What is operations management

Operations Management (OM)

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What Is Operations Management (OM)?

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 net operating profit possible.

Key Takeaways

Operations Management

Understanding Operations Management (OM)

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 abilities of the company.

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. Other operational issues include the management of inventory levels, including work-in-process levels and raw materials acquisition, quality control, materials handling, and maintenance policies.

Operations management entails studying the use of raw materials and ensuring minimal waste occurs. Operations managers utilize numerous formulas, such as the economic order quantity formula to determine when and how large of an inventory order to process and how much inventory to hold on hand.

The combination of understanding and coordinating the work of a company are central to becoming a successful operations manager.

Operations and Supply Chain Management

A critical function of operations management relates to the management of inventory through the supply chain. 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. The coordination involved in setting up business processes in an efficient way requires a solid understanding of logistics.

An operations management professional understands local and global trends, customer demand, and the available resources for production. Operations management approaches the acquisition of materials and the use of labor in a timely, cost-effective manner to deliver customer expectations. Inventory levels are monitored to ensure excessive quantities are on hand. Operations management is responsible for finding vendors that supply the appropriate goods at reasonable prices and have the ability to deliver the product when needed.

Another large facet of operations management involves the delivery of goods to customers. This includes ensuring products are delivered within the agreed time commitment. Operations management also typically follows up with customers to ensure the products meet quality and functionality needs. Finally, operations management takes the feedback received and distributes the relevant information to each department to use in process improvement.

Special Considerations

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.

An MBA in operations management can give someone a global perspective on industry trends and an awareness of any financial regulations and political uncertainties that can affect an organization. It also gives someone a solid grasp of the inherent complexities and the tools needed to respond well to change.

What Is the Purpose of Operations Management (OM)?

Operations management 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.

What Are Some Systems of OM?

Modern operations management revolves around four theories: business process redesign (BPR), reconfigurable manufacturing systems, Six Sigma, and lean manufacturing. BPR 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 are designed to incorporate accelerated change in structure, hardware, and software components.

This allows systems to adjust rapidly to the capacity to which they can continue production and how efficiently they function in response to market or intrinsic system changes. Six Sigma is 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 a 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.

What Is an Example of Operations Management?

Operations management is prevalent in the healthcare sector. The current healthcare system overuses expensive, technological, and emergency-based treatment. High costs from care often remain uncompensated due to uninsured patients. A prevalence of services in expensive settings creates a burden on taxpayers, health insurance holders, and healthcare institutions themselves.

Operations Management: Definition, Principles, Activities, Trends

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Since all companies have operations, i.e. certain ways to create an optimal output from various input sources, whether it be manufacturing physical products or offering services, it is good to be familiar with the basics of managing these operations. Especially as mastering these basics can directly support your business goals.

In this article, we will introduce you to a historical background and the current concept of operation management, its guiding principles, and the everyday activities that are the responsibility of an operation manager. We will also give you an outlook on some of the recent trends that have an impact on this discipline.

WHAT IS OPERATIONS MANAGEMENT?

Operations management involves planning, organizing, and supervising processes, and make necessary improvements for higher profitability. The adjustments in the everyday operations have to support the company’s strategic goals, so they are preceded by deep analysis and measurement of the current processes.

Historical background

Operations management was previously called production management, clearly showing its origins in manufacturing. Historically, it all began with the division of production, starting as early as the times of ancient craftsmen, but spreading more widely only by adding the concept of interchangeability of parts in the eighteenth century, ultimately sparking the industrial revolution.

Still, it was not until Henry Ford took a twist on manufacturing with his famous assembly line concept, otherwise known as “bring work to men,” that the management of production for improving productivity became a hot topic. From the 1950’s and 1960’s, it formed a separate discipline, besides bringing other concepts, such as Taylorism, production planning, or inventory control, to life.

As the economies in the developed world were gradually shifting to be service-based, all the corporate functions, including product management, started to integrate them. The service side also began its approach by applying product management principles to the planning and organizing of processes, to the point where it made more sense to call it operations management.

Multidisciplinary nature

Operations management is now a multidisciplinary functional area in a company, along with finance and marketing. It makes sure the materials and labor, or any other input, is used in the most effective and efficient way possible within an organization – thus maximizing the output.

Operations management requires being familiar with a wide range of disciplines. It incorporates general management, factory- and equipment maintenance management by tradition. The operations manager has to know about the common strategic policies, basic material planning, manufacturing and production systems, and their analysis. Production and cost control principles are also of importance. And last, but not least, it has to be someone’s who is able to navigate industrial labor relations.

Interested in a deep dive into operations maangement? Read the following slides.

Required skills

The skills required to perform such work are as diverse as the function itself. The most important skills are:

THE MAJOR PRINCIPLES OF OPERATIONS MANAGEMENT

Some of the fundamentals of the everyday work in operations management worth expanding a little more. Below you will find two major approaches that are important to understand the driving forces behind the decisions about planning, designing and organizing processes.

They are both embracing the idea of focusing on the delivery: supporting the organization to deliver better results, by an optimized input of materials, equipment, technology, and human resources.

The ten principles of OM by Randall Schaeffer

Randall Schaeffer is an experienced manufacturing and operations management professional, an industrial philosopher, and regular speaker at conferences organized by APICS, the leading US association of supply chain and operations management. He presented his list of 10 principles of operations management at an APICS conference in 2007, saying the violation of these principles had caused the struggle US manufacturing companies were experiencing.

The 16 principles of operations management by Dr. Richard Schonberger

Dr. Richard J. Schonberger, renowned researcher of American manufacturing and author of the book “World Class Manufacturing: The Next Decade,” has become widely known in operations management by his set of 16 customer-focused principles.

THE ACTIVITIES OF OPERATIONS MANAGEMENT

There are three major groups of activities performed by operations management, deriving from its planning or designing, organizing, and supervising functions. All activities involve considering assets, costs, and human resources, and are preceded by a thorough analysis of processes.

Design

Before planning processes or designing products, operations management should be busy analyzing the market to test the demands. If it delivers promising results, e.g. a niche to target or a new product or service to develop, you can start planning.

In most cases, planning involves designing a new product, from the initial concept to the actual launch, with several testing phases involved. During planning, you will have to consider both technical and business requirements.

Sometimes the processes need to be updated: designing a new supply chain or other logistics processes. If your product is a service, process design aims for a variety of requirements and customer contact levels.

Again in other cases, it’s about a new facility: your company decides to expand its operations, and you will have to decide on the location of the facility, its capacity, and its layout.

Plans should always support the business objectives: they are in focus when considering the costs and finding the best matching quality and capacity, or calculating inventory and human labor needs.

Therefore, it is important to set proper measures in the planning phase, to know if the actual performance meets them, or there is need for adjustments. Capacity is one of these measures, as is product quality, or delivery times. The initial figures are usually estimates based on the market analysis conducted beforehand.

One thing operation managers should be good at is critical path analysis. Learn more about that in the following video.

Management/Organization

So you have a facility for production, your product design is ready, and so is the way it will be produced: with what material and human resources, at what costs, with what workflow.

This is a solid starting base for maximizing the efficiency of your operations. Still, you will need constant and competent management to correct the accidental mistakes in planning, to adjust production to changing costs or regulations, and keep them efficient on many levels.

The operations manager selects and schedules the processes for an optimal result and does the same with materials for an ideal quality and capacity. Organizing the maintenance of the equipment is also part of the quality management activities. Furthermore, the inventory and the whole supply chain has to be managed in order to produce more efficiently.

As in all management functions, the management of human resources is an essential activity. In operations management, the planning of actual employment levels can have a great impact on whether an organization can operate effectively.

Improve

There is always room to improve when it comes to the processes used, the quality and capacity achieved, or as far as the level of inventory and human resources are concerned.

A great deal of operations management’s tasks, therefore, comes from these needs, and this is where long-term planning steps in. But remember, changes made according to these plans are only as good as the improvement they bring in business terms.

A better way to forecast demand gets you closer to an improvement of processes, as savings on costs and delivery times occur. The quality of a product will be higher if you have Total Quality Control established and assess the operational risks correctly. Inventory control accounts for a better use of supplies. With Just-In-Time manufacturing, the capacity issues can be solved. Collaboration is a common go-to strategy that you can use to improve the effectiveness of your human resources.

As a general advice, you can always consider adding some technology in the mix. The best way to do that is to develop a technology plan: identify where the company is now, in which areas it would need a boost, what relevant technologies are available, and which ones are feasible to implement.

RECENT TRENDS IN OPERATIONS MANAGEMENT

The ever-shrinking product lifecycles, the new trends on the labor market, the environmental concerns, and the digitalization of the processes require innovative approaches to operations management. Some of the trends that have a significant impact on the discipline today are:

Business Process Reengineering (BPR)

It’s a radical approach to designing core processes: take everything that you used before, discard it, and then start again from scratch. With Business Process Reengineering, you can foster innovation and improve any selected measures dramatically. If you want to do it well, focus on how you can add more value to the customer.

Lean and agile manufacturing

Established by the Toyota Corporation, the term lean manufacturing has become a mainstream trend in the industry, and it is used interchangeable with Just-In-Time production. The concept behind is a constant improvement of processes in order to reduce waste and inventory, and maximize the output of high-quality, low-cost products and services.

A new twist on this concept is agile, or otherwise known as “the new lean.” It has its origins in software development but now is used by various industries. The reason it came to life was the growing complexity of processes, and it is characterized by product development done in small increments and super-fast decision-making. These together ensure the necessary flexibility and interactivity, proven remedies for unpredictable changes in market demand.

Six Sigma

Improving processes using a data-driven approach is an innovation of Motorola from mid-1980. It’s still among the trends of impact because it is a quality-improvement and cost-reducing method that focuses on customer satisfaction.

The method is based on the Six Sigma measure, which is achieved if only 3.4 defects are found in a million of output. This way, production efficiency can be nearly 100%. When presented with a problem, the Six Sigma approach uses a five-step method called DMAIC, an acronym of define, measure, analyze, improve and control.

Reconfigurable manufacturing system (RMS)

Another possible method for reacting to quick changes in the market is RMS, a production system that can be used with different functionalities within a product family. With an RMS, you can make adjustments in production cost-effectively.

Employee involvement

A recent trend that impacts the human resources management activities in operations is the increasing involvement of employees in the planning processes. Listening to the opinions of the workers often brings up fresh ideas, a different perspective on what problems should be solved and how to make the operations more effective.

Sustainability

Due to the ever constraining environmental regulations, businesses must operate under pressure to reduce their harmful impact while still being able to grow. The issues, since affecting all levels of operations, need the insights of operations management on what are the options to meet these new expectations.

Many times, principles applied for efficiency coincide with sustainable operations management principles, like organizing resources or cut times and waste.

Behavioral operations management

This trending research area studies the impact of human behavior, especially non-rational decision-making, on the discipline. Because of its complexity, operations management is a field prone to frequent deviances in problem-solving.

There is a solid interest to understand the most important factors that influence manager’s decisions, as well as to make efficient problem-solving methods more widely available. With such a toolbox, managers can make more rational decisions and improve the overall efficiency of the operations.

Everything you need to know about Operations Management

A crucial part of running a business is to ensure that business operations are running smoothly. This is where the role of operations management is important. To ensure that the business reaches its financial goals, the operations manager will ensure that all processes are streamlined and mapped in order to achieve the desired outcome.

The operations manager wears many hats within an organisation. This includes helping with finance, sales, human resources, IT, and if necessary marketing. By keeping his or her hand in each of these jars, an operations manager is aware of what is happening within each of these departments.

Functions of operations manager

The operations manager has a wide range of functions that they need to perform within an organisation. Overall, the main job description of the operation manager is to ensure that all products and tasks are delivered on time, within budget, and to ensure the outcome is successful. To make sure that the job is done well, they perform the following functions:

1. Create and manage a budget
2. Define company policies and implement training
3. Project planning
4. Increase business efficiency
5. Forecasting

Create and manage a budget

Finance is an important aspect to track for an operations manager. They will receive an allocated budget to kickstart and maintain the project. With this budget, they will take a look at the cost of resources and tools. Part of budgeting includes:

Defining

The operations manager will receive the task and will need to allocate a budget towards resources and tools. Most organisations have policies and procedures and the operations manager will need to have a look at this to make sure he/she is following protocol.
The operations manager will need the following to create a budget:

1. Cost estimates
2. Basis of estimates
3. Scope baseline
4. Project schedule
5. Resource calendars
6. Contracts

Once these have been finalised, the operations manager can move on to the next step.

Executing

This means putting the plan into action. The operations manager will need to take a look at resources and tools. This means sitting with those involved and determining what is needed.

Updating

Along the way, there will be challenges. That much is a given in any business. Sometimes there might be an extra resource that is needed or the time during one of the project phases might need to be extended. The operations manager will need to assess the importance of the challenges and will update the budget accordingly. Obviously, this will need approval.

Evaluation

In this phase, the operations manager needs to look at the budget to see whether the allocated funds worked. This will help set a template for similar projects going forward as well as keep the project moving along as planned.

Define company policies and implement training

To ensure business operations are running smoothly, the operations manager will implement policies to make sure that employees are aware of their role within the company. The policies also see that staff work in a safe and harmonious environment.

Efficiency is also an important aspect for the operations manager. Training a staff to perform tasks excellently in the least time possible is a critical part of managing a team. To make sure that employees are performing the job well, constant teaching needs to be implemented. The operations manager may suggest courses or training seminars that may help career advancement and job efficiency.

The operations manager needs to ensure that policies and training meet the organisation’s overall mission.

Project planning

High-level planning is needed when running a business. An operations manager will need to become familiar with the use of schedules to help arrange project plans, resource workloads, work structure breakdowns, and setting realistic timelines.

Resources will need to be optimised to ensure that the company has an edge over competitors and to make sure the outcome is of the highest quality. The operations manager will ensure that the business strategy is in line with the company’s mission with regards to sales, capacity, etc.

Increase business efficiency

A business is only successful if all departments are working as a unit. With a common goal in mind, the outcome is fruitful. The job of the operations manager is to ensure that all objectives are met and that the business is running as efficiently as possible. What this means is that whatever support a department needs, the operations manager will make sure it happens. For example, if automation will help make a function more efficient and produce higher quality, the operations manager will assess to make sure it meets business objectives and is within budget. If given the green light, it will be implemented.

Management should look to increase the effectiveness and efficiency of support services (HR, IT and Finance) through improvements to each function as well as coordination and communication between support and business functions.

Forecasting

A big part of operations management is forecasting. This refers to product demand. By analysing, the operations manager will need to forecast to know what to produce, when to produce and how to produce in accordance with the customer’s needs.

Careers in operations management

There are many career options you could explore within the operations management field. These include:

Business Operations Manager
Quality Assurance Manager
Operations Research Analyst
Logistics Manager

Business Operations Manager

The business operations manager executes and manages the company’s operational activities. This means overseeing the day-to-day operations to ensure that goals are achieved and that business objectives are met.

This role requires an individual to have a ‘big picture’ perspective. What this means is that because they know what the business objectives are, they need to have an overview of what is happening in each department. This way, they can utilise the correct resources when needed.

The role also requires someone to be a critical thinker – someone who can analyse a situation and make a decision that is best for the company.

In larger companies, their roles include the following:

1. Creating and managing a budget
2. Oversee company policies and procedures
3. Ensure company compliance
4. Oversee hiring objectives and job description creation
5. Keep updated on employment trends and best practices
6. Keep track of resources and technology that may improve department efficiency

In a smaller scale business, this role will be slightly different. The business operations manager will supervise the finance department, staffing, policies, marketing and help create and manager business objectives.

No matter the company size, this role is crucial to a business’ operation.

Quality Assurance Manager

The quality assurance manager role needs someone with an excellent attention to detail. Products need to meet a high-quality threshold before it makes its way onto the market. The quality assurance manager will have a template in which they assess the end-product. This means that they create and manage quality control measures.

The role will include:

A career in this field means that the individual needs to be inquisitive and committed to an excellent standard.

Operations Research Analyst

People in this role are high-level problem-solvers. Through optimisation, data mining, and statistical analysis – the operations research analysts are able to provide solutions to business inefficiencies and to streamline processes. The role requires someone who is proficient in mathematics and analytics.

Job responsibilities will include:

Companies have lately relied on data and analytics for better insight. The operations research analyst needs to turn raw data into something that will help inform the business objectives.

Logistics Manager

This role is usually found in the supply chain industry. The logistics manager is focused on an efficient and accurate work environment and output. In the supply chain industry, they’ll ensure that the products are delivered to the right location – all within a timely manner.

Their responsibilities include:

Logistics managers will need to be effective communicators and have the ability to resolve problems fast.

What skills are needed for operations management

A career in operations management requires a certain skill set that will ensure the individual is successful within the role. These include:

1. Leadership
2. Conflict management
3. Flexibility
4. Critical thinking
5. Excellent time management

Leadership

The operations manager will need to implement and execute policies and procedures. In order to do so effectively, they will need leadership skills. Being a good leader means being able to communicate well, be a great motivator, and have the ability to adapt well to challenges. Creative thinking also indicated strong leadership. The operations manager needs to make plenty of decisions, some of which may require out-of-the-box thinking.

Conflict management

In any work environment, you’ll come across obstacles which are usually in the form of conflict. The operations manager will need to be proficient in conflict resolution. This means listening carefully, identifying points of agreement and disagreements, and developing a plan to resolve the conflict. The goal of the operations manager is to make sure that those involved feel heard during the resolution process and that the procedure is a stress-free one.

Flexibility

Some business environments are stressful and changes can happen by the minute. The operations manager will need to be flexible when it comes to adapting to the changes fast and ensuring that everything is communicated to the rest of the staff. At the same time, they will also need to be receptive to feedback by staff.

Critical thinking

Critical thinking means that an individual can analyse information objectively and come to a reasonable conclusion. An operations manager will need to assess all forms of data, facts, research and observations in order to draw a conclusion that will help them solve a problem or help them make a decision.

Excellent time management

Staff need to be efficient, produce high-quality work but also ensure that all work is completed within the deadline. This is done with excellent time management skills, which will help the organisation save money and increase revenue. An operations manager will encourage exceptional time management skills amongst the staff by ensuring the right skill set is paired with the right task. Getting to know the strengths of employees will help in this regard.

Operations manager salary

As mentioned above, the operations manager will need to have a high-level overview of how an organisation is run. This means having their hands within every department and business function – from IT, HR, Finance, etc.

The average salary for this position in South Africa is R 596 763 per annum.

Operations managers can expect to earn the following according to their occupational level:

A bonus remuneration within this field varies according to your experience and ranges from R16,000 – R42,000.

How to become an operations manager

There is no such thing as a Bachelor of Operations Management degree in university. In fact, the way most people advance to the job of an operations manager is by gaining work experience. The roadmap usually begins within the human resources, information technology, finance, or sales departments. This is where individuals receive a clear idea of how an organisation operates.

Once a significant amount of time has been spent in these departments, they may be promoted to a management position. This is where a whole new skill-set is developed. The management position will help develop communication, leadership, and delegation skills. This will be beneficial in an operations management environment.

The next step will be a junior entry-level position, where an individual can gradually work their way into a senior operations management position.
To speed up the advancement, most employers will encourage staff within the organisation to attend training seminars or participate in courses. These will help build the foundation and provide insight into the fundamentals of the position.

Operations Management Definition and Principles

Business operations are an integral part of every business, irrespective of the industry. It will be helpful to know all the necessary processes that are part of the business. The primary business operations are producing final products using different inputs, providing services, etc. Effective operations management is necessary for the success of a business.

In this article, you will learn about the definition of operations management, what is operations management, principles of operations management, and different activities involved in operations management.

Definition:

Operations management can be defined as an area of control that is concerned with the management of business operations like planning, organizing, and supervising all day-to-day operations. The main goal of operations management is to make necessary changes time-to-time to maintain or enhance the profitability of the business.

Table of Contents

What is operations management?

Operations management is mainly concerned with the business operations that are involved in the manufacturing, production, or for the provision of services. The operations management consists of planning, organizing, and supervising all activities involved in the production and manufacturing departments. The operations management is a delivery focused management.

It makes sure that the organization is successfully converting resources into outputs and generating maximum profits while doing so. The input involved in the operations is not only considered as raw material but all the information such as machinery equipment, technological devices, human resources, etc.

Supply chain management and logistics are two primary operations that precisely define the operations management. Operations management is an integral part of supply chain management. For example, a business must understand the global trends to meet the demands of the customers in the market.

Whereas, the logistics concerns about the cost-effective and careful use of resources. Careful use of resources is essential in the present times as supply of resources can shorten at any point in time, or the demand of customers can increase at any point in time.

Operational management is one of the main functional areas, like marketing and finance, in an organization. This area of management cares about the way labour and material are used as an input. The operational manager makes sure that all these resources are used efficiently so that maximum output can be obtained. Operations management consists of a wide range of disciplines such as general management, factory, and maintenance management in the organization.

An operations manager needs to know about the production and manufacturing systems, material planning, strategic policies, and analysis of different processes. Operations management not only concerns about planning and organizing but also worries about the cost of production and other procedures. Lastly, the operations manager takes care of industrial labour relations.

Historical background of the operations management

Earlier operations management was referred to as production management as earlier it was merely concerned with the manufacturing operations. Before the eighteenth century, operations management was concerned with the division of production. But later, it included the different parts of production, which was referred to as the industrial revolution.

Later, Henry Ford introduced the concept of an excellent assembly line concept in manufacturing, which was known as “Bring work to men.” Because of this, the management of production has become an essential topic for enhancing productivity in the organization. In the 1950s and 1960s, it was introduced as a different concept known as inventory control, Taylorism, and production planning.

When businesses turned to become service-based, all the companies started to integrate different corporate operations such as production management. Service-based companies began to apply all product-based principles, such as planning and organizing the processes. Hence, the integration of all methods was named as operations management.

Principles of operations management

In this section, you will learn about the two different approaches that will help you to understand the driving forces about planning, organizing, and designing processes. Both methods follow the idea of delivering excellent output by making the optimized use of material and human resources available in the organization.

Randal Schaeffer gives ten principles of operations management

Randall Schaeffer is a well-known name in the business world. He is an expert in manufacturing operations and operations management. He mentioned ten principles of operations management that no company must violate if they want to stay profitable.

The following are the ten principles mentioned by Randall Schaeffer

1. Organization

All the processes in an organization are related to one another. It is crucial to predict all the elements and to have consistency to achieve profitable outputs.

2. Reality

The operations management must focus on the problem and not only pay attention to the methods and techniques used to solve the problem. Because no plan can provide a solution to all questions.

3. Accountability

Accountability means the responsibility of people working in the organization. An operations manager decides the metrics and rules for different operations and assigns various duties to different employees. It is the responsibility of the manager to supervise the work of the employees. In this way, he makes sure that all employees are putting their 100% efforts to achieve the organization’s goals.

4. Fundamentals

The successful operations management is the result of applying Pareto rule. The Pareto rule says that 80% of the organizational goals can be achieved by strictly maintaining the disciplines and records of the work performed by each individual in the organization.

In contrast, the other 20% is made by adopting new techniques to enhance the processes.

5. Causality

Effective operations management depends on finding the right cause of a problem. A problem will keep on surfacing if its origin is not attacked and solved.

6. Variance

Variance is a way of introducing creativity in the processes. An operation manager should encourage the variation in the organization; this will help in finding the creative methods to perform different activities.

7. Humility

Humility should be considered as creative criticism. An operational manager should never limit himself to trial and error methods to find the solution to a problem; instead, he should take help and move on with other works.

8. Managed passion

Passion is a driving factor that helps a company grow. An operations manager should inculcate passion in their employees by using different techniques if employees don’t feel passionate about their work.

9. Change

Change may seem scary to some people, but an operational manager should never fear change. New ideas and methods are introduced in the market from time to time. To be relevant for an extended period, an organization should embrace the change.

10. Success

Success is not permanent. What you may consider as success might not remain relevant in the future. Therefore, a company’s efforts should be in the interest of customers. A company should keep revising its policies and methods to retain customers for an extended period.

16 Principles of operations management introduced by Dr Richard Schonberger

1. Continuous improvement

It is crucial for an organization to continually make efforts to improve its services to deliver the best quality and to respond to the demand of customers quickly. Continuous improvement helps businesses to become flexible to adapt to a new business environment.

2. Team up with your customers

The second important principle given by Dr Richard Schonberger is to team up with your customers. You produce for your customers, and the success of your business depends on their choice. Learn about what they demand and are willing to buy. Then use this information to create products to fulfil their demands effectively.

3. Learn about the competition

You can never succeed by ignoring your competitors. It is essential to learn about your competitors, their customers, key strategies, etc. and take inspiration from them to modify your business practices.

4. Single-purpose

Make sure that all your employees are aware of your intention and put effort according to it.

5. Organize resources available in the organization

Organize resources in such a way that you can use these resources in a way so that you can fulfil the demand of your customers at any point in time.

6. Focus

Focus on creating products that your customers would want to use. Don’t allow the production of products that your customers might not like.

7. Keep your equipment in good shape

Your equipment is your assets. Put efforts to maintain them and keep them in the right way rather than buying new equipment.

8. Work on your human resources

Your human resources are your main asset. Providing them cross-training, job rotation health, job safety is necessary to optimize their productivity. In addition to this, you can offer them rewards and recognition to encourage them to work hard.

9. Reduce human errors

Human errors can be the reason for wastage of resources. Make your frontline employees accountable for all the mistakes made by them.

10. Acquire simple but best equipment

Use equipment that is less complex but is the best of the current times. It is one of the best ways to stay ahead in the competition and deliver better to your customers.

11. Cut setup

The cut setup means to be ready for different types of processes. Keep your information and tools prepared to meet the surge in demand.

12. Cut times

Cut times mean reducing the total delivery time that you take to deliver products to your customers. This can be achieved by adopting the latest technology and delivery methods.

13. Total quality control

The quality of your final product will depend on the types of material and techniques that you will use to produce them. Make sure that your partners deliver content that is of optimum quality.

14. Pull system

An organization must enhance the workflow in the organization and reduce waste by making on-demand production.

15. Visibility management

Make efforts to increase the visibility of your company in the market. Promote your achievements and the improvement you made in your products and services. So that your customers can know about your progress.

16. Fix causes

Problems are caused in the system by the underlying cause. Therefore, rather than just focusing on the issue on the surface, pay attention to the root of the problem that may be hidden.

Activities involved in operations management

There are mainly three types of activities that are part of operations management. The three activities are designing, organizing, and supervising the events taking place in the organization. All of these activities are affected by human resources, assets, and costs, etc.

Let us learn about all activities one by one that is involved in the operations management.

1. Design

Analysis of the market to learn about the demand in the market should be performed before starting the process of planning and designing the product. The planning process should only be started if the outcome of market research shows a promising result.

The planning and designing phase of any product starts with the introduction of new ideas to the final launch of the product. This process is not as simple as it seems. It involves various testing phases to check the quality of the product before introducing it into the market. The planning phase of a product involves both the business and technical requirements for creating a product.

Many times, you might need to change or modify the processes, such as introducing new logistics and creating a new supply chain. In case if you are planning to provide a service, then you will require the involvement of your target customers and a variety of requirements for creating the service.

However, in case if your company is planning on expanding its operations, then it has to decide on its capacity, layout, and all other essential requirements. You should expect in such a way so that it is always per your business goals. In the planning phase, you should consider the cost of your operation along with the quality and capacity to be produced. You should calculate inventory available and human resources available to get work done without any obstacles.

Take proper measures in the planning phase so that you can be sure of what you need to do to meet the performance metric, and if not, you can make necessary changes to achieve the desired outcome.

2. Management

Once you have designed your production plan and have all the facilities ready for production. The next step after this is management. You need to manage what human resources, material, and what cost you will need to produce the goods that you want to provide.

It is the beginning base for the production process to optimize the efficiency of your operations. Continuous and competent management is required to tackle the accidental mistakes that take place during the production process. The management should be efficient in adjusting their production plan according to the change in the demand in the market or according to the difference in the regulations and cost.

It is the job of the operations manager to select the material of ideal quality to produce goods of excellent quality. He is also responsible for managing the supply chain and inventory in the company efficiently.

The human resource of an organization also plays an essential role in the efficient production of an organization.

3. Improve

Achieving better quality and enhanced capacity of production is a continuous process. Every organization continually makes efforts to improve its quality and size of production. In addition to this, achieving 100% of human resource capacity is also a primary concern for the organization.

Therefore, a large portion of operation management’s work is concerned with performing these tasks. Hence, long-term planning becomes an essential part of the operation management’s job.

An effective way of forecasting demands helps in the improvement of processes as well as helps you in saving both time and cost of production. You can produce products of higher quality by controlling the quality and assessing and managing operational risks. Supplies can be used effectively by making the proper use of inventory control. Manufacturing products, as per the need, can help you in dealing with capacity issues. Human resources can be used effectively by using the most straightforward and effective technique called collaboration.

In addition to this, don’t forget to take advantage of technology to maximize the effectiveness of your business. Prepare a technology plan for your company. Identify where your company stands at the present times and where do you want to see it in the coming times. Identify the areas that require improvement and find out the technologies available in the market that can help you in achieving your goal. Lastly, implement those technologies to improve the overall performance of your business.

Importance of operations management

Operations management is quite easy and straightforward in smaller companies, as in smaller organizations, each employee takes part in the management work. However, it becomes crucial and complex work for organizations with a large number of employees.

As management, you can’t leave work to employees and expect them to deliver results as you expect. Therefore, it becomes essential for you to standardize procedures and make your employees follow those procedures to get effective outcomes.

Effective operations management is of utmost importance. Let us learn about what benefits you can obtain using effective operations management.

1. Better Output

An operations manager can optimize the processes that are necessary and have a significant impact on the production and manufacturing of products and services. Improved processes result in lower defective products, higher output, and lower cost of production.

2. Higher Profits

Higher profit is a byproduct of better manufacturing. Your investment reduces, and wastage of investment is also reduced because of better output. Therefore, a company with better production ends up in enhancing its bottom-line and increasing profits.

3. Competitive advantage

Improved quality of your products and services helps you in gaining a competitive edge in the market. This helps you in acquiring new customers and also retaining the old customers.

4 Popular theories for effective operations management

A. Business process management (BPM)

Business process management is a method of continually analyzing, enhancing, and automating processes. It is not a process that you apply once in a while and forgets about it. It is a continuous process, and the followings are the steps that you are required to take to work on any procedure.

1. Design

The design part of a business is an integral part of every business. The design part of a company means where the methods start and where they end.

2. Modelling

The next step after designing is modelling. Once you understand the processes, you are required to put them on paper in the form of a workflow diagram. This will make analysis work easy for you.

3. Analysis

Once you have a workflow diagram that specifies all the steps involved in a process. You can analyze it and can determine whether or not these steps are adding value to the process. Based on this information, you can remove steps that you find unnecessary and can add a few steps to enhance the process.

4. Monitoring

Monitoring is a necessary step as you can improve a process without knowing what is exactly happening there.

5. Improving or automating

In the last step, you will make the changes based on the information obtained from the analysis and monitoring steps.

B. Six sigmas

Six sigma theory focuses on the manufacturing process. Six sigma theory makes sure that the defect rate is minimum. Six Sigma methodology consists of five steps that you are required to follow to enhance your manufacturing process.

1. Define

Define issues in the manufacturing process and write down what methods and tools you want to use to improve the manufacturing process.

2. Measure

Measure the performance of the operations.

3. Analysis

Analyze the root cause of the problem and write down what is causing the problem.

4. Improvement

Find potential solutions for the issues.

5. Control

Lastly, implement the solutions and compare new outputs with the old outputs to learn about the effectiveness of the solution.

C. Business Process Re-engineering

Business process re-engineering methodology is different from the methods that we discussed above. In this methodology, you re-engineer the new process rather than making changes in the older method. Business process re-engineering can be performed with the help of software and technological tools.

D. Supply Chain Management

Supply chain management is an integral part of operations management. Supply chain management concerns the relationship of an organization with its suppliers. Effective exchange of information between organizations and suppliers is essential for the organization.

Operations management involves the adequate and smooth flow of information in supply chain management. An operations manager can identify the issues with the processes and can provide solutions to them to enhance their performance.

Operations Management

The administration of business practices to maximize efficiency within the organization

What is Operations Management?

Operations management is a field of business concerned with the administration of business practices to maximize efficiency within an organization. It involves planning, organizing, and overseeing the organization’s processes to balance revenues and costs and achieve the highest possible operating profit. An operations manager is tasked with ensuring that the organization successfully converts inputs such as materials, labor, and technology into outputs in an efficient manner.

Summary

Responsibilities in Operations Management

Operations management is a field of business that involves managing the operations of a business to ensure efficiency in the execution of projects. It means that the individual in charge of the department will be required to perform various strategic functions. Some of the functions include:

1. Product Design

Product design involves creating a product that will be sold to the end consumer. It involves generating new ideas or expanding on current ideas in a process that will lead to the production of new products. The operations manager’s responsibility is to ensure that the products sold to consumers meet their needs, as well as match current market trends.

Consumers are more interested in the quality of the product more than the quantity, and the organization should create systems that ensure the products produced meet the needs of the consumer.

2. Forecasting

Forecasting involving making predictions of events that will occur in the future based on past data. One of the events that the operations manager is required to predict is the consumer demand for the company’s products.

The manager relies on past and present data on the uptake of the company’s products to determine future trends in consumption. The forecasts help the company know the volume of products needed to meet the market demand.

3. Supply Chain Management

Supply chain management involves managing the production process from raw materials to the finished product. It controls everything from production, shipping, distribution, to delivery of products.

The operations manager manages the supply chain process by maintaining control of inventory management, the production process, distribution, sales, and sourcing of suppliers to supply required goods at reasonable prices. A properly managed supply chain process will result in an efficient production process, low overhead costs, and timely delivery of products to consumers.

4. Delivery Management

The operations manager is in charge of delivery management. The manager ensures that the goods are delivered to the consumer in a timely manner. They must follow up with consumers to ensure that the goods delivered are what the consumers ordered and that they meet their functionality needs.

If the customer is unsatisfied with the product or is complaining about certain features of the product, the operations manager receives the feedback and forwards it to the relevant departments.

Ideal Skills of an Operations Manager

Unlike the marketing or finance departments, where managers are responsible for their departments, operations management is a cross-department role where the manager assumes an array of responsibilities across multiple disciplines. To be successful, an operations manager must possess the following skills:

1. Organizational Abilities

Organizational abilities refer to the ability of the operations manager to focus on different projects without getting distracted by the many processes. The operations manager should be able to plan, execute, and monitor each project to the end without losing focus.

If a manager is not organized, uncompleted tasks will pile up, important documents will get lost in the process, and a majority of the time will be spent finding lost documents that could be easily accessible had the manager been organized. Good organization skills can increase production efficiency and help the manager save time.

2. Coordination

An operations manager needs to have good coordination by knowing how to integrate resources, activities, and time to ensure proper use of the resources toward the achievement of the organization’s goals. Coordination involves carrying out specific activities simultaneously and switching between the activities with ease. It also involves dealing with interruptions, obstacles, and crises, and efficiently going back to the normal routine functions to prevent further interruptions.

3. People Skills

Most of the responsibilities of an operations manager involve dealing with people. This means that they must know how to relate with the employees, outside stakeholders, and other members of senior management. An operations manager should know how to manage the fine lines with other colleagues by knowing how to communicate, listen, and relate to them on professional and personal levels.

Since workplaces are made up of people from diverse cultures, the operations manager needs to show tolerance and understanding to other people. Also, the manager should be able to resolve conflicts and mediate disputes between employees and members of the senior staff.

4. Tech-savvy

In this age of rapidly advancing technologies, an operations manager needs to have an affinity for technology in order to be in a position to design processes that are both efficient and tech-compliant. Modern organizations are becoming increasingly tech-dependent in order to gain a competitive advantage in the market.

This means that most of the processes conducted manually, such as procurement, must transition to more efficient automated processes. When an operations manager is familiar with the latest innovations in the tech industry, they can use the innovations to improve internal processes.

Additional Resources

Thank you for reading CFI’s guide on Operations Management. To keep learning and developing your knowledge of financial analysis, we highly recommend the additional CFI resources below: