RE$-$THINKING OPERATIONS IN THE NEXT NORMAL

Operations functions$$including procurement, supply chain, and manufacturing$$are at the forefront of managing the

challenges and finding new ways of working considering 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 postpandemic 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 $2\mathrm{.}7$ 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 $1(16$ MARKS$)$

$$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$.$ Considering this statement,

critically discuss the challenges and issues that operations managers have been exposed to in the past three years and

provide recommendations on how these can be handled in the future to improve organisational performance.

QUESTION $2(14$ MARKS$)$

McKinsey Global Institute $($MGI$)$ analysed the data for NTI conditioners a manufacturing firm based in Gauteng, South Africa

which makes three different types of air conditioners: the Cecilia type, the Casablanca type, and the walnut type. Weekly

sales of each type are two, four and six units at a price of R$350,$ R$450$ and R$500$ each, respectively. The Cecilia type can be

assembled in $1\mathrm{.}5$ hours, the Casablanca type in one hour, and the walnut type in $45$ minutes. Labor cost is R$40$ per hour

and the factory$$s multifactor productivity is $2.2.$