Operations Management is the term we use for the management of the resources necessary to produce and deliver the products and services required by customers. These resources include labour, materials and capital equipment.
The following definition reflects the nature of Operations management:
'Operations management is about the way organizations produce goods and services. Everything you wear, eat, sit on, use, read or knock about on the sports field comes to you courtesy of the operations managers who organized its production. Every book you borrow from the library, every treatment you receive at the hospital, every service you expect in the shops and every lecture you attend at university - all have been produced.'
-Slack et al (1995) Operations Management, Pitman Publishing: London.
An operation can also be considered as a transformation process: operations are a transformation process as they convert a set of resources (INPUTS) into services and goods (OUTPUTS). These resources may be raw materials, information, or the client itself (p.e. people travelling with an airline).
Operations function is important to the organisation because it directly affects how well the organisation satisfies its customers.
If we consider the three stages in operations, Input, Transformation and Output, we can classify Input resources in two types: as transforming resources (the staff and facilities) which act upon the transformed resources (materials, information and customers) which are in some way transformed by the operation.
Operations interfaces with many different disciplines and many themes are developing which require the support of Operations Management.
It also mediates between production system demands and other systems - marketing, purchasing, warehousing/distribution, staff, finance.
The management challenge is to ensure that customers' requirements are met while at the same time ensuring that the operating system is run efficiently
The role of the operations manager is invaluable to achieve an efficient resource utilisation and provide hight-quality service response level.
The objectives of operations managers include: producing required quantities of items to quality and on time, at acceptable financial and social costs, with good sales price, and an acceptable ROI with flexibility to adjust to demands.
The operations manager has a key role in developing the processes for making and supporting a product. He can re-design processes. Restructuring programmes can be introduced as some production plants are closed and others upgraded. New technologies and working practices are introduced.
Organizations can produce goods and services.
When we speak about Barclays Bank or a Restaurant, both are services. When personal service is offered the customer reaction is more immediate and less predictable, so such systems demand more control. The degree of customer contact and reaction affects system efficiency. In services productivity is more difficult to measure and quality involves more subjective assessment.
In all stages of product planning Operations Management is a central activity in organizing things: design of a new product, forecasting outputs, design of processes and administrative systems, laying out new work areas, and re-designing existing ones, advicing on quality issues, etc.
There are differnet types of production system such as p.e. builders, gardeners and manufacturers that transform raw materials & components. Suppliers, wholesales, retailers that change the nature of "ownership". Insurance provides people with security, building societies lend for housing, physios improve physical well-being, etc.
Conflicts in Operations Management
Managers must balance potentially conflicting objectives such as customer satisfaction versus efficient resource utilisation in decisions about product design, job and work design, location, process planning/control, scheduling and inventory.
An Operations Manager can make failures in a project such as ignore its environment; push a new technology to market too quickly; let new ideas starve to death from inertia; don't bother conducting feasibility studies; etc.
Management options such as cost cutting on materials may give lower quality and more complaints.
Staff productivity without extra pay may be sought but workers may resist increased work tempo.
Management wants long production runs to use materials, machines and staff efficiently but this can delay a quick response to an order.
A doctor that limits consulting time due to long queue may overlook a serious illness.
The operation manager can fail in evaluating the suitability of existing production plants in order to make a new product or service at a profit.
Decisions have to be made on holding stocks, wich means capital tied up, making it complicate to change the product, having the possiblitity to pass the sell-by date, etc.
A range of techniques may be used to examine how conflicts may be avoided. Techniques include value analysis, linear programming, network analysis, statistical quality control and efficiency measures.
Quantitative techniques offer only limited help, the whole system and boundary relationships with other systems must be managed.
The boundary concerns of operations management include :
In today’s increasingly competitive international business, manufacturing and service companies need to become more innovative and more successful at developing new products, processes and services on a fast and regular basis.
The growth of services encourages rethinking the production concept and the need for international competitive advantage and technological innovation is raising the status of manufacturing.
For some companies to remain viable changes must be implemented so that new product can be produced, or the cost of an existing product can be reduced and quality improved through R&D programmes.
New products have to be developed. What the design is and how it can be produced are important development decisions. Innovative designs have to be made within cost and skill parameters, and staff trained to handle the new products.
Procuring and storing raw materials, components & equipment is a key role. Operations Managers have to work with the purchase specialist in order to source the raw materials and components in the right quantity, price and quality, choice the suppliers and discuss contarctual issues.
Choosing the appropriate relationship for each supplier is important. Whether the supplier relationship aims at cost reduction or value-added benefits for the customer, or both. The appropriate relationship could be one of competitive tension, cooperative partnership, or strategic alliance.
Product strategies must be implemented identifiying market segments, deciding wich products are offered, and deciding on logistical problems.
All organisations have to balance their production capacity with the market. Demand and supply must be sincronised. The demand can raise or fall due to seasonal changes, taxes, etc.
The operations manager can use strategies to vary demand, delay orders, balance seasonal products, maintain excess capacity, adjust capacity, administer costs.
Some firms operations can serve as the foundation for successful strategic attacks and defenses.
Innovation- production staff needs marketing and sales information. Finally, customer feedback helps R&D design and create future products.
Finance and accounting
The Operations function, whether it be in a manufacturing or service business, employs most of the people, spends most of the money and utilises most of the fixed and working capital assets of that business.
A major part of total revenue and capital investment expenditure is spent on production operations.
Production department must budget. The cost of each element of expenditure/activity must be known for price and wage determination and profit/loss identification. Capital equipment has to be replaced, maintained and disposed of to the best tax advantage.
This involves recruitment, training, the design of reward systems, health and safety and industrial relations.
Work will be done by specialists brought together in task forces that cut across traditional departments. Coordination and control will depend largely on employees.
Organizations pose their own management challenges: motivating and rewarding specialists; creating a vision to unify an organization of specialists; devising a management structure that works with task forces; and ensuring the supply, preparation, and testing of top management people.
Products must be designed to function well with style. The range of products or degree of standardisation must be decided. Materials must be chosen. Such matters link innovation and marketing to production.
The CAD (computer aided design) designer evaluates designs with fast computer graphics offering 3-D perspectives, with machine generated colour. Specifications are more accurate. CAD can store standard designs, names and dimensions of components (information needed for purchasing specifications, machine and tools set-up).
Modular production is supported with products built up from families of stock items. Modular systems are a form of standardisation - a means of cost reduction.
Operations management have met with widespread acceptance as a means of expediting product development, making efficient use of resources, and stimulating cross-functional communication. Not only manufacturing firms, but also legal offices, hospitals, and local governments have accepted operations management as an indispensable part of their organizations.
Design and Control of Service Part Distribution Systems. 1997. Eindhoven University of Technology. Jos HCM Verrijdt.
Organizing for Worldwide Effectiveness: The Transnational Solution. Christopher A. Barlett and Sumatra Ghosal. Harvard Business.
The Coming of New Organization. Peter F. Drucker. Harvard Business.
How to fail in Project Managemen (Without Really Trying). Jffrey K. Pinto; Om P. Kharbanda. Harvard Business.
The Manager´s Guide to Supply Chain Management. F. Ian Stuart; David M. McCutcheon. Harvard Business.
Operations Management. An Active Learning Approach. John Bicheno and Brian B.R. Elliott. Blackwell Publishers 1997.
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