Operations management: an explainerPosted on: March 7, 2023
Operations management is the collection of business practices and processes that create efficiencies in order to maximise profits within an organisation.
The operations management methods used will vary from business to business, but the general principles are to lower inputs – such as labour, raw materials, and capital – and increase outputs, such as goods and services.
The benefits of effective operations management
Effective operations management has been one of the most important tools for managing business operations during the ongoing coronavirus pandemic. The supply chain issues that followed in the wake of the pandemic have had an impact on virtually every sector, directly or indirectly, from technology to healthcare. Meanwhile, consumer demand has unexpectedly spiked in some areas, while dropping off sharply in others.
This disruption highlights the importance of operations management, because only through strategic, agile operations management can businesses successfully navigate the current storm in the supply chain – as well as future challenges to come.
Effective operations management is also credited with helping organisations to achieve – and maintain – a competitive advantage within the market, and driving profitability.
Other benefits can include improved or increased:
- product and service quality
- capacity planning
- employee contribution, motivation, satisfaction, and engagement
- workflows, with decreased bottlenecks
- inventory supply
- decision making
- production timescales and processes
- customer satisfaction
- service operations
- compliance procedures and processes
Areas of operations management
There are a number of business areas, both strategic and operational, that fall within the scope of operations management.
Supply chain management
Operations and supply chain management, also known as OSCM, is one of the fundamentals of wider operations management. By successfully coordinating supply dependencies within an organisation, an operations manager can ensure that their business runs as smoothly as possible. Effective supply chain management requires organisations to have a thorough understanding of:
- economic and market forecasting
- procurement, outsourcing, and suppliers
- inventory management and resources, including materials and labour
- production processes and process design
- local and global trends
- customer demand and feedback
- shipping, distribution, and product delivery
- quality control and assurance
Operations management takes a strategic, long-term view of business activities. Because of this, it also underpins project management within the organisation, influencing how individual projects are planned and resourced.
Assets, such as facilities, equipment, and technology, are determined and maintained according to operations management directives.
Human resources (HR) management
An aspect of asset management is HR management, or people management. This is because an organisation’s people are one of its most valuable assets, but cannot be managed in the way other assets, such as facilities or equipment, would be. Instead, effective operations management ensures that people are supported and enabled in helping to create efficiencies, minimise waste, and increase revenues.
Product design and development
Through operations management data, new products and services can be optimally designed and developed to meet consumer needs and market trends.
Operations management is responsible for minimising the cost of procuring resources, producing them into products or services, and then distributing them to consumers. It is also responsible for maximising the profits generated by these products or services.
Operations management: methods and systems
There are several methods, systems, and theories used within operations management. Some examples include:
- Six Sigma. Six Sigma is a quality-focused, error-reducing operations management method that was born from quality improvement initiatives such as total quality management (TQM) and statistical process control (SPC). It improves processes by aiming for 99.99966% perfection in any process, which requires high quality control and low levels of inefficiencies – just 3.4 defects in every million units in a manufacturing process.
- Business process redesign (BPR). BPR is a method used to help businesses redesign – or restructure – their processes. This is typically done by analysing existing business processes and then completely redesigning them based on the data.
- Business process management (BPM). BPM ensures continuous improvement. It requires businesses to continually review and analyse their processes with the aim of optimising, improving, and automating them where possible.
- Lean manufacturing. Also known as lean and agile manufacturing, this approach to the manufacturing and production process seeks to minimise waste and reduce costs. It often relies on technology and specialisation to increase efficiencies.
- Reconfigurable manufacturing systems. A reconfigurable manufacturing system is one that’s designed – using both hardware and software – to respond appropriately and quickly to sudden changes in the market, supply chain, or consumer demand.
- Sustainable operations management. A sustainable operations management system is focused on supply chain sustainability, and considers factors such as climate change when evaluating resources and business practices.
The role of an operations manager
Operations management is often overseen by a chief operations officer (COO). However, smaller organisations may appoint another strategic senior person with a wider business management role to oversee operations management.
Regardless of title, though, the responsibilities are largely the same. These are likely to include:
- developing new operations processes and assessing existing procedures
- managing the production of goods and services
- enhancing the operations strategy and improving productivity and performance metrics.
Skills typically needed for operations management include:
- leadership, and relationship-building with stakeholders and other parties
- interactive communication
- planning and organisation
- innovation and creativity
- expertise in relevant areas, from budgets and risk management to technology and automation.
The difference between operations management and operations strategy
Operations management and an operations strategy are two sides of the same coin within an operations function. The operations strategy outlines an organisation’s priorities for operations management, and works alongside the organisation’s overarching business strategy. Operations management, meanwhile, implements the strategy and puts it into practice.
Achieve competitive success through operations management
Improve the processes used to deliver products and services, and give yourself an edge as a leader, with the MBA Entrepreneurship and MBA Psychology degrees at the University of Wolverhampton. These flexible Master of Business Administration (MBA) programmes are taught 100% online, so you can study part-time around your current professional and personal commitments and earn while you learn.
One of the core modules on both postgraduate programmes is in operations and supply chain management, so you will gain a firm foundation in a broad range of operations management challenges facing managers working in modern organisations – and become equipped with the knowledge and tools to resolve these challenges. You will also explore the information needs of organisations and systems to support operations management processes.