Basics of Operations Management
Operations management is a key functional area of business management (Chase and Zhang 663). It is concerned with designing and controlling the process of production and other business operations related to the production and delivery of goods and services. Operations management professionals design the processes required to convert inputs (labour, raw materials, intellectual property, etc.) into outputs (goods and services). The history of production and operations systems date back to 5,000 B.C. when the priests in Sumeria developed and utilized systems for managing inventories and labour. But it is the industrial revolution of the 19th century that made operations management into a separate discipline. Developments like division of labour during the industrial revolution and the assembly in the early 20th century made operations management as an indispensable function of a business organization. One of the main objectives of operations management is to balance costs with revenue to accomplish the highest possible profits for the organization. While the discipline mainly focused on areas like Business Process Reengineering, JIT, and TQM; it has now become more dynamic with more emerging concepts related to technological advancements being added every day (Chase and Zhang 665).
This post explains the basics of operations management in detail.
Roles of Operations Management
Being one of the main functional areas of a business, operations management performs a number of functions. Some of the key roles of operations management are:
Framing the Strategic Objectives
Operations management would clearly understand the mission and goals of the organization and develop a clear vision as regarding the contribution of operations management in achieving them. In order to make the goals of the organization achievable, operations management translates these goals into implications for objectives, speed, dependability, and operational performance. This is achieved through the framing of strategic objectives of its own department and various other departments in the organization. To this end, operations manager coordinate closely with other managers, and frame objectives to achieve the goals of the organization.
Management of Resources
Management of organization’s resources is the one of the key role of operations management. Operations managers are responsible for the proper management of key resources in the organization like labour and raw materials. Keeping an eye on the firm’s supply chain inventory and purchasing the items that are required for the production activity are some of the central activities performed the operations management departments. Roles related to the management of labour include recruitment of employees, training the employees, and conducting staff development programs.
Designing, Planning, and Controlling
The designing role involves deciding on the physical form, contour, and configuration of products, products, and services. Operations management decides which of the production systems like TQM and JIT are appropriate for the business operations. Once the systems are in place, operations management puts the necessary controls on place so that they work without any problems.
Performance Measurement and Operations Improvement
Reviewing the performance of operations department in the organization and implementing periodic improvements in the functions performed are the other roles of operations management. Performance measurement involves measuring the performance and effectiveness of organization’s operations management using different kinds of performance measurement metrics. Operations management looks into areas like the effectiveness of existing systems being used in the organization like TQM and benchmarking and developing new frameworks that help organizations to review their performances used (Johnston 114). Operations management periodically suggests the top management the improvements that need to be made to improve the efficiency of the company’s operations.
Decisions Made By Operations Managers
Being in charge of all the operations related of the organization, operations managers take a number of decisions related to the running of the business. In fact, the chief role of an operations manager is that of a decision maker (Stevenson 17). Some of the key decisions taken by operations managers are:
Selection of Location
The location of a manufacturing plant or a service outlet may ultimately decide the success of an organization. A lot of factors like availability of raw materials, labour, power, communications facilities, proximity to customers, etc. need to be kept in mind while deciding upon the location. Operations managers with their thorough understanding of the requirements of the organization are better placed than the executives in other departments to select the appropriate locations for the organization.
Process and Capacity Design
Operations managers take decisions regarding the design of process and capacity design. There are multiple process and capacity options available for both products and services. Decisions related to process and capacity design commit the resources of the organization to a specific technology and human resource use. Hence, operations managers put their utmost efforts to come out with an apt process and capacity design suitable for the organization.
Inventory Decisions
Operations managers take all the decisions related to inventory management. Decisions like what to procure, who much to procure, the source from where inputs are procured, and the intervals in which inputs are procured are some of the decisions taken by operations managers regarding inventory (Stevenson 33).
Quality
Operations managers take quality decisions of the products manufactured by keeping the quality expectations of customers in mind (McCubbrey). Quality decisions include the minimum level of quality that needs to be maintained, systems like TQM that need to be in place to produce quality output, and technology choices that need to made for keeping up with competition.
Scheduling
Feasible and effective production schedules are essential to maintain a free production activity in the organization. Designing good schedules involve understanding the requirements and availability of facilities, materials, and human resources that are required to perform the production and other operations continuously.
Information Flow Between Operations Management and Other Departments
Operations management needs to have communication links with other business functions like marketing, sales, HRM, and finance. Since operations management forms the core activity required for the production of any good and service, operations managers also need to be continuously in touch with the top executives of the organization like CEO, CFO, and president.
Operations Management and Marketing/Sales
Operations management needs to be regularly in touch with the marketing/sales departments of the organization to understand the happenings in the market. This would help operations managers to understand the changing tastes and preferences of the customers well. The flow of information between operations and marketing departments is two way. Having an open communication with operations department would also facilitate marketing managers to know about the features/quality of the product that is being manufactured by the company. Since different departments have control on different kinds of resources, free exchange of information between marketing and operations departments would also facilitate marketing personnel to do their jobs freely (Ruekert and Walker 2).
Operations Management and Finance
Communication between the operations and finance departments of the organization help the operations managers in better understanding the costs and margins for each of the product that is being manufactured by the organization. Finance managers too will have an idea regarding the costs associated with operational processes in the organization.
Operations Management and HRM
As the operations department will be looking after the production activity in the organization, they need to maintain a huge pool of labourers. Operations managers keep themselves in regular touch with HRM department to keep themselves updated regarding the labour market and give their requirements of fresh labourers.