With reference to the case study, discuss the main reasons that have been influential in transforming the operations management function.
Case Study:
Operations functions—including procurement, supply chain, and manufacturing—are at the forefront of
managing the challenges and finding new ways of working in light of global trends and disruptions. The
COVID-19 pandemic has accelerated the pace of change, creating an inflection point. Companies have
relied on their operations functions not only to maintain day-today operations, which has itself been
challenging, but also to position the business to survive and grow in the post-pandemic world. For example,
regionalization has been accelerated by the pandemic, as countries closed their borders and protected their
supply chains. Globalization was already under strain before the pandemic: the intraregional share of global
goods trade increased by 2.7 percentage points between 2013 and 2018, according to an analysis by the
McKinsey Global Institute (MGI). Regionalization is most apparent in global innovation value chains, given
their need to closely integrate many suppliers for just-in-time sequencing. This trend could become apparent
in other value chains as well, as automation reduces the importance of labor costs and increases the
importance of speed to market in company decisions about where to produce goods.
The pandemic is the latest, and most severe, disruption to affect value chains in recent times. The financial
impact of these disruptions is significant. An MGI analysis found that over the course of a decade, the
average company can expect disruption to cause losses equal to almost 45 percent of one year’s profits.
This is equal to seven percentage points of decline, on average. As many companies have learned over
the past year, many operations functions are not sufficiently prepared to handle the shocks. These functions
were built for an earlier era, when change was more gradual, disruptions were less frequent, and customer
expectations were lower. Today, companies need greater transparency into demand, supply chains, and
production capabilities, so that they can respond proactively or in real time to rapidly changing
conditions. Considering that operations disruptions—whether arising from geopolitics, technology, climate
change, or disease—are becoming increasingly frequent, incremental improvements will not be sufficient
to prevent significant revenue losses. Operations leaders must fully rethink their organizations and
capabilities to deliver not only short-term financial improvement, but also longer-term value creation through
efficiency, resilience, agility, and digitization.
Question:
With reference to the case study, discuss the main reasons that have been influential in transforming
the operations management function.
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