Have you ever wondered how you go to McDonalds and get your child’s Happy Meal just the right size and test, and this has been consistent over the years? Or go to the near-by department store and find the staff well behave and know exactly what to do? What about bank layout specially designed to accommodate customers in an orderly, effective, and efficient manner? That’s operations management at work! It is an important sector of a company or organization that ensures all that needed to be done is done perfectly to make you, the customer, have a great experience and come back tomorrow. It makes sure that customers get what they want, when they want it, at the time they want and at the place they want it to be delivered. They coordinate with all the organization’s functional areas to achieve these. But the question is, how do they do it? The answer is, what we are all about to find out in this article. If you are ready, let us begin.
What is operations management?
First off, let see how operations management is defined by different authorities.
According to Investopedia, operations management is the administration of business practices to create the highest level of efficiency possible within an organization. It is concerned with converting materials, labor and other inputs into goods and services as efficiently as possible to maximize the operational profit of an organization. Operations management teams attempt to minimize costs while making sure that quality is not trampled with to achieve the highest possible net operating profit.
Heizer and Render (2011), defined operations management as a discipline that applies to restaurant like Hard Rock Café as well as factories like Ford and Whirlpool. The techniques of operations management apply to every productive enterprise around the world. It doesn’t matter if the application is in an office, a restaurant, a hospital, a department store, a factory – production of goods and services requires operations management.
Difference between production and operations
It is important that we differential these two concepts – production and operations. They are often confused of being the same, when actually they are two different things. As for production, it is an activity that is part of operations activities, but you cannot say the same about the operations because it encapsulates so much more. Operation is larger than just productions, it cut across all functions of a business. Production is a creation of goods and services while operation is a set of activities that create value in form of goods and services by transforming inputs into output as efficiently as possible. Efficiency is the key to operations hence the need and the involvement of different functional areas of a company in their job specification.
Functions of operations management
Every operations management must perform these tasks or must make these decisions, as they are often called. The functions are as follows:
1. Designing of goods and services
Designing of goods and services is the first and one of the most important decisions that an operation manager can make. Because this can make or mar what happens to the final product. What product or service to offer, how to design their look and how to package them are all decisions the operation management will seriously engage in until they get it right. Of course, they work with other functional areas like, finance and sales and marketing to achieve that.
2. Management of quality
Quality is the ability of a product or service to meet customers satisfaction to the optimum level possible. Quality is the degree of excellence of a product or service. Although, quality means different things to different people but all in all, quality should satisfy the customers to the highest level of satisfaction possible. How to define quality and who will be in charge ensuring the stated standard is achieve is one of the most critical decisions of operations management. Quality doesn’t just happen, it is achieved by planning, organizing, controlling, and leading until a product or service reach the final consumers in the way and manner it meant to be. Good operations ensure that to happen.
3. Process and capacity design
It goes without saying, there is a ton of processes that happen in creation of value through goods and services. One of the critical decisions of operations management is business processes and capacity design. The equipment and tools to use, at what capacity they are needed, the kind of technologies to put in place, what processes need what, planning and organizing the processes in order of importance and based on the production and operation cycle are all done under the watch and supervision of operations management. In fact, this function is at the core of operations.
4. Location strategy
As we may all know, business location is as critical as the business itself. Location matters – a very good business with bad location is prone to fail. I believe so many of us know one or two business that were started at some location that we thought were not good and often those business do not end up well. There was this Shawarma Shop that I used to know, they served one of the tastiest Shawarma that I know of coupled with good price and good customer service, but unfortunately they had to close after a short period of operation, simply because the location was not favorable for food business. Therefore, it is part of operations management to put in place the strategy for the business location. Those strategies must be based on well-informed data driven decision, because, needless to say, location is critical to the business success.
5. Layout strategy
Not only location of the business so also the layout of the business is critically important. Therefore, layout strategy is one of the functions or important decisions that operations management work on. How the setting of a business place should be, the kind and where the furniture to be placed, how other equipment are to be arranged should and must be done systematically to serve the customers, the staff and the business well.
6. Human resources and job management
Providing a reasonable and favorable work environment is one of the tough decisions that operations management deal with. The Human resource input that need to be acquired in order to produce desired output are all apart of human resource decision that operation management work with HR department to see to it success.
7. Supply chain management
Supply chain management (SCM) is an activity that starts way back from sourcing and purchasing raw materials, to production of the goods and services, up to selling and delivering of the final product to the final consumer. It is also one of the critical decisions that operations management makes to ensure that this very important process is done as effectively and efficiently as possible. Decisions such as, should we make or buy this component, how much to produce and on what quantity, are all things that are critical to this area of a business and operations management ensures it success.
8. Inventory management
Inventory is a term that shows the amount of goods available for sale and the available raw materials that are to be used for the production of the products in store. Therefore, it is one of the decisions that the operations management involve in to ensure the inventories are manage as effectively as possible. To maintain the balance between shortage and excess of inventory. A lot of careful decisions must be made and continue to be made all the times.
9. Intermediate and short-term scheduling
Scheduling is ensuring that all that needed to be done are in place when the time comes – things that are needed like raw material, equipment, humans need and other tools are readily available at the time of production or even delivery to the customer. Through scheduling things are arrange accordingly, all the foreseeable problem and obstacle are being taken care of until the objective is achieved. Scheduling is a careful planning ahead of time and operations management oversees that decisions.
Maintenance is building a reliability into processes. Operations management work tirelessly to see that all the machines, facilities and computing resources are in excellent condition whenever they are on demand. And this is achieved through constant maintenance – no stone is to be left unturned when it comes to maintenance.
Looking at the above-mentioned critical decision areas, one can conclude that every business organization need a very viable and competent operations management for its survival and success.
Productivity and operations management
Productivity challenge is one of the challenges that companies battle with and operations management is the one tasked with the responsibility of tackling it, thereby, making achieving and improving productivity as one of their priority.
Productivity is seen as the measure of efficiency. How companies make use of as little resources as possible to create output (goods and services) is what productivity means
According to Heizer and Render (2011), productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor, capital, management).
Productivity can be achieved in several ways. One of the ways is using the same inputs to produce more output. Another way is reducing the number of inputs to produce the same amount of output. Sometimes productivity is even achieved by using fewer input to produce even greater output, this is the best form of productivity that can be attend.
Productivity is calculated in two different ways; labor productivity or single-factor productivity and total/multi-factor productivity
Single-factor productivity is a ratio of output (goods and services) divided by labor-hour. Look at the equation of single-factor productivity below:
Productivity = unit produced/labor-hour used =units per labor hours
As for multi-factor productivity, the addition in the equation is adding more inputs, like, capital, material, miscellaneous e.t.c to the labor-hour in the denominator.
How do companies achieve highest level of productivity?
Management achieve highest level of productivity by applying so many different strategies, some of the most current trends and strategies are:
- Eliminating of waste through implementation of agile and Lean manufacturing system otherwise known as Just in-time-system. Just-in-time-system is a strategy that seek to eliminate waste to almost zero level. In this strategy, supply chain is well integrated making it easier for a company to order new raw material and produce product as they are needed without keeping something in the warehouse. This method if implemented will boost productivity
- Business Process Reengineering (BPR): BPR is a continues improvement of business processes to achieve highest level of efficiency possible. It is an approach that redesign processes by discarding the old ones and starting another one from scratch again. This approach always looks at ways that will add value to the final consumer in a new accelerated way that has never been done before.
- Six sigma: Is a quality measurement approach which is considered to be achieved if only 3.4 defects are found in a million of output.
- Total quality control: It is a process of ensuring having the best of everything in an organization, from the inputs, the processes and the output.
Productivity in the physical products and service-based product
It is easier to achieve and measure productivity when dealing with physical products than service-based products. Because physical products are tangible product that their production is separated from their consumption. While on the other hand, services are intangible product that are consumed as they’re produced and more customized based on individual customer needs.
To sum up
Finally, we have seen what operations management is and how operations managers have to deal with ten important and critical decisions. Also, we discussed about productivity and the two ways we can measure productivity. And lastly, we gave some examples of the ways, approaches or strategies in which organization or rather operations management can follow to improve productivity in their organization
That is all we got regarding operations management. I would like to hear what you think in the comment section below. Thank you
Belyh A. (2019, September 23). Operations Management: Definition, Principles, Activities, Trends. Retrieved from: https://www.cleverism.com/operations-management-definition-principles-activities-trends/
Heizer and Render (2011). Operational Management. Tenth edition. New Jersey, United States. Pearson Education, INC
Kenton W. (2020, September 6). Operations management. Retrieved from: https://www.investopedia.com/terms/o/operations-management.asp