What is operations management?
You’ve probably heard the term “operations management” thrown around, but what is it?
Operations management is the backbone of any business. It’s the way that companies are able to keep up with supply and demand, and it’s what leads to a business’s overall success. It’s easy to see why operations management is so important, but what exactly is it?
Operations management is essentially the process of planning, coordinating, and monitoring all aspects of production in a company. It involves everything from design and manufacturing to distribution. Operations managers are responsible for making sure that all of these processes are completed efficiently and without error. They analyze data and make adjustments as needed in order to ensure that everything runs smoothly. Operations managers can work within various industries such as healthcare, government agencies, or even small businesses.
For those who have an interest in operations management, there are many career options available depending on one’s skill set and interests. If you like working with numbers then maybe you might consider becoming an accountant or financial analyst—both of which require excellent communication skills since they deal directly with clients on a daily basis! One could also become a supply chain manager who oversees inventory levels at warehouses across multiple countries around the globe.
How to define operations management
Operations management is defined as the design, operation and improvement of the systems that create and deliver an organization’s products or services. It involves the responsibility of ensuring that business operations are efficient in terms of using as little resource as needed and effective in terms of meeting customer requirements.
Operations management refers to 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 professionals try to balance costs with revenue to achieve the highest net operating profit possible. They must also balance productivity with efficiencies to ensure quality goods and services for customers.
Production and Operations management in a manufacturing context
Operations management is the series of activities that transform inputs into outputs. Operations managers are responsible for these activities at all levels of the organization, from daily decisions to corporate strategy. In a manufacturing company, these decisions include but are not limited to:
- Which products will be produced? This is strategic planning.
- How much inventory should be stored? This is inventory management.
- How many employees do we need? This is human resources management.
- How can we reduce costs? This is process improvement.
For example, a company may look at how many employees are required to complete a given number of units per day. If an employee is able to produce 100 units per day, but the company has an order for 200 units and only one person working on it, then the company will need two employees on that task in order to complete it on time. If the company can get by with only one employee producing 100 units per day, then it will have saved money by not having to pay a second employee for their time. However, if there is an unexpected delay in production due to factors outside of the company’s control (such as when raw materials arrive late), then having extra employees available could prevent delays from happening again in future orders as well as increase overall efficiency because fewer employees would be needed for orders that did not require them all at once. The goal of operations management is always about being able to deliver what customers want when they want it at a price they are willing pay.
Operations management in a service industry context
Operations management is a huge topic, and it encompasses everything from hiring a new employee to manufacturing a product to shipping it to the customer. However, when you work for a services company as opposed to a manufacturing company, the day-to-day operations are more likely to be centered on processes instead of products (though they can also be both).
A process is any activity that takes an input and transforms it into an output. For example, if you take your car in for an oil change, the mechanic takes the dirty oil out of your car and replaces it with clean oil. The input is the dirty oil and the output is clean oil. In this case, the process is changing your oil. You could say that your car was transformed by having its oil changed.
However, processes can also have intangible outputs. For example, let’s take language lessons. When you take language lessons, you provide information about where you are in terms of fluency and what kind of things you’d like to learn (inputs), and at the end of the lesson, you have gained new knowledge about how to speak that language (output). This process has transformed your understanding of a language by providing instruction on grammar rules or idioms, for example.
Operations management in a service company is the process of making sure that the parts of the business that make up a service company, like a restaurant or a fitness center, happen as efficiently as possible. It’s about making sure that employees and managers are doing what they need to do, that everyone has all their tools at hand, and that everything happens as it should. For example: If you’re running a restaurant and someone orders extra breadsticks at the start of an order without expressing any interest in purchasing more, you can use operations management to figure out what went wrong and make sure it doesn’t happen again.
Examples of operations management #1: Making your order at Starbucks.
Starbucks, as we all know, is a coffee shop. But, as we may not all know, it’s also an excellent example of operations management practices in action. As they’re busy preparing your drink, Starbucks employees are actually following a procedure that has been carefully mapped out and optimized to ensure speed and quality every step of the way.
It starts with the placement of their ingredients and utensils. They’re arranged in what’s called the “process layout,” which means that all of the items required for each task are grouped together. The syrup and milk dispensers are at the end of the bar on one side, the espresso machines are in the center, and all of the other ingredients (the sprinkles and syrups) are on the opposite side. The baristas’ motions are limited to a small area so that they don’t have to take any unnecessary steps during their shift (which can add up over time). The process is designed to minimize movement while still allowing them to move quickly around obstacles if needed.
Once you’ve placed your order, one barista will take care of making your drink while another will be handling the other customers’ orders—this is another way that Starbucks minimizes wait time by managing its employees’ resources efficiently.
Examples of operations management #2: Manufacturing a car
The next example in our series on operations management is one that is a bit more complex than the previous one of filling prescriptions. Consider the process of manufacturing a car.
The car manufacturer needs to purchase all the raw materials, such as steel and rubber, for making the components of the car. These materials are then converted into standard parts (such as wheels and steering wheels) that are needed to make cars. All these components need to be stored somewhere and retrieved when they are required. The assembly line then needs to be set up to put all these components together in the right order, in the right place, at the right time, so that they eventually become a car. Once this process is complete, there is usually some quality control that needs to be done on some or all of the finished product before it can be sold to customers.
Manufacturing a car is a complicated process that involves hundreds of people and dozens of moving parts. From picking out the right steel for the frame to designing the bodywork and upholstery, there are many complex tasks involved in producing a single vehicle. Operations management is all about ensuring that those tasks run smoothly while keeping costs low—and this includes everything from conceptualizing the car to getting it into your driveway.
Here’s how operations management works: First comes the design phase, where engineers and designers work together to create a prototype based on consumer research and trends. Then it’s time for production planning: This stage involves finding materials, determining when they will be needed at each step of production, and figuring out how much will be needed overall. The next step is actually building the car. This includes everything from manufacturing individual parts to assembling them into a whole vehicle.
Of course, this is a simplified example, but it gives you an idea of what all is involved.
Production and Operations Management Sub-Domains
There are three levels of operations: strategic level, tactical level, and operational level. The strategic level is focused on specifying broad goals for managing the operation, including decisions about policies such as outsourcing, economies of scope and economies of scale. The tactical level is concerned with controlling day-to-day activities to achieve operational targets. Operational managers at this level work collaboratively with each other to achieve targets for quality, quantity, cost, delivery and other factors concerning products or services provided by the organization. The operational level focuses on controlling activities on a daily basis. Operations managers at this level plan for resources needed for immediate activities, direct daily staff efforts to meet demand.
The domain includes a number of sub-domains that are entire domains by themselves. The list below is not exhaustive but will provide a good view of some of these sub-domains.
Production and Service Operations: Production and service operations managers are responsible for the day-to-day activities that keep businesses running smoothly. They are in charge of managing the employees their companies hire to help them achieve their goals. Project management is a large part of the job, as these professionals need to coordinate the work activities of others and make sure everything is on track. They must also monitor progress and make any necessary adjustments to meet deadlines.
Purchasing and Supply Chain: Purchasing is the function of buying the goods and services that a company needs to operate and/or manufacture products. A purchasing manager’s primary concern is acquiring materials for production in a timely manner and at a price that enables the company to sell its product profitably. In addition, the purchasing manager must ensure that the quality of materials purchased meets company standards. Purchasing managers often deal with vendors to negotiate prices, delivery dates and quantities. The purchasing department will sometimes develop relationships with vendors in order to get lower prices and better terms.
Supply chain management is the oversight of materials, information, and finances as they move from supplier to consumer. Supply chain management involves orchestrating several complex systems throughout the process. All of these systems contribute to improving efficiency and reducing costs while meeting customer demand. It also requires an understanding of international trade, procurement, financing and marketing logistics. As supply chains are becoming more global, it has become increasingly important for companies to have a clear understanding of risk management strategies around their supply chains.
Production Strategy: One of the most important aspects that a company has to take into consideration is its production strategy. The capabilities of these systems and the ways in which they are used determine the capabilities of the firm. The production strategy that is employed determines the kinds of products or services that can be offered, the quality of those products and services, and ultimately the long term profitability of the organization. The most common types of production strategies are mass-production and flexible production (Lean Manufacturing).
Production strategy can itself involve different sub-domains:
Aggregate Planning: Aggregate planning involves determining how much raw material should be ordered and how many units will be produced at various levels of production. This information is used to determine how much capacity must be built into a facility to handle peak demand during periods when demand exceeds supply. Aggregate planning also involves determining how much labor will be required at various levels of production by identifying which jobs are simple enough for hourly employees to perform on their own and which require supervision from management or skilled workers.
Capacity Planning: Capacity planning involves determining how much capacity is needed for each type of product or service offered by an organization so that it can meet customer demand without having excess inventory sitting around for long periods of time. Capacity planning often requires predicting future customer demand based on historical trends as well as taking into account new developments in technology that may affect future customer demand (such as new product lines).
Inventory management: Have you ever been in the middle of making a recipe for your family, only to realize that you don’t have enough of an ingredient? Or what about when you’re at your favorite store and see that they’re all out of the product that you’ve come to rely on? These are examples of inventory. Inventory is a fancy word for products or ingredients. It’s not just the important stuff that you need to pay attention to, like your main ingredients. It also means the other things in your life that help it run smoothly, including your cleaning supplies, toilet paper and even cash. When someone talks about managing inventory in their business, they’re talking about how well their company can predict how much product they’ll need and when they’ll need it. The goal is to have just enough inventory so as not to waste money by buying too much and not too little so as not to run out of stock.
Logistics and distribution: An effective logistics and distribution operation is a key part of operations. Logistics involves the transportation and warehousing of goods, along with their management. Distribution is the delivery to customers. The different modes of transportation are air, land, sea, and rail. The most suitable mode depends on whether the products are high-value and time-sensitive, or low-cost and bulky; whether they have a short or long shelf life; and whether there are legal restrictions on certain products in some countries. A global network of warehouses can store products for distribution when needed. Information technology systems can be used to control inventory and track shipments as they move through the supply chain.
Quality control: Quality control is a huge part of any business operation. Without it, every other process could be perfect, but the final product would be shoddy. Quality control is part of production, of course, but it’s also what helps ensure customer satisfaction and repeat business. It’s what keeps your customers coming back and telling their friends about you. In other words: it matters!
A quality control system is going to vary from business to business, depending on what you make or do. However, there are a few overarching things that apply everywhere. First, you should have a standard for quality—what does an acceptable product look like? How good does it work? Next, you’ll want to make sure that everyone understands what the standard for quality is and how to achieve it. Once you’ve made your products or provided your service, you’ll want to check them against the standard in some way—is everything up to par? If not, go back to the drawing board and figure out where the problem occurred—whether it was in a certain step along the line or with a certain employee—and fix it before moving forward again. In fact, fixing little problems as they arise is a huge part of any successful quality control system—you don’t want errors to become habits
Project management: Project management is an inherent part of operations management. A project manager’s job is to oversee a project from inception through to completion. Project managers are responsible for ensuring that projects are completed on time and within budget, while still delivering the required quality standards. They must also be able to manage conflicts within the team and between team members, as well as be able to communicate effectively with clients or stakeholders who may not have an understanding of what it takes to complete certain tasks or deliverables. Project managers must possess strong organizational skills and be able to adapt quickly when things go wrong so that they can get back on track without compromising the project’s success rate or profitability for your organization.