Operation management involves planning, organising and directing process in order to attain higher profitability. Operations management was previously known as production management where the entire focus was on manufacturing. However, today operations management is a multidisciplinary area which works with finance and marketing. It ensures that the labour, material and other inputs are used efficiently. It is based on various disciplines and draws principles from general management.
Principles of Operations Management:
Dr Richard J Schonberger has developed 16 principles of management as follows:
Visibility Management: Promoting organisational achievement and let the external market learn about productivity, improvement in the competency.
Fix Cause: Paying attention to the root causes which hamper and obstruct the performance and affect cost.
Total Quality Control (TQC): Using only the best processes, procedures, materials and other inputs.
Pull System: Improving the workflow and cutting down any wastage of material and time.
Cut Set-up: Preparation for on-demand production and readiness in supporting various processes simultaneously.
Cut Times: The path to clients must be reduced and sales should be made with a shorter channel so that goods are delivered faster.
Minimising Human Error: The work equipment must be improved and the workers must be made accountable.
Best and Simple Equipment: The organisation must possess and retain simple instrument which can flexibly be used at the minimum cost.
Maintenance of Equipment: Instead of purchasing a new asset, the manager must improve the current asset.
Investment in Human Resource: Providing cross-training, improving health and safety standards and rotating jobs. It focuses on recognition and rewards.
Organise the Resource: Operations must be organised and programmed in such a way that they result in a minimum delay in delivery to customers.
Focus: No variation must be allowed and the manager must always focus on customer demand.
Know Your Competitors: It focuses on identifying the competitors, their clients and what best practices are followed by them.
Continous and Quick Improvement: The organisation must never stop improving its objectives, policies and procedures.
Unified Purpose: The frontline workers must be involved in strategic discussions and ensure that they understand the work expected of them and communicate if they want some change.
Teaming-up with Customers: A close analysis must be done about their purchase behaviour, usage and then organise the service and product categories accordingly.
Role of Operations Management:
Operations management performs the following four roles:
Direct: It is the overall nature and strategy of operations. It helps in translating the plans and purposes into reality.
Design: It comprises of designing the operations services processes and products. It deals with determining physical form shape and composition of operations and processes.
Deliver: After designing the process, the operations focus on the delivery of services and products.
Develop: The last role is to develop process performance. This is because any process manager or operations manager cannot routinely deliver services and products in a similar manner. Thus, they constantly develop and capabilities of their processes to enhance process performance.
Scope of Operations Management:
It aims at managing processes that assist in the conversion of inputs into outputs by developing human and financial resources to achieve desired results and customer utility. It has a broad scope and is applied in the following areas:
Location of facilities:
This decision is a capacity decision where funds are committed for a long time. Operations management deals where should the operations be conducted. Hence, this decisions help in identifying the place of production. Location is generally based on sources of raw material, company’s expansionary policies etc.
Plant Layout and Handling Material:
The layout here determines what will be the physical arrangement of facilities. It deals with configuring various work centres, departments and equipment. The objective is to design a physical layout which aids in smooth operations and ensure quality and quantity of output.
Operations management also encompasses designing the product. Product design actually converts the ideas of business into reality. It deals with manufacturing and designing new products. Thus, there are three main functions i.e. designing and marketing, product development and manufacturing.
It is a macroscopic level of making decisions. It aims at designing the entire process from procurement of raw material to the production of finished goods. Thus, operations management helps in analysing the workflow so that raw materials are converted into finished goods in a qualitative and timely manner. Various factors that affect designing of the process are process flow, analysing, choosing the right technology, selection of a process etc.
Production Planning and Control:
It is the process of planning the production in advance and setting and exact way of each item, it also deals with giving production orders to shops and following up the progress. It works on the principles ‘First plan your work then work on the plan.’
Main functions under production planning and controlling are planning, routing, scheduling, dispatching and follow up.
Quality Controls (QC):
This is a ‘system which is used to maintain a desired level of quality in product or service.’ It is a systematic control comprising of diverse factors. The key motives of quality control are to ensure there is a reduction by minimising defects. It comprises of activities that ensure company’s income improves by reducing optimal quality at reduce price, thereby ensuring the longevity of the business.
As discussed in inventory management, operations management deals with handling the inventories in such a way that it reduces the total cost. This decision comprises of acquiring materials, controlling and using the material and connectivity it with the production process. The key objective is to minimise the cost of material, purchase, receive, dispatch, ship and store the raw materials efficiently so that the total cost of storing reduces. It also aims at reducing cost by tracing new supply sources and developing a good relationship with the supplier.
This function deals with handling the machinery and equipment of the business or machines are mishandled or they remain idle then there is an increased cost. If any machine remain idle then there is an increased cost. If any machine remains idle or breaks down then it disrupts the entire production process. Hence, the key role of operations management here is to ensure there is a minimum breakdown and machinery is maintained properly. It also ensures that machines are available when required so that they can be used to their best capacity without any interruption.