Basic Concepts of Operations Management

This article deals with the basic concepts of operations management like operational efficiency, operational effectiveness, operational strategy, six sigma, etc.

Operational Efficiency

Operational efficiency refers to the ability of a business enterprise to produce and deliver products and services to the customers in the most cost-effective manner that is possible for it (Case, et al., 1982). While trying to produce the goods in a cost-effective manner possible, the business enterprise should also ensure that the products and services adhere to highest standards of quality. Operational efficiency can be achieved by streamlining the company’s core processes in order to respond to the constantly changing market forces in a cost-effective manner.

The best way to achieve operational efficiency is by working hard to minimize redundancy and waste while at the same time leveraging on the resources that contribute most to its success, employing the best workforce available for the organization, deploying the latest technology, and using the best business processes.

Operational Effectiveness

Operational effectiveness refers to the part of organizational activity which deals with having functions that work well. These functions of the organization should work in conjunction and fit together well to effectively implement the organization’s strategy. It involves a number of practices that help the organization to i) Better utilize the resources at its disposal, ii) Better implement its processes, and iii) Accomplish its mission and goals. Many management experts like Michael E. Porter opined that organizational success requires both operational effectiveness and right strategy.

Simply put, operational effectiveness is all about augmenting the functional performance of the organization. In order to achieve this, managers coordinate and control the functional performance within the organization, measure and improve processes that are under their control, and complete the circle by leveraging those improvements to enrich functional effectiveness.

Operational Strategy

One of the most important concepts of operations management is operational strategy. Every business enterprise needs to frame and implement an appropriate strategy in order to achieve anything. Without a proper strategy, there will be lost of wastage in the precious organizational resources. Operational strategy refers to the methods that are used by companies in order to attain their objectives. By developing appropriate operational strategies, a company can conceive and implement systems that are efficient and effective for using resources, people, and work processes.

Operational strategies deal with the functional anatomy of a business enterprise. They are part of the business plan of an organization. While preparing a business plan, managers are cautious to include a section on operational strategies. These strategies describe who a business enterprise is run and how each process is executed to achieve its overall business objective. An effective presentation of operational strategies in a business plan provides a powerful substantiation and credibility to the financial targets decided in the business plan.

Operational Sustainability

Operational sustainability refers to the method of evaluating whether a business enterprise can maintain its existing practices without putting the future resources at stake (Howarth, 2007). Operational sustainability can refer to one of many areas like ecological resources, social resources, and economic resources. Each of these resources are elaborated below in a detailed manner.

Ecological Sustainability

From an ecological standpoint, operational sustainability refers to the company’ capability to use the natural resources at the current pace without depleting the resources it depends upon.

Social Sustainability

From a social standpoint, operational sustainability refers to the ability of all individuals in a society or all companies in a region to access equal or same kind of resources.

Economic Sustainability

From an economic standpoint, operational sustainability refers to the impact of the business enterprise’s operations on other organizations operating in the region and the business’ ability to continue and prosper in the future.

Quality

In order to make the customers prefer the products of a business enterprise, care should be taken that the products sold are perceived to be of good quality. It is generally defined as the non-inferiority of a product or service in the market. Some management experts also define it as a the fitness of a product for a specific purpose. Consumers generally concentrate on the specification quality which refers to how a product/service compares with other competitors in the marketplace. On the other hand, producers generally concentrate on conformance quality which refers to the degree to which a product or service was manufactured correctly.

In the organization where I work, quality is considered to be subjective. Consumers generally do not evaluate the products of company in isolation. They tend to compare the products manufactured by the company with that of the competitors in the market. Hence, the managers in my organization constantly try to benchmark our products with that of the competitors in the market and try to be one step ahead of them.

Six Sigma

Six sigma has become the most important concepts of operations management that should be learned by every student. Maintaining the quality of products is key to keep the customers loyal to the company. There were a number of tools and techniques developed to monitor and maintain the quality of the products/services produced by the organization (I Six Sigma, n.d.). Six Sigma is the set of tools and techniques that were developed for the process improvement. Six Sigma tries to improve the quality of a process output by identifying and reducing the variation in manufacturing.

It was first introduced in Motorla by an engineer named Bill Smith in the year 1986. When Six Sigma was introduced, Japanese companies like Toyota were the first to embrace it. Currently, Six Sigma is followed by many companies around the world. Following the rules and tools and techniques under Six Sigma, many companies have succeeded in bringing drastic improvements in the quality of products manufactured by them. Despite the names of big companies that are often heard to be implementing Six Sigma, many small companies too have implemented this quality improvement technique. In the organization where I work, the technique is successfully implemented despite have a very small employee base of 500. Six Sigma made our organization stand out in the market for producing products which had little or no errors. In the view of the experience of our organization and many other small and medium enterprises, it should be remembered that Six Sigma still has a lot of value for organizations even thirty years after its introduction.

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