What Is Operations Management?

Understanding the Strategic Importance of Operations

Photo courtesy of The Open UniversityOpens in new window In truth operations and operations management are of strategic importance to an organization. This is because all of the aspirations that modern day organizations have to excel in any of the following areas—mass customizationOpens in new window, lean productionOpens in new window, agile manufacturing, customer provision and so on—depend on the ability of the organization to actually do these things and such capabilities reside within operations.

The above definition of operations management is important because we must always bear in mind that operations do not take place in one confined area of organization. Rather, various forms of operations will take place simultaneously across the organization.

For example, in a manufacturing plant we might assume that operations take place merely at production, but this limits what is actually taking place. In reality, a range of operations will be undertaken in addition to the manufacture of the product, such as inventory handlingOpens in new window, logisticsOpens in new window, information processing and office administrationOpens in new window. Similarly, in services, the obvious point where we may think operations take place is in the direct contact between the service provider and the recipient of the service.

This contact is sometimes called the moment of truth. However, behind the scenes (in services, this is often called back-office operations) there will be a number of operations that would have needed to be in place. In services, the difference between the point of contact and all of the support activities has been likened to an iceberg (Normann, 2000).

In performing operations tasks, the organization uses different kind of inputs (the transformational inputs, such as plant, buildings, machinery and equipment) as well as less tangible but important inputs (such as learning, tacit knowledge and experience) and transforms these into outputs.

Operations management is essentially the process of making things.

To manufacture a product, we must source the materials from suppliers. We must have a location to build the product and, after we receive the materials, arrange a system to assemble or produce the new product.

Service organizations, that is, hospitals, hotels, restaurants, and retailing, do the same things that manufacturers do. They forecast, schedule, select the right location and layout, ensure quality, and manage inventory. In a sense, their process is to convert customers into satisfied customers. If they get the quality right, the customers will return. If they don’t, the customers alert other potential customers to avoid the establishment.

When you awake in the morning, perhaps your first step is to stagger to the coffee pot and brew a pot. In the haze of the morning fog, with your rumpled hair and morning breath, you may notice that this coffee pot is a manufactured product that was assembled in some far corner of the globe and ordered by a retailer, where you bought it when the last one broke down. You hope that it is a reliable product that was built through an effective production system.

Your next step in the morning may be to get the morning newspapers, so you stagger outside in your slippers, holding tight to your bathrobe so as not to scare your neighbors, and retrieve it from the damp lawn. It did not land there from outer space.

The process of delivering that newspaper to your front lawn involves arranging all the news stories, printing the papers, and distributing them to subscribers and news vendors. Operations management is hard at work, all through the process. The newspaper may eventually be recycled; and sometime in the future, you may be reading from a paper that somebody else read from last year.

Or you may get the news from television. Viewers pretty much take for granted that there will be a news anchor, reporters, and a weather forecaster. What we don’t see is the frantic behind-the-scenes producers, camera people, schedulers, lighting experts, makeup team, and so on, who get the show on the air. Every day these unsung technicians do their operations jobs to exhaustion.

On this particular morning, you may opt to have breakfast at a fast-food restaurant. You step into a waiting line—which, by the way, is monitored for length by the manager to determine the optimal number of cashiers to staff the place—and place an order. This sets into motion a preestablished production system, often resembling an assembly line in manufacturing.

You may take public transportation to get to school or work. In the case of trains and buses, a schedule has been mapped out that the drivers and engineers attempt to hold on to.

This schedule is designed to optimally deliver passengers in order to make full use of the vehicles. The schedulers probably have more routes operating in the “rush” hours.

When operations management is handled smoothly, the system is seamless and unnoticeable. A university makes a class schedule that is heavily influenced by the demand for similar classes in the previous year. Once the schedule is set, faculties are matched to the classes.

Operations management is essentially a conversion process:

The testing aspects and the teaching evaluation process are elements of the quality system in a university. The final element of quality probably is how successful the students are in work and life. If you graduate from University X, then you represent that university in all you do. Anytime someone runs for political office, it is mentioned where he or she attended college. If an officeholder turns out to be a crook, it is a black mark against his or her education. Thus, universities desire to send out educated and ethical graduates. Our “inspectors,” so to speak, are the employers.

If you have no problem getting the classes you need and you really enjoy them, then perhaps you will graduate, succeed, and donate millions back to the university. If all goes well, the operations function is usually seamless and invisible.

There are more jobs in operations management than in any other function in business. Operations positions include:

• materials manager
• purchasing agent
• buyer scheduler
• manufacturing manager
• general operations manager
• and the supervisors for the line employees.

Operations management is very often a route to the top of the organization, since people in operations are typically the most in tune with what goes into actually making the product. The operations managers work in coordination with the marketing executive, who must understand how to sell the product and how best to promote and distribute it.

Operations managers must share information with the finance and accounting executives, who are primarily concerned with the numbers on the balance sheets and investments. It is the operations manager who is in the trenches of business, working with the product and supporting the service. With the numbers employed in the operations function, it is no surprise that many business students find themselves in operations jobs, whether they majored in accounting, human resources, or finance.