Operations management
Operations management is an area of management concerned with designing and controlling
the process of production and redesigning business operations in the production of goods or
service.
Operation management means the administration of business activities for attaining higher
efficiency. It is a process of planning, organizing, and supervising the operations of the business
for better productivity. Operation management aims at reducing the cost to business by
avoiding any wastage of resources.
• Operations management is the administration of business practices to create the highest
level of efficiency possible within an organization.
• Operations management is concerned with converting materials and labor into goods
and services as efficiently as possible.
Functions of Operations Management
• Finance- Finance plays a main function in operations management. The operation
manager should not waste finance in unproductive tasks.
• Operation– The function of operation management is basically concerned
with planning, organizing, directing and controlling of daily routine operations of an
organization. The operation manager ensures that all activities are going effectively and
efficiently.
• Strategy– The strategy formulation is also the main function of operation management.
The operation manager should have pre-planned tasks. Formulation of plans and tactics
helps the organization in optimizing their resources and developing a competitive edge
over competitors.
• Product Design– It is the duty of operations manager to design the product according
to the market trends and demands. He should ensure that innovative techniques are
incorporated within the product and its quality is maintained.
• Maintaining Quality– Operations managers should ensure a better quality of products.
The manager should not compromise with the quality of Products. They should work
on quality management and should supervise all tasks. If any defects are found they
should take steps to rectify such defects.
Nature of Operation Management
• Dynamic- Operations management is dynamic in nature. It keeps on changing as per
market trends and demands.
• Transformational Process– Operation management is the management of activities
concerned with the conversion of raw materials into finished products.
• Continuous Process– Operation management is a continuous process. It is employed
by organizations for managing its activities as long as they continue their operations.
• Administration– Operation management administers and controls all activities of the
organization. It ensures that all activities are going efficiently and there is no
underutilization or mis-utilization of any resource.
What is role of om?
The input/output transformation model:
Operations management transforms inputs (labor, capital, equipment, land, buildings, materials
and information) into outputs (goods and services) that provide added value to customers.
Figure summarizes the transformation process. The arrow labeled “Transformation System” is
the critical element in the model that will determine how well the organization produces goods
and services that meet customer needs. It does not matter whether the organization is a for-
profit company, a non-profit organization (religious organizations, hospitals, etc.), or a
government agency; all organizations must strive to maximize the quality of their
transformation processes to meet customer needs.
The Transformation Role of Operations Management
We say that operations management performs a transformation role in the process of converting
inputs such as raw materials into finished goods and services. These inputs include human
resources, such as workers, staff, and managers; facilities and processes, such as buildings and
equipment; they also include materials, technology, and information. In the traditional
transformation model outputs are the goods and services a company produces
Differences in Manufacturing Versus Service Operations
All organizations can be broadly divided into two categories: manufacturing organizations and
service organizations. Although both categories have an OM function, these differences pose
unique challenges for the operations function as the nature of what is being produced is
different.
There are two primary distinctions between these categories of organizations. First,
manufacturing organizations produce a physical or tangible product that can be stored in
inventory before it is needed by the customer. Service organizations, on the other hand, produce
intangible products that cannot be produced ahead of time. Second, in manufacturing
organizations customers typically have no direct contact with the process of production.
Customer contact occurs through distributors or retailers.
For example, a customer buying a computer never comes in contact with the factory
where the computer is produced. However, in service organizations the customers are
typically present during the creation of the service.
Usually there is much overlap between them, and their distinctions are increasingly becoming
murky. Most manufacturers provide services as part of their business, and many service firms
manufacture physical goods they use during service delivery.
able 1-1 Comparing Manufacturing and Service Operations
Manufacturers Services
Tangible product. ( A tangible product is a Intangible product. (An intangible good is claimed to be
physical object that can be perceived by touch a type of good that does not have a physical nature, as
such as a building, vehicle, or gadget. Most opposed to a physical good (an object). Digital goods
goods are tangible products. For example, a such as downloadable music, mobile apps)
soccer ball is a tangible product.)
Product can be inventoried. Product cannot be inventoried.
Low customer contact. High customer contact.
Longer response time. Short response time.
Manufacturers Services
Capital intensive. Labor intensive.
OM Decisions:
All organizations make decisions and follow a similar path
First decisions very broad - Strategic decisions
Strategic Decisions - set the direction for the entire company; they are broad in scope and long
-term in nature.
Strategic decisions less frequent
Following decisions focus on special - Tactical decision
Tactical decisions: focus on specific day - to-day issues like resource need, schedules, &
quantities to produce are frequent.
*Tactic and Strategic decisions must align
Historical development operations management:
• The traditional view of manufacturing management began in eighteenth century when Adam
Smith recognized the economic benefits of specialization of labor. He recommended breaking
of jobs down into subtasks and recognizes workers to specialized tasks in which they would
become highly skilled and efficient.
• In the early twentieth century, F.W. Taylor implemented Smith's theories and developed
scientific management. From then till 1930, many techniques were developed prevailing the
traditional view.
Historical Evolution
• 1776 -Specialization of labor in manufacturing -Adam Smith
• 1799 - Interchangeable parts, cost accounting - Eli Viihitney and others
• 1832 -Division of labor by skill; assignment of jobs by skill; basics of time study -Charles
Babbage
• 1900- Scientific management time study and work study developed; dividing planning and
doing of work - Frederick W. Taylor
• 1900- Motion of study of jobs - Frank B. Gilbreth
• 1901- Scheduling techniques for employees, machines jobs in manufacturing -Henry L. Gantt
• 1915 - Economic lot sizes for inventory control - F.W. Harris
• 1927 -Human relations; the Hawthorne studies -Elton Mayo
• 1931 - Statistical inference applied to product quality: quality control charts -W.A. Shewart
• 1935 -Statistical sampling applied to quality control; inspection sampling plans -H.F. Dodge
&H.G. Roming
• 1940- Operations research applications in World War II -P.M. Blacker and others.
•1946- Digital computer -John Mauchlly and J.P. Ecker
• 1947-Linear programming -GB. Dantzig, Williams & others
• 1950- Mathematical programming, on-linear and stochastic processes -A. Charnes, W.W.
Cooper & others
• 1951- Commercial digital computer; large s-cale computations available. -Sperry Univac
• 1960- Organizational behavior; continued study of people at work -L. Cummings, L. Porter
1970- Integrating operations into overall strategy and policy. Computer applications to
manufacturing. Scheduling and control. Material requirement planning (MRP)-W. Skinner
J.Orlicky and G. Wright
•1980-Quality and productivity applications from Japan robotics. CAD-CAM -W.E. Deming
and J. Juran
Today’s Om Environment:
Today’s OM environment is more global, more service oriented, and uses more information
technology than that of even a few years ago. Companies can outsource steps of their operation
easier. Now even service operations are outsourced off-shore. Information technology allows
companies to cooperate more closely, creating tighter supply chains, quicker response and less
waste. Specific features include greater outsourcing, greater use of information technology, and
deeper cooperation in the supply chain.
1. Customers demand better quality, greater speed, and lower costs
2. Companies implementing lean system concepts – a total systems approach to
efficient operations
3. Recognized need to better manage information using ERP and CRM systems
4. Increased cross-functional decision making
OM in Practice:
◼ OM has the most diverse organizational function
◼ Manages the transformation process
◼ OM has many faces and names such as;
◼ V. P. operations, Director of supply chains, Manufacturing manager
◼ Plant manager, Quality specialists, etc.
◼ All business functions need information from OM in order to perform their tasks
Business Information Flow
OM Across the Organization
◼ Most businesses are supported by the functions of operations, marketing, and finance
◼ The major functional areas must interact to achieve the organization goals
◼ Marketing is not fully able to meet customer needs if they do not understand what
operations can produce
◼ Finance cannot judge the need for capital investments if they do not understand
operations concepts and needs
◼ Information systems enables the information flow throughout the organization
◼ Human resources must understand job requirements and worker skills
◼ Accounting needs to consider inventory management, capacity information, and labor
standards
Importance of Operations Management
• Helps in achievement of objectives: Operations management has an effective role in
the achievement of pre-determined objectives of an organization. It ensures that all
activities are going as per plans by continuously monitoring all operations of
organization.
• Improves Employee productivity: Operation management improves the productivity
of employees. It checks and measures the performance of all people working in the
organization. Operation manager trains and educate their employees for better
performance.
• Enhance Goodwill: Operation management helps in improving the goodwill and
presence of the organization. It ensures that quality products are delivered to all
customers that could provide them better satisfaction and makes them happy.
• Optimum utilization of resources: Operation management focuses on optimum
utilization of all resources of the organization. It frames proper strategies and
accordingly continues all operations of the organization. Operation managers keep a
check on all activities and ensure that all resources are utilized on only useful means
and are not wasted.
• Motivates Employees: Operation management helps in motivating the employees
towards their roles. Operation managers guide all peoples in performing their roles and
provide them with better atmosphere. Employees are remunerated and rewarded
according to their performance level.
Scope of Operations Management
• Increase Productivity: Operation management played an important role in increasing
the productivity of business. It manages all aspects of production activities to achieve
highest efficiency possible. Operation manager are responsible for designing
production plan for carrying out the operations. They ensure that all inputs used by
organizations are efficiently transformed into outputs that is products or services. It is
crucial for all business for properly managing their day to day activities and efficient
utilization of all its resources which helps in raising productivity.
• Raises Revenue: Operational management directly influences the profitability of the
business. It works on reducing the cost of operations to business by reducing the
wastage of resources. Operations managers monitor every production activity and take
all necessary steps for maintaining efficiency in the organization.
• Achievement Of Organization Goals: Every organization strives towards
achievement of its desired goals. Proper management of production activities helps
business to properly implement their strategic plans in their operation. Operation
management ensures that all operations of business are going in desired direction.
It regularly monitors every activity and takes all corrective measures as required
according to prevailing situations. Proper functioning of business as per strategic plans
helps in achievement of desired goals.
• Improve Customer Satisfaction: Customer satisfaction is necessary for every
business to improving its relations with its customers. It helps them in retaining them
for the long term. Operation management monitors the quality of products
manufactured by organizations. It ensures that high-quality products are produced in
accordance with the requirements of customers. When products manufactured by
business completely fulfil the needs of customers, their satisfaction level will improve.
• Reduce Investment Need: Operation management reduces the additional capital
requirements of the business. It ensures that all capital employed in the business are
efficiently used. Management of operations ensures that all production activities go
uninterrupted without any shortage of capital. By increasing the efficiency and avoiding
the wastage of employed resources, it avoids any deficiency of capital in business.
Businesses are not required to invest more in their production activities.
• Enhance Goodwill: Maintaining proper goodwill in the market is the goal of every
business. Operation management focuses on improving the position of the organization
in the market. It ensures that business works for providing better services to its
customers. Business should manufacture durable and high-quality products that may
provide better satisfaction to users. Customers will gain confidence in their products
which will improve their market image.
• Improve Innovation: Operation management helps in implementing innovative
changes in organizational activities. All decision regarding production planning is taken
by operation managers by doing research and analysis of prevailing market situations.
It takes into account all technological changes and builds a strong base of knowledge
and operations. This helps in bringing various innovations in operations of the business.
