Operations management is the process by which goods and services are created, produced, and delivered to the customer. This process can be quite complex, especially within a large organization where there are numerous departments involved in the creation of these goods and services. Therefore, it is essential that this process is managed properly in order to meet customer needs and achieve organizational goals.
The Operations Manager is responsible for overseeing the process of how goods and services are manufactured and delivered. This covers a broad range of activities including design, planning, procurement, finances, marketing, and other organizational functions. The extent to which an Operations Manager is involved may depend on the size of the organization, what is being produced, and the nature of the specific industry.
Some of the decisions that need to be made in this process include the sourcing of raw materials, the hiring and training of workers, where and how to produce the goods, and how to get those goods to customers.
The process becomes more complex when delivering services rather than actual goods. Consider how a hotel meets the needs of a specific guest, or how a hairdresser cuts a client's hair. It can be harder to satisfy a customer when the service is bought and used at the same time.
Production planning requires a long-term strategy to ensure that the best approach is taken. Three basic types of processes – made-to-order, mass production, and mass customization – are evaluated so that decisions can be made about how to best serve customer needs.
Made-to-order involves goods that are customized to specific consumer requests, such as signs made by print shops. Mass production is when large numbers of identical products are made at low cost and are priced so that a large number of customers are able to buy those goods. Mass customization is when large numbers of goods are produced at affordable prices, but can also be tailored to meet individual customer preferences such as shoes and apparel, which allow shoppers to make adjustments to meet their fit and taste requirements.
Production and quality control require a constant monitoring of operations and output to ensure that the process is efficient and that the goods are consistent with standards and specifications.
Services differ from manufactured goods in that services are intangible, they can be customized, and they are produced at the same time that they are consumed. But, efficiency is equally important in the services sector as it is in manufacturing goods. Decisions that need to be made revolve around the types of services being offered, how they will be delivered, where they will be located, and how demand will be determined.
Operations managers are responsible for all aspects of manufacturing activities, including long-term planning, procurement, logistics, and staffing. Managers must also decide on the optimal location for their production. Some of the factors to be considered include minimizing shipping costs, having availability to skilled workers and resources, and locations that are desirable for both workers and businesses.
Once a location has been determined, managers must decide on the demand for the products and the capacity requirements of the facility. This leads to a determination of plant equipment needs, as well as the number of hours required to fulfill demand.
Additionally, attention to the overall process, integrating both internal and external factors, can provide managers with meaningful insight and provide them with a framework within which to address problems and issues that may arise. Specifically, examining the entire process can help managers work across all functions of the organization, achieve company goals between departments, and avoid fragmentation of operations and activities.
In a functional structure, organizations divide their activities into various areas, such as IT, finance or marketing. One advantage of this design is that it allows for individuals with similar skills and responsibilities to work closely together for greater effectiveness and efficiency. One drawback is that it may hinder communication with other departments, diminishing innovation and creativity. To address this, many companies are implementing cross-functional teams so that members of each group can interact and share ideas and concepts.
When organizations transform inputs into outputs, they are creating goods and services that meet customer needs. When companies maximize the quality of this process, they can make it difficult for competitors to produce similar quality goods.
By closely controlling the operations management process, companies can achieve a competitive advantage. When functional areas within an organization can work together across disciplines, common organizational goals can be met.
The transformation process turns resources into finished goods. An operations manager must direct, and oversee, the inputs used to create an item. These inputs are classified as transformed resources and transforming resources. Transformed resources include materials, information and customers. Transforming resources include staff and facilities.
The result of this process is an output, which encompasses both goods and services, that are created to meet customer needs.
The operations system allows managers to review every step of the transformation model including inputs and outputs, which are under the organization's control. However, external factors, such as suppliers, who provide resources for the inputs; customers,who are the users of the outputs; and the environment, which can include technology, legislation, climate, competition, and other elements, are out of the control of the organization.
This vocabulary list includes terms that might help you with the review items above and some terms you should be familiar with to be successful in completing the final exam for the course.
Try to think of the reason why each term is included.