Module 3: Operation management

What Is Operations Management?

Operations management (OM) is the administration of business
practices to create the highest level of efficiency possible within an
organization. It is concerned with converting materials and labor into goods
and services as efficiently as possible to maximize the profit of an
organization.

Operations management teams attempt to balance costs with revenue to

achieve the highest possible net operating profit.

Operating costs are associated with the maintenance and administration of

a business on a day-to-day basis.
Operating revenue is the revenue that a company generates from its
primary business activities.
Operating profit is its total earnings from its core business functions for a
given period.

Function of Operations Management

Operations management involves utilizing resources from staff,
materials, equipment, and technology. Operations managers acquire,
develop, and deliver goods to clients based on client needs and the
company’s abilities.

Operations management handles various strategic issues, including

determining the size of manufacturing plants and project management
methods and implementing the structure of information technology networks.

Operations and Supply Chain Management (OSCM)

A critical function of operations management relates to the
management of inventory through the supply chain. This process is known
as operations and supply chain management (OSCM).
 To be an effective operations management professional, one must be
able to understand the processes that are essential to what a company does
and get them to flow and work together seamlessly.

Role of an Operations Managers

Operations managers are involved in coordinating and developing new
processes while reevaluating current structures. Organization
and productivity are two key drivers of being an operations manager, and the
work often requires versatility and innovation.

 Technical expertise in areas such as production automation, data

entry, budget tracking, and design.
 Organizational ability and attention to detail, including keeping track
of project files, employee reports, budgets, schedules, and other details
related to company processes.
 Motivational prowess in the form of strong leadership skills that
provide the expertise to motivate others, inspire ideas, and foster a
supportive and diverse team.
 Analytical aptitude, including skill in risk analysis and mitigation when
initiating new projects. Operations managers must also analyze
processes to identify challenges and offer solutions if negative
situations develop.
 Decision-making proficiency, especially under stress, when there is
very little time to assess all factors.
 Ability to maintain quality standards, including as they relate to raw
materials, machinery, manufacturing procedures, packaging, delivery
processes, and the finished product.

Purpose of Operations Management

Operations management (OM) is concerned with controlling the
production process and business operations in the most efficient manner
possible. OM professionals attempt to balance operating costs with revenue
to maximize net operating profit.

Systems of Operations Management

 Business process redesign (BPR), which is focused on analyzing
and designing workflow and business processes within a company.
 The goal of BPR is to help companies dramatically restructure the
organization by designing the business process from the ground up.
 Reconfigurable manufacturing systems, which are designed to
incorporate accelerated change in structure, hardware, and software
components. This allows systems to adjust rapidly to the capacity at
which they can continue production and function efficiently in response
to market or intrinsic system changes.
 Six Sigma, an approach that focuses on quality. The word “six”
references the control limits, which are placed at six standard
deviations from the normal distribution mean. Tools used within the Six
Sigma process include trending charts, potential defect calculations,
and other ratios.
 Lean manufacturing, is the systematic elimination of waste within the
manufacturing process. This theory sees resource use for any reason
other than value creation for customers as wasteful and seeks to
eliminate wasteful resource expenditures as much as possible.

Types of Operations Management

Objectives Management
Objectives management, or strategic control, is a top-level operational
management function that monitors company strategy as it undergoes
implementation. Objectives management also evaluates any deviations from
the strategy and reins them through adjustments.

Task Management
Task management, or operational control, oversees intermediate
processes, keeping them in tune with pre-established objectives. Task
managers use internal data pipelines, enforcing corrective actions at various
production levels.

Individual Supervision
Individual supervision ensures that the organization meets its overall
strategy. Ground-level supervisors oversee the individual efforts of all team
members, interacting with them and passing on instructions from the task
management team.

Major Performance Objectives of Operations

Management
Quality
Quality is a consistent indicator of your organization’s integrity, performance,
and customer satisfaction. It is, therefore, a crucial operations management
principle that lowers costs and increases customer satisfaction.

Speed
Speed goes in hand with quality. Faster turnarounds that do not
compromise on quality save costs. It is also an integral component of your
buyer’s decision-making process.

Dependability Cost
Low business cost in every operations management’s objective since
low prices attract more sales. So, operations teams must strive to lower the
indirect and direct business costs to provide lower price tags for the market.

Flexibility
According to Magdi Batato, Nestlé’s head of operations, operational
management teams need to adopt the principle of subsidiarity. In political
and social circles, subsidiarity implies that central authorities allow local
operatives closest to the input and output centers to make decisions.

Frameworks for Operations Management

Value Chain
Value chain analysis is a systematic framework that identifies your
customer’s most significant source of value in your products or services. It is
a process that examines the entire sequence of activities involved in
creating and delivering a product or service.

System Thinking
Systems thinking is a process management framework that analyzes
a process’s dynamics, conditions, and restraints. Defining a system as an
interdependent and interrelated set of parts, only separated by boundaries,
seeks behavior patterns in the sum of a system’s parts.

Business Process Reengineering

Business process reengineering (BPR) is the modern analysis and

radical redesign of existing processes. Business process redesign improves
efficiency by leveraging technology and cross-functional collaboration
between teams. It restructures key aspects of the production flow, such as
process optimization and technology integration.
Critical Path Analysis
A critical path is the most time-consuming project sequence that operators
must wind down before the entire project receives the completed
designation. In critical path analysis, the operations team highlights a
project’s most crucial tasks and notes its dependencies.

Lean Manufacturing
Lean manufacturing focuses on minimizing waste, optimizing processes, and
maximizing efficiency. Operations management is a systematic method that
analyzes operations to eliminate non-value-added activities.

Six Sigma
Lean Six Sigma is a smart blend of two methodologies: lean and Six Sigma. t
involves reducing and eliminating eight types of waste, known as
DOWNTIME: defects (overproduction), waiting, non-utilized talents,
transportation, inventories, motion, and extra processing.

Benefits of Using Lean Six Sigma in Your

Business
Simplify Your Business Processes
A lean Six Sigma methodology will help organization reduce waste and
identify non-value-added tasks. This can simplify processes and eliminate
unnecessary steps that don’t bring value. This leads to increased efficiency,
reduced cycle times, and improved productivity.

Make Fewer Errors and Mistakes

When it comes to the lean Six Sigma process, the first step is to
establish the desired level of quality that meets customer expectations.
Prioritize continuous improvement efforts to address the problems that
impact business success most.

Ensures Predictable Performance From Employees

This methodology sets clear standards and procedures, which means
employees know exactly what’s expected of them. It creates simple
processes with less variance that are easier to oversee and manage,
resulting in more predictability.

Satisfy Your Customers

Lean Six Sigma principles use tools and techniques to create a
customer-focused operation with customer experience on the front burner.
By enhancing processes and effectively overseeing quality, organizations can
achieve superior products and services.
Drives More Sales and Revenue
The lean Six Sigma methodology also helps businesses increase the
speed and effectiveness of their lead generation efforts by eliminating waste
and reducing variability in lead generation processes.

Reduces Operational Costs

By eliminating non-value-adding activities, automating repetitive tasks,
and enhancing process and resource efficiency, businesses can significantly
reduce operational costs and improve service levels.

7 Key Principles of Lean Six Sigma

Focus on the Customer
The principal objective of every business is to offer a product or service
that its customers will pay for. Try to imagine yourself as your client and
determine whether your offering lives up to their expectations.

Address a Real-World Problem

Brainstorm together to find the areas that require the greatest
improvements—aim for the problems that deliver the most punch. Prioritize
problems with the most impact. Collect data that suggests where your
specific problem area sits and concentrate on refining that area.

Measure the Value Stream

Consider the entire process—from when a consumer places an order to
when they receive the finished product—as a journey. Lean Six Sigma
encourages mapping the journey and identifying each stop along the route.

Base on Analysis of Data

Lean Six Sigma is a data-driven methodology that supports an
organized, data-driven approach to process improvement inside an
organization.

Get Rid of Waste

The idea of waste removal initially appeared in the Toyota Production
System. In the context of lean, waste is a “non-value-added activity,” and we
are reducing that timeline by eliminating non-value-added waste.

Involve Stakeholders
Put together a team with members from each department affected by
the problem.
Ensure a Flexible and Responsive Ecosystem
Promoting a flexible and responsive ecosystem is the last principle.
Change is inevitable. Once you have implemented improvements, do not just
sit back and relax.

Challenges of Operations Management And

How to Overcome Them

Safety
You should have a safety process documentation strategy and
communicate it to team members interactively, assertively, and frequently.
The technology could seamlessly fuse safety and production and establish
workplace safety accountability among all ranks.

Global Operations
Trade barriers between economies are crashing as more national
economies join the global trade network. To this end, operation managers
now face more complexity and challenges related to cultural differences and
diverse regulatory environments.

Quality Control
Some challenges that limit quality control and assurance in many
businesses include low commitment from management. Proper commitment
and support through determining process costs, details, and justification can
enhance the quality of products and business systems.

Process Improvement
Consistent quality operations are the lifeblood of business excellence.
Where businesses have failed to achieve an excellent operational
atmosphere, operations management should address the root cause of the
failure by undertaking process improvement.

Labor Shortage
There is a mushrooming talent shortage challenge, as four in five
employers report difficulty hiring talent. Some factors driving up labor
shortage include rapid technological advancements leading to a growing
demand for tech-savvy talent.

Time Management
Poor time management leads to long lead times and logistical delays.
Data shows that 70% of businesses suffer the extension of their product or
delivery lead times due to raw material delays.
Advanced Technology Adoption and Integration
Operations managers are like truffle hunters. They constantly look out
for the best IT systems and products.

Sustainability
The most significant sustainability challenges are a lack of
transparency in the supply chain and changing consumer preferences. The
regulatory environment is leading to more scrutiny of business operations,
and upfront costs of doing business are rising.