recruitment from semi-skilled young people who had just completed their education at a local technical secondary school to university graduates with degrees in engineering or computer science. This shift almost certainly necessitated a shift in approaches to leadership and motivation.
- Marketing: In the process of becoming an automated manufacturing process, RDM fundamentally changed its marketing mix. Though the decision to shift from kerosene stoves was market driven (declining demand), the automated process allows RDM to customize products and make, as in the case of the aluminum water bottles, wholly new products.
- Accounting and Finance: Prior to automation, RDM made uniform products on a large scale. Pricing decisions would have been relatively rare - setting a fixed price for a product. Now that the business is making customized products, pricing decisions have to be made with virtually every order, which involves people from the accounting department. Whereas RDM had capital expenditures prior to full automation, it also had substantial revenue expenditures in the form of payroll. With automation, the mix of capital versus revenue expenditures shifted in the direction of more capital expenditures. This shift requires significantly different approaches to finance.
Candidates should name the functions, but they can be implicit.
N.B. R\&D is not a business function.
Accept any other relevant changes.
Mark as a 2+2.
Award [1] for an appropriate business function identified and an additional [1] for some description of changes in context. Award a maximum of [2] for each function described.