What
is Operations Management?
Production is the
creation of goods and services. Operations Management (OM) is a set of
activities that creates value in the form of goods and services by transforming
inputs into outputs. Activities creating goods and services take place in all
organizations. In manufacturing firms, the production activities that create
goods are usually quite obvious. In those organizations we can see the creation
of a tangible product such as TV or a Toyo motorcycle.
In organizations that do not create physical products, the
production may be
less obvious. It may be “hidden” from the public and even
from the customer. Examples are the transformations that take place at a bank,
hospital, airline office, or college.
Often when services are performed, no tangible goods are produced.
Instead, the products may take such forms as the transfer of funds from a
savings account to a current account, the transplant of a liver, the filling of
an empty seat on an airline, or the education of a student.
Regardless of whether the end product is a good or service, the production
activities that go on in the organization are often referred to as operations
management.
Organizing to
Produce Goods and Services
To create goods
and services, all organizations perform three functions. These functions are
the necessary ingredients not only for production but also for an
organization’s survival. They are:
Marketing, which generates the demand or at least takes the order for a
product or service (nothing happens until there is a sale).
Production/operations, which creates product.
Finance/accounting, which cracks how well the organization is doing, pays
the bills, and collects money. Universities, churches or mosques, and
businesses all perform these functions. Even a volunteer group such as the Boy
Scouts of Nigeria is organized to perform these three basic functions
Why
Study Operations Management?
We
study OM for four reasons:
1.
OM is one of the three major functions of any organization, and it is
integrally related to all the other business functions. All organizations
market (sell), finance (account), and produce (operate), and it is important to
know how the OM activity functions. Therefore, we study how people organize themselves
for productive enterprise.
2. We study OM
because we want to know how goods and services are produced. The production
function is the segment of our society that creates the products we use.
3.We study OM to
understand what operations managers do. By understanding what these managers
do, you can develop the skills necessary to become such a manager. This will
help you explore the numerous and lucrative career opportunities in OM.
4. We study OM
because it is such a costly part of an organization. A large percentage of the
revenue of most firms is spent in the OM function. Indeed, OM provides a major
opportunity for an organization to improve its profitability and enhance its
services to society. It considers how a firm might increase its profitability via
the production function.
What
Operations Managers Do?
All good Operations
Managers perform the basic functions of the management process. The management
process consists of planning, organizing, leading, and controlling. Operations
managers apply this management process to the decision they make in the
operations managers function.
Successfully addressing
each of these decisions requires planning, organizing, staffing, leading and controlling.
The
10 major decisions of operations managers that are shown below.
Ten
Critical Decisions of Operations Management
Service and product
design What good or service should we offer?
How should we design these products?
Quality management. How do we define the quality? Who is responsible for quality?
Process and capacity
design. What process and what capacity will
these products require? What equipment and technology is necessary for these processes?
Location Where should we put the facility? On what criteria should we base
the location decision?
Layout design How should we arrange the facility? How large must the facility be
to meet our plan?
Human resources and work How do we provide a reasonable and job design
environment? How much can we expect our employees to produce?
Supply-chain Management Should we make or buy this component? Who are
our suppliers and who can integrate into our e-commerce
programme?
Inventory, material requirement planning and JIT (just-in-time)
How much inventory of each item should we have? When do
we reorder?
Intermediate and short-term Scheduling Are we better off keeping
people on the payroll during slowdowns? Which job do we perform next?
Maintenance Who is responsible for maintenance? When do we do maintenance?
The
Heritage of Operations Management
The field of OM is
relatively young, but its history is rich and interesting. Our lives and the OM
discipline have been enhanced by the innovations and contributions of numerous
individuals. We will now introduce a few of these people, and we provide
summary of significant events in operations management.
Assignment
Discuss at least five views from papers, articles, books, etc. of different
scholars that have worked on O.M. At least ten pages
Operations
in the Service Sector
Manufacturers produce
tangible products, whereas service products are often intangible. But many
products are a combination of a good and a service, which complicates the
definition of a service. Because definitions vary, much of the data and
statistics generated about the service sector are inconsistent.
However, we will define
services as including repair and maintenance, government, food and lodging, transportation,
insurance, trade, financial, real estate, education, legal, medical,
entertainment, and other professional occupations.
Differences
between Goods and Services
Lets
examine some of the differences between goods and services:
Services are usually
intangible (for example, your purchase of a ride in an empty airline seat
between two cities) as opposed to a tangible good.
Services are often
produced and consumed simultaneously; there is no stored inventory.
For instance, the beauty salon produces a haircut that is “consumed”
simultaneously, or the doctor produces an operation that is “consumed” as it is
produced. We have not yet figured out how to take inventory of haircuts or
appendectomies.
Services are often unique. Y our mix of financial coverage, such as investments and
insurance policies, may not be the same as anyone else’s, just
as the medical procedure or a haircut produced for you
is not exactly like anyone else’s.
Services have high customer interaction. Services are often difficult
to standardize, automate or made as efficient as we would like because customer
interaction demands uniqueness.
Services have inconsistent product definition.
Product definition may be rigorous, as in the case of
an auto insurance policy, but inconsistent because policyholders change cars
and mature.
Services are often knowledge-based. Legal services and therefore
hard to automate.
Services are frequently dispersed. Dispersion occurs because
services are frequently brought to the client/
customer via a local office, a retail outlet or even a
house call
New
Trends in Operations Management
One of the reasons OM
is such an exciting discipline is that
the
operations manager is confronted with an everchanging
world.
Both the approach to
and the results of the 10 OM decisions are subject to change. These dynamics
are the result of a variety of forces, from globalization of world trade to the
transfer of ideas, products, and money at electronic speeds
Global focus: The rapid decline in communication and transportation
costs has made markets global. At the same time, resources in the form of materials,
talent and labour have also become global. Contributing to this rapid globalization
are countries throughout the world that are vying for economic growth and
industrialization. Operations managers are responding with innovations that
generate and move ideas, parts and finished goods rapidly, wherever
needed.
Just-in-time performance: vast financial resources are committed
to inventory, making it costly. Inventory also impedes response to rapid
changes in the marketplace. Operations managers are viciously cutting
inventories at
every level, from raw-materials to finished goods
Supply-chain partnering: shorter product life cycles, driven by
demanding customers, as well as rapid changes in material and processes,
require suppliers to be more in tune with the needs of end users. And because
suppliers usually supply
over half of the value of products, operations managers
are building long-term partnerships with critical players in the supply chain.
Rapid product development: rapid international communication of
news, entertainment, and lifestyles is dramatically chopping away at life span
on products. Operations managers are responding with management structures and
technology that are faster and alliances (partners) that are more effective
Mass customization: once managers begin to recognize the world as
a marketplace, then the individual differences become quite obvious. Cultural
differences, in a world where customers are increasingly aware of options,
places
substantial pressure on firms to respond. Operations managers
are responding with production processes that are flexible enough to cater for
individual whims of customers. The goal is to produce customized products,
whenever and wherever needed.
Empowered employees: The knowledge explosion and a more technical
workplace have combined to require more competence at the workplace. Operations
managers are responding by moving more decisions making to the
individual worker.
•Environmentally sensitive production: The Operation manager’ s
continuing battle to improve productivity is increasingly concerned with
designing product and processes that are environmentally friendly. That means
designing products that are biodegradable or automobile components that can be
re-used or recycled or
making packaging more efficient.
Ethics: Operations managers are taking their place in the continuing
challenge to enhance ethical behavior
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