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Operations management involves "overseeing, designing, controlling the process of production and redesigning business operations in the production of goods and/or services."
Operations management functions differ depending upon the purpose of the organization. In a manufacturing setting such as a factory, operations management would include designing efficient processes to produce the product, timely acquisition of raw materials, insuring adequate numbers of properly trained workers, and proper maintenance of equipment.
Operations management in a service setting would focus on insuring that workers are adequately trained, that customer service locations are equipped as needed and are safe for employees and the public, that services are revised as dictated by customer input or competitive forces.
While operations management is focused on the production of goods and/or services in an organization, its importance to the overall organization cannot be underestimated. When an organization's operations are properly managed, the functions of all other departments are smooth, and when an organization's operations are managed improperly, all other departments suffer.
A human resources department is able to make good predictions on the need for staff, to develop good job descriptions, and to recruit and train more easily when operations are run well. Jobs are easier to fill, and turnover remains lower. If an operations are not run well, the consequences for human resources are not good. For example, the human resources people cannot develop good job descriptions and requirements for the production department, find it more difficult to recruit and train, and face higher turnover, which is costly to any organization.
An accounting department that is supporting a smooth operation can pay materials and supplies bills promptly since a well-run operation plans ahead. Payroll is easy to handle, with predictable costs. But if the operation is run poorly, predictable costs such as these are difficult to ascertain, making it difficult for the accounting department to do its job well.
A finance department, which is charged with finding capital, either through debt or equity financing, can raise money far more easily with a smooth-running, successful operations division, being able to point to high productivity, trimming of costs, and good scheduling to meet demand. On the other hand, if the finance department can only show a record of inefficiencies, too much or too little inventory, and uneven productivity, it is difficult to raise capital.
The marketing division's success is reliant on successful operations as well. It must have a successful and on-time product or service to market. It must have a product or service that works and that is being produced in appropriate numbers. If it does not, if there is a shoddy product or a product for which production is behind, the best marketing in the world is of little use.
The legal division's ability to support operations is dependent upon a well-managed operation, too. A well-made product does not lead to liability claims. When supplies and materials are planned for, there is less likelihood of contract disputes with suppliers. When products are produced on-time, there is less likelihood of contract disputes with purchaser.
All in all, operations are the heart of any organization that is providing a good and/or a service. When operations are managed well, it makes the function of all other departments easier, and conversely, when operation are managed poorly, all other departments suffer.
The business function responsible for planning, coordinating, and controlling the resources needed to produce products and services for a company.Operations management refers to the administration of business practices to create the highest level of efficiency possible within an organization. Operations management is concerned with converting materials and labor into goods and services as efficiently as possible to maximize the profit of an organization.
Operations Management - Explained:
Operation refers to the coordination of those activities in a business that are involved in combining inputs for the purpose of producing an output that is valued by consumers. This process is called value adding. For example, a bag of oranges can go through certain procedures to turn it into bottles of orange juice. The bottles of juice will be worth more than the original bag of oranges because, at each stage of production, value was added.
The operations department is responsible for acquiring the inputs and devising the best production methods so that value adding occurs in the most efficient and effective way. Thus, the role of operations management (and the operations manager) is to ensure a smooth production process that contributes to the output of goods and services of an organization.
Characteristics of Operation Management:-
- An organizations core function
- Exists In every organization whether Service or Manufacturing, profit or Not for profit.
- Most businesses are supported by the functions of operations, marketing, and finance
- The major functional areas must interact to achieve the organization goals
Role of Operations Management:-
OM Transforms inputs to outputs
- Inputs are resources such as People, Material, and Money
- Outputs are goods and services
Strategic role of operations management – cost leadership, good/service differentiation
The term strategic refers to things that are important or essential in relation to a plan of action; thus, the strategic role of operations management in business is to play a part in ensuring that the goals of the organisation are met. This means that the operations manager will have to be involved in the development of the business’s goals so that the operations department knows what resources and production methods are needed to meet these goals.
Cost leaders and differentiation can exist in the same industry. For example, in the car industry.
Cost leadership refers to the strategies to produce goods or services at the lowest possible cost whilst they are still acceptable to customers. By reducing the costs of production and distribution, a business will be able to gain an advantage over competitors. However, it is important that customers see that they are gaining value for money, otherwise this strategy will not see long term rewards for the business. If the strategy is successful, the business will become the leading provider of a particular good or service based on their lowered costs. Businesses adopting a cost leadership strategy commonly have standardised products
The car manufacturer Kia is well known for being a cost leader. It has concentrated on reducing costs of production but also focused on the ‘look’ of the car because customers will not buy a car that looks cheap.
Good/ service differentiation
Product differentiation is the way that a business will make their good or service stand out from other similar products. A business will use differentiation so that they can improve sales and/or charge a higher price. For example, airlines will try to differentiate their product so as to attract consumers. Businesses can differentiate themselves from others by changing obvious aspects such as price, quality or performance but also in more innovative ways such as changing the technology used in the process, speeding up delivery time and building alliances.
Porsche focus on a differentiation strategy to set it apart from other cars in relation to design, marketing and technology. For Porsche, further developing high performance sports cars also serves as a value adding activity and enhances its reputation.
Goods and/or services in different industries
The operations function will look different in different businesses depending on their industry category. Some businesses make tangible products known as goods. These businesses are usually found in industries in the primary and secondary sectors. For example, a primary producer, such as a sheep farmer, will provide fleece to a wool manufacturer. In these sectors, operations managers will focus on obtaining the materials that go into the making of the product (inputs) and the actual production processes.
Other businesses supply intangible (non-physical) products to customers. This is called a service and the businesses that provide these are found in industries in the tertiary sector. The tertiary sector is where the output is sold to the customer. For example, the banking industry sells financial services to customers and the retail industry sells retail products. In these industries, the operations manager will focus on customer service and after care.
Interdependence with other key business functions
The operations department brings together the materials and the activities needed for the production of goods and services to meet consumer demand. It also shares ideas across the business about how to improve processes or achieve cost savings to bring about best practice. The operations manager will liaise with the other department in the following ways:-
- Discuss staffing and training and development needs with the Human Resources department/manager.
- Discuss financing requirements with the Accounting and Finance department/manager.
- Discuss product design with the Marketing department/manager.
Therefore, it can be seen that the Operations department carries out a coordinating role in the business to ensure that the prime function (main activity) of the business is carried out efficiently and effectively so that consumer demand is met. In this way the business will be profitable.
Operations management refers to the design, operation and control of the transformation process that converts such resources as labour and raw materials into goods and services that are sold to customers.And just as every organization produces something ,every unit in an organization also produces something.Today, every successful organization recognize the crucial role that operations management plays as part of the overall organizational strategy to establish and maintain global leadership.The strategic role that operations management plays in successful organizational performance can be seen as more organizations move towards managing their operations from a value chain perspective which means the entire series of organizational work activities that add value at each step beginning with the processing of raw materials and ending with the finished product.
There are various reasons which makes operations management important.It encompasses both services and manufacturing, its important in effectively and efficiently managing the productivity as every organization should have high productivity which can lead to economic growth and development and help employees in receiving high wages as well as lead to increase in company's profit without causing inflation. Operations management is also important as it plays a strategic role in an organization's competitive success.%MCEPASTEBIN%
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