Comparison of the approaches to operations management in Barclays Plc. and Toyota Motor Corporation

Summary

This assignment looks at the operations management of the two large organisations in their respective sectors. The organisations discussed are Toyota Motor Corporation, an automaker giant, and Barclays PLC, a financial services giant. I have discussed competitive priorities, marketing strategy, capacity planning, inventory management, supply chain design, performance measures and total quality management. All these help the organisations gain competitive advantage over other competitors as they focus on different ways to lower the cost of operations and making the best use of the resources by ensuring that all the waste is eliminated. The insight has been provided as to how these goals can be met to achieve the competitive advantage and how the innovation and long term sustainability of the companies can be achieved successfully.

Introduction

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The following article discusses and compares the processes, priorities and strategies used in two huge organisations in different sectors. We would be discussing Barclays PLC and Toyota Motor Corporation. The reason for the discussion of these two companies is that they are well renowned in their respective sectors.

Barclays is a global financial services company headquartered in London, United Kingdom. In the 2010 Forbes magazine’s list of world’s leading companies it was ranked 9th largest banking group and 21st largest company worldwide.

Toyota is a multinational automaker headquartered in Toyota City, Japan. In 2010 Forbes magazine’s list of world’s leading companies it was ranked 360th, a steep fall from its 3rd ranking in 2009. This was partly because of a major accelerator problem with its cars which forced Toyota to recall millions of cars worldwide and partly because of decline in sales amid the global crisis in automobile industry.

Main Body

Barclays

Being founded in 1690, it now operates in more than 50 countries and employs over 147,500 people. It has over 48 million customers worldwide. It operates in different sectors which include Credit Cards, Retail Banking, Corporate and Investment Banking and Wealth Management. It has a primary listing on London Stock Exchange and a secondary listing on New York Stock Exchange. We will be discussing the retail banking operations of Barclays in this assignment. (Barclays, 2011)

Toyota Motor Corporation

It was founded on August 28, 1937 and it employs over 320,590 people. Its main business activities are motor vehicle production and sales. It is the world’s largest automobile manufacturer in terms of sales and production. It is a part of Toyota group which in addition to automobile industry also provides financial services and builds robots. In this assignment we will be dealing with the production aspect of Toyota.

Competitive Priorities

Toyota - Barclays

• Low Cost

Present - Present

• Quality

Present - Absent

• Flexibility

Present - Present

• Time

Present - Present

Competitive priorities are the critical operational dimensions a process or value chain must possess to satisfy both internal and external customers.

Toyota’s main competitive priorities are concerned with its cost, quality and flexibility.

Toyota’s low cost operations enable it to produce products at low cost. This helps in setting low costs for customers and earning reasonable profit making the cars more attractive to customers and more competitive in the market.

It offers flexibility in its products. It offers a wide range of models targeting a wide customer base ranging from Aygo and iQ for low income families to auris, prius and corolla for medium earners to lexus, land cruisers and camry for high earners. The customers can also design their own cars and can choose what specifications they want in their cars which make them unique to others. It gives the freedom to customers and a sense of power.

Toyota maintains a high quality of standard in their production. They treat quality with utmost importance and that’s why when quality is mentioned the name of Toyota springs in to the mind of the customers. This gives Toyota the edge over its competitors.

Barclays has a competitive advantage of low cost operations. To gain the benefit from low cost operations over its competitors Barclays has moved its back-office jobs and the call centres to India where cheap labour is available. As India is a IT hub so the cost is also saved by not needing to invest in training and hiring of people.

Barclays offers flexibility in its bank accounts. It offers 13 different types of current accounts for the customers to choose from which are in addition to the business accounts, premier accounts and the saving accounts. A wide range of these accounts mean that the customer can evaluate what suits best to their circumstances and is more likely to be choosing it over other accounts. (Current Accounts, 2011)

Barclays lacks quality in the customer service. As of September 2010 bank complaints ranking recorded by Financial Services Authority (FSA), Barclays was rated 2nd clocking in 259,266 complaints for the six months period with only Lloyds being the worst. (BBC News, 2010)

It tries to serve the customers in time. In September 2010 bank complaints survey it was revealed that 91% of the complaint cases were dealt with by Barclays in the given timeframe of eight weeks.

Marketing Strategy

Corporate strategy provides a direction that serves as the framework for carrying out all the organisation’s functions. It specifies the aims the company will pursue and identifies the growth objective.

Ansoff matrix

Toyota

Toyota has a vision of making cleaner and environment friendly cars. It segments the market according to different regions as well as different people. It aims to target each and every person possible.

It has got environment friendly cars e.g. prius for those people who are environment conscious. It targets the middle and low income families with the economy cars and the up market customers with luxury cars.

It uses differentiated marketing as it has specified cars in specified markets. The models which it produces and provides in one country are not necessarily present in other countries e.g. it only provides two models in Pakistan whereas in America and Europe it provides loads others.

It focuses on what the customers in a specific country are concerned about. In the developed countries who are concerned about environment it provides Prius to attract the customers whereas this car is not present in Pakistan as not a large chunk of people are concerned about eco-friendliness there.

Throughout its existence Toyota has adopted all four marketing strategies discussed in Ansoff’s matrix to succeed and become the market leader it has been for so long until the recent accelerator problem occurred with its cars which was disastrous for it.

Barclays

Barclays is one of the financial industries that have invested heavily in the marketing. It keeps on coming out with different ways to keep itself in the public eye. It’s a main sponsor of different sports including football, tennis, golf, individual sponsorships, and the cycling in London. It is the official partner of one of the biggest football leagues followed in the world known as Barclays Premier League.

Barclays has achieved its growth by product development, market development and diversification. It diversified into the new business of cycle hire throughout Central London, United Kingdom.

It expands its business by market development by investing in new countries with its banking operations and then by product development by increasing its operations in those countries.

It is now operating in more than 50 countries and provides a wide range of services.

Barclays also indulges in other marketing activities. In June 2010 it launched an online game, 56 Sage Street, to target young people. It was also supported by activities on Facebook which is the largest social networking website.

It has also made advertisements that included waterslide and rollercoaster which are not typical for a financial institution. It takes people by surprise.

Capacity Planning

Capacity planning deals with setting out future capacity requirements after forecasting the future demands for that period. It’s straightforward to determine capacity requirements when demands for products and services can be forecast with a certain degree of precision.

Barclays can also use the Theory of Constraints to identify the bottlenecks e.g. the time the mortgage department takes to process the home-loan application. Once the bottleneck is identified the plans can be made to overcome the bottleneck. The personnel could focus on the bottlenecks to make sure that the resources are being fully utilised. The employees would be properly trained to make sure they fully understand and work to overcome the bottlenecks. Once the time issue has been resolved the bank can start looking for more constraints.

Toyota can use the capacity management to match the demand in busy periods. It knows the demand would be more at the start of the year as compared to the year end and much more when a new model is being launched. Past analysis can be used to predict the demands at different times of the year. It can arrange the staff in a way which would not cause any hindrance to its operations and would be able to meet the demand if not over do it. If it’s for a short time period the staff can be asked to do overtime. This might require paying more than the original pay rate but it would eliminate the cost of training, hiring and paying additional benefits.

The Theory of Constraints can be used to find out the bottlenecks which limit the production. Different ways of overcoming the constraints can be applied and personnel required to focus on removing the constraints. The employees in that department need to be properly trained to make sure they make the best use of the resources. Once the constraints are removed the company can move on towards identifying other constraints before they arise and cause problems.

Inventory Management

It is an important concern for managers in all types of businesses to plan and control the inventories in order to meet the competitive priorities of the organisation. Poor inventory management can seriously affect those organisations that operate on low profit margins.

Like any other bank Barclays’ only inventory is cash. It needs to be very careful with the inventory management to run the business. The cash that customers deposit is invested by the banks to earn money. The cash flow per day should be anticipated properly and it should be made sure that sufficient amount of cash is kept in the bank to serve the customers when they come for it. This level should be worked out so that they don’t keep so much cash which could have been invested elsewhere instead of keeping in the safe and hence results in lost value. On the other hand it should not be so less that it results in customers being denied money at any stage.

Inventory management plays a very important part in the manufacturing organisations e.g. Toyota. As Toyota deals in lean manufacturing so the inventory level for Toyota is almost zero. Less inventory results in savings as there are no inventory holding costs, cost of capital, storage and handling costs and taxes, insurance and shrinkages. While there are so much savings it is not without risks. The products need to be perfect to keep the process going as with TQM there is no inventory to cover up if something goes wrong. Toyota can keep a safety stock inventory just in case any breakage occurs in the production system.

Performance Measures

It is important to see how well the organisation is performing both for the manufacturing and service organisations. Key factors responsible for the success or failure should be noted and if possible the factors responsible for success should be exploited and those of failure minimised if not diminished.

Both manufacturing and service industries need to see if the performance measures meet the competitive priorities of the organisation.

Key Performance indicators could be set up to see if the performance is up to the mark. Barclays can use this to assess the quality of service provided by the staff. It can be noted by assessing the no. of complaints received in a given time period. The customer satisfaction surveys can also be handed out to customers to see where do they feel the lackings are. The steps can then be taken to overcome those problems. The following KPIs can be used to measure the performance of the organistaions.

Barclays

• No. of accounts opened
• No. of home loans approved
• Staff turnover
• Customer feedback
• Share price on Stock exchange
• Investor returns
• New products offered

Toyota

• No. of cars produced
• No. of defects occurred
• No. of injuries
• New models introduced
• Customer interest

Supply Chain Design

Supply chains permeate the entire organisation. It is hard to envision a process in a firm that is not in some way affected by a supply chain. The supply chains must be managed to co-ordinate the firm’s inputs with its outputs to achieve the competitive priorities of the firm’s enterprise processes. Supply chains are equally important for both the service as well as manufacturing sector organisations. As a firm grows big it can’t perform all its activities by itself and to gain that competitive advantage it needs to evaluate its options and outsource its less profitable activities or manage close relationships with a few reliable suppliers.

As the service sector industries like Barclays are concerned they can outsource quite a few of their operations. India being the hub of call centres for the US and the UK, the call centre of Barclays can be moved there which provides with cheap labour and trained staff. The contract could be given to companies and so Barclays would not need to hire the staff which would save it from paying out fortunes in redundancy costs if it ever needs to finish operations. As the staff would be already trained there would be no training costs and no hiring costs.

As Barclays deals with the important personal information of millions of clients it can outsource the delivery of documents to a firm that specialises in the handling of documents and provides a good reliable delivery. It would be cost effective as well as a competitive advantage as customers will see it a trustworthy brand who takes the clients’ security very seriously.

For a manufacturing organisation like Toyota, it needs to maintain close relationships with a few suppliers who clearly understand the true meaning of the brand and understand what quality the customers exactly expect of that brand. It should not go for a large number of suppliers who barely understand the brand as Toyota did and what was the first brick laid to the devastation of Toyota which saw millions of cars being recalled worldwide. Maintaining close relationships with a few suppliers instead of going in a large supply chains which include tier-2 and tier-3 help create that special bond. It helps achieve the “Just in Time” which is only possible through Total Quality Management.

All the companies involved in the supply chain need to be closely linked to each other and they should be expecting high quality from each supplier as they all rely on one another to provide the best value product to the customer.

Both Toyota and Barclays can outsource their payroll system to a specialist financial firm which would be both cost effective and would also be dealt with the experts. By outsourcing these activities they can focus on more important activities which are the basis of their businesses.

Total Quality Management

Total Quality Management is a philosophy that aims for achieving high level of process performance and quality. To achieve this it stresses on three principles which are related to employee involvement, customer satisfaction and continuous improvement in performance.

Employee Involvement

TQM plays an important part in both the manufacturing as well as service sector industries. It emphasises that everyone in the organisation must share the view that he is responsible for the quality of the product. TQM gives rise to effective teamwork which is the basis of quality circles, which became popular in the late 1970s after Japanese used them successfully.

In Toyota the employee involvement can be achieved by having quality circles and listening to the concerns of each employee in those teams. Every employee should be encouraged to come up with solutions. Every employee should be given the authority to stop production line as soon as quality problem is spotted.

Quality in both the manufacturing and service sector organisations is achieved in different ways:

• Manufacturing Service
• Reliability Tangible factors
• Durability Courtesy
• Performance Timeliness
• Features Consistency
• Serviceability Responsiveness to customer needs
• Conformance to specifications Atmosphere

Continuous improvement

Customers today demand and expect high level of quality at a reasonable price. For the companies to survive in the long run they need to make quality in their products a top priority. This can be achieved through Six Sigma principle where the level of defects is reduced to approximately 3.4 parts per million. This in turn saves both time and cost and wins customer loyalty.

Barclays can achieve the total quality management in their operations in a number of ways. A timeframe can be set up in which a customer needs to be attended at any cost no matter how long the queues are. The customer needs to be greeted happily at his first contact and should be catered to in an efficient and effective way.

Toyota can benefit by reducing the waste and making proper use of the resources. The staff can be trained to use the plan-do-check-act cycle for problem solving. This helps to point out all those activities that don’t add any value to the product and new ways can be found to complete the production cycle in less time and eliminating those activities that don’t add any value to the product.

Customer Satisfaction

Customers are usually satisfied when their expectations regarding a service or product have been met. They often describe the satisfaction as quality.

This can be measured by Barclays in terms of how long it takes for a customer to be served after he entered the front door. The time should be set in which a customer needs to be served in the best possible way. The calls should be answered in a given time and staff should be properly trained to answer the queries. The atmosphere of the branch and the appearance of the staff members should be given importance to.

Toyota can make sure its customers are satisfied by making the cars of excellent quality in lowest possible cost to the customer. Quality should be inspected at every stage. Any defects would delay the entire process and hence delay the delivery to customer leading to the unsatisfied customer. The good quality would mean less wear n tear resulting in less warranty claims and a satisfied customer.

Evaluation of the operational concepts of Barclays and TMC

a) Capacity Planning

Barclays

The capacity planning would help Barclays as it would be able to anticipate demand and make sure it has got the right resources to meet any variations in demand. The demand variations could be studied using the past analysis and extra staff could be made available at busy times of the day or the year. The competitive advantage could be achieved by making sure that all the customers are properly attended and less staff made available at less busier times. The sustainable advantage could also be achieved by making best use of the resources in the most effective way.

Toyota

The capacity planning would help Toyota anticipate what model’s demand is going to be more as compared to the others. More emphasis could be laid on producing those cars whose demand is more and less production for the cars whose demand is comparatively less. This would help gain competitive advantage as producing the right amount of cars would save costs and no stock would need to stored. Sustainability in the long run can be achieved due to the economies of scale achieved.

b) Inventory Management

Barclays

The inventory management would help Barclays keep sufficient cash to keep its process working and at the same time investing it somewhere else to gain higher returns. The competitive advantage will be achieved by making the best use of the cash and gaining the maximum possible return out of it. This would help in long term sustainability of Barclays.

Toyota

The inventory management would mean keeping less stock and hence resulting in almost zero stockholding costs, insurance and tax. The space would also be free and hence used for other purposes. Maintaining safety stock would help them if they face problem at any point in time with the inventory or to meet an unexpected increase in demand. This all would result in cost savings and hence provide a competitive advantage.

C) Supply Chain design

Barclays

As Barclays has already outsourced its back office and call centres to India which is a hub of call centres and a greater awareness of IT so it gives it a competitive advantage above those competitors whose call centres are UK based because there is cheap labour available in India. Above that there are no hiring and training costs to be incurred. Innovation can also be achieved because when talent is pooled together from bright people in different parts of the world many new things are discovered which would not have been possible otherwise. This also helps with the long term sustainability.

Toyota

The supply chain design for Toyota would mean having close contact with a few suppliers who best understand the culture of the company. This would mean a greater understanding of what product is required and what quality is desired. The competitive advantage would be achieved because of close relationship. Discussion between the supplier and enterprise would also lead to innovation. This would also help with the long term sustainability of the company

d) Performance Measures

Barclays

The overall performance of the operations can be measured by KPIs or Balanced Scorecard. It can be found out that equal importance is given to all the four perspectives which are customer, financial, learning & growth and internal business process perspective. This would help achieve the competitive advantage and would also help in the long term sustainability.

Toyota

Toyota can measure the performance of its operations by setting up benchmarks and comparing the actual performance with the benchmarks. Reasons for not matching up with the benchmarks could be looked and proper measures could be put in place to meet up with the standards. This would help achieve competitive advantage and also help in long term sustainability.

e) Total Quality Management

Barclays

Barclays could use TQM to make sure all the resources available to it are properly used and given importance to. All employees work to the full of their potential and customers are given the best service possible. This would help Barclays gain competitive advantage over other competitors and also help in the long term sustainability. It would also help in the innovation.

Toyota

The lean production system adopted by Toyota eliminates its waste totally and helps achieve low production costs. This gives it a competitive advantage over other competitors. Competitive advantage could be achieved by saving costs and resources and sustainability in the long run can be achieved.

Conclusion

Operations management is very important for an organisation as operations are at the heart of the overall success or failure of the company. The topics discussed in this assignment for managing operations are capacity planning, inventory management, supply chain design, performance measures and total quality management. The companies under discussion here are Barclays and Toyota. Overall, Toyota is more cost effective and it pays great emphasis on lean manufacturing and JIT which is the key to effective use of the resources and cost reduction.

References

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