Introduction: what
is operations
management?
Definition
Operations management is not merely an alternative description for those functions which are otherwise known as production management or manufacturing management. Nevertheless, if you are employed in one of those functions you will find that many of the techniques used in operations management have a considerable contribution to make to them.
Instead, the scope of operations management is much broader, making it relevant to just about every function in any sphere of activity – from personnel to accounting, from government service to charities. Chapter 1 describes the way operations management takes place in a wide range of commercial, industrial and not-for-profit activities.
The following definition establishes the scope of operations management:
The activities carried out by an organization to provide the service to customers or clients which is its basic reason for existing.
This definition is so broad that it will be helpful to draw out its key elements and implications.
Transformation and added value
It is generally accepted that organizations exist to create added value for customers by transforming inputs into outputs. This topic is developed further in Chapter 1. For the moment a few examples will clarify the point:
Manufacturing businesses transform raw materials into finished goods.
Haulage businesses transform freight by moving it from its point of manufacture or import to where the customer wants it.
Charities transform public goodwill into potential aid.
Publishers transform authors’ ideas into instruction or entertainment for readers.
Transformation adds value in many forms. It may result in outputs which offer convenience, availability, ease of access or which customers cannot create for themselves. In Chapter 2 I explain how organizations decide the outputs and value they will offer through the strategic planning process, and the customers they will seek to satisfy. We also describe the impact of those decisions on operations managers.
Effectiveness, efficiency and responsiveness
The transformation process costs money. Customers will only pay a limited amount for added value: if the price exceeds the value, they will look elsewhere or go without. Consequently, as Chapter 3 explains, it is important for operations managers to ensure that the operations for which they are responsible are:
effective – meeting customer needs, on time, every time
efficient – keeping costs and inputs to a minimum
responsive – adapting to changes in the external environment, competition and customer requirements.
Further chapters in this book address aspects of these three essentials. Chapter 5 considers the need to match quality to customer expectations. Chapter 7 explores ways of measuring performance, whilst Chapters 8 and 9 focus on identifying and correcting performance shortfall.
Customers
Customers were traditionally seen as coming at the end of the production chain and contact with them was limited to sales, marketing and accounts staff. This is no longer the case. As Chapter 4 points out, organizations are increasingly recognizing the importance of internal customers, which radically alters the role of operations managers. In order to meet the requirements of internal customers, operations managers are responsible for:
identifying their needs (Chapter 4)
meeting their expectations (Chapter 5)
matching or exceeding the competition (Chapter 8).
These chapters introduce ideas drawn from total quality management, marketing, and organization development.
Managing resources
This is the title of Chapter 3, but the theme underlies the content of other chapters as well. The resources used in transforming inputs into outputs are made up of raw materials and components, equipment or fixed assets and people. Chapter 3 explores the ways of adapting the availability of resources to customer demand. Chapter 6 examines the importance of maintaining a healthy and safe working environment, whilst the focus of Chapter 10 is people – bosses, peers and subordinates.
The focus of the book can be summarized by stating that managing operations involves:
ensuring that operational objectives are consistent with corporate goals
identifying and satisfying the needs of customers (both internal and external)
achieving efficient and cost-effective outputs
monitoring and improving performance
making optimum use of resources.
You may be wondering where people fit into this summary. The answer is that they are too important to be dismissed with a single phrase.
At various points in this book I shall suggest that:
you will need the support of others to identify, rectify and implement operational improvements
your staff are essential to performance
your manager may be your only source of strategic direction
change cannot be imposed, it must be welcomed
your staff are a key resource
the nature of the operation should reflect your staff's capability
the extent to which you can improve your operation depends on the extent to which you involve and develop your staff.
By the end of the book you should be able to answer the following questions:
What inputs and resources do you use?
What transformations are you responsible for?
Who are your customers? What are their requirements and expectations?
How does your operation contribute to the achievement of your organization's goals?
What actions could you take to improve quality?
Why are health and safety issues important to you?
How can you measure performance?
What should you do with performance data?
When is operational improvement necessary?
What are the risks of improvement and change?
Whose support do you depend on?
How can you increase their contribution and cooperation?
Finally, you should recognize that all managers have an operations management role, regardless of the inputs and resources they use, the transformation and outputs for which they are responsible, their titles, functions or the type of organization which employs them.