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What is operations management?

Posted on: January 19, 2022

Operations management is related to the administration of a business and is specifically concerned with streamlining and optimising business processes. By creating higher efficiency in all processes across the business, operations management can improve profitability. 

Depending on the nature of the business, areas that may be key to lowering costs include the procurement of raw materials used in the production of goods or ensuring lower staff turnover through better human resources practises. In short, the aim is to lower the inputs and increase the outputs. Because operations management touches on all aspects of the business, the company’s chief operations officer requires experience in a lot of different areas, from material requirements planning (MRP) to service operations.

Why is operations management important?

Operations management is important because when carried out effectively, it gives a business a competitive advantage. It has become increasingly important in the past few years as various socio-economic, political, and climate-related issues have put pressure on resources and their transportation. Supply chain management, inventory management, and requirements planning have all been severely challenged, and not just by the pandemic, but by trade relations between the USA and China, and Brexit too.

Retailers have been particularly hard pushed when it comes to operations strategy as customer demand and online shopping levels reached an all-time high during the pandemic. Mobile e-commerce and shopping apps contributed to e-commerce accounting for over 30% of total sales in the UK in 2020. The changing retail climate and the lockdowns that the world has experienced have made it difficult to use the standard just-in-time (JIT) inventory system or to get a handle on forecasting. Workflows have been difficult to maintain with service providers being similarly disrupted by the pingdemic in the UK and various waves of Covid-19 around the world.

The shipping network was also under the spotlight in 2021 when the cargo ship, the Ever Given, became stuck in the Suez Canal on route to delivering containers to Felixstowe, Hamburg, and Rotterdam. This blockage of a major trade route caused a backlog of container deliveries, further stressing the supply chain. The USA experienced queues of container ships at major ports later in the year due to a combination of manufacturing bottlenecks, shipping delays, and a shortage of workers and facilities. Amazon has largely avoided these problems by investing in its own containers and by chartering private cargo ships and long-haul planes, making the company relatively self-reliant. The company has been doing this for years, so it doesn’t rely heavily on transportation partnerships. It will have been an expensive early investment, but one that has set Amazon up to be the successful case study that it is.

At this time, with so much uncertainty, there is a real need for agile business operations and new process designs to emerge, which can be realistically applied to the ever-changing operations function.

What is Six Sigma?

As an operations management method, Six Sigma came out of what were known as quality improvement initiatives such as total quality management (TQM) and statistical process control (SPC). The Six Sigma methodology was originally developed by Bill Smith when he was at Motorola, where he managed to save the company more than $16 billion. The method actually has its roots in statistics where standard deviation is signified by the Greek letter, sigma.

Six Sigma improves processes by aiming for 99.99966% perfection in any process, so demands high quality control and low levels of inefficiencies. This equates to just 3.4 defects in every million units in a manufacturing process. There are two major methodologies used within Six Sigma, both of which are composed of five sections:

The DMAIC method is mainly utilised in the improvement of existing business processes.

  • Define the problem and the project goals
  • Measure in detail the various aspects of the current process
  • Analyse data to find the root defects in a process
  • Improve the process
  • Control how the process is carried out in the future

The DMADV method is used to create new processes and new products or services.

  • Define the project goals
  • Measure critical components of the process and the product capabilities
  • Analyse the data and develop various designs for the process, choosing the best one
  • Design and test details of the process
  • Verify the design by running simulations and a pilot program

Criticisms of Six Sigma point to its rigidness and the fact that it pays less attention to building in robustness from the start. In 2007, editor in chief of Design News, Jim Dodge wrote about how Six Sigma was not an appropriate method to use in a research environment. He said, “Under Six Sigma, the free-wheeling nature of brainstorming and the serendipitous side of discovery is stifled,” and concluded “there’s general agreement that freedom in basic or pure research is preferable while Six Sigma works best in incremental innovation when there’s an expressed commercial goal.”

In their paper “Six Sigma – Friend or Foe?” Yasar Jarrar and Andy Neely posited that, “when looking at the evidence put forward for Six Sigma’s success, mostly by consultants and people with vested interests, the question that begs to be asked is: are we making a true improvement with Six Sigma methods or just getting skilled at telling stories? Everyone seems to believe that we are making true improvements, but there is some way to go to document these empirically and clarify the causal relations.”

It seems that Six Sigma can be successfully used to create metrics for straightforward manufacturing processes, which can be made more efficient with automation, for example. Lean Six Sigma combines another process improvement method called Lean with Six Sigma and has been adopted by many companies. It has provided a useful template when implementing project management during the unpredictability of the pandemic. Corporations are also shifting their focus to results such as customer experience, employee happiness, and sustainability, and understanding how those are related to the bottom line.

How to get into operations management

Whether you already work in operations or are ready to bring your insight to this important business function, an MBA will help you make the leap to management level. 

Refining your skills and gaining expertise couldn’t be easier with a 100% online MBA or, if you’re looking to specialise, a 100% online MBA Finance, that lets you study around your current commitments. The University of Wolverhampton will set you up for success as you study part-time which allows you to apply your learnings to your current role.

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