Operations Management Law and Legal Definition
Operations management is a multi-disciplinary field that focuses on managing all aspects of an organization's operations. The typical company carries out various functions as a part of its operation. The dividing of a company's activities into functional categories occurs very early on, even in a company formed and operated by a single individual. Most companies make a product of some kind or produce a salable service. They must also carry out a sales and marketing function, an accounting function, and an administrative function to manage employees and the business as a whole. Operations management focuses on the function of providing the product or service. Their job is to assure the production of a quality good and/or service. They apply ideas and technologies to increase productivity and reduce costs, improve flexibility to meet rapidly changing customer needs, assure a safe workplace for all employees, and when possible assist in assuring high-quality customer service.
For the most part, the title "Operations Manager" is used in companies that produce a tangible good—manufacturers on the whole. In service-oriented businesses, the person responsible for the operations manager role is often called by another name, one that addresses the service being offered. Examples include project manager, consultant, lawyer, accountant, office manager, datacenter manager, etc.
KEY ISSUES IN OPERATIONS
As an organization develops plans and strategies to deal with the opportunities and challenges that arise in its particular operating environment, it should design a system that is capable of producing quality services and goods in the quantities demanded and in the time frames necessary to meet the businesses obligations.
Designing the System
Designing the system begins with product development. Product development involves determining the characteristics and features of the product or service to be sold. It should begin with an assessment of customer needs and eventually grow into a detailed product design. The facilities and equipment used in production, as well as the information systems needed to monitor and control performance, are all a part of this system design process. In fact, manufacturing process decisions are integral to the ultimate success or failure of the system. Of all the structural decisions that the operations manager makes, the one likely to have the greatest impact on the operation's success is choice of the process technology. This decision answers the basic question: How will the product be made?
Product design is a critical task because it helps to determine the characteristics and features of the product, as well as how the product functions. Product design determines a product's cost and quality, as well as its features and performance. These are important factors on which customers make purchasing decisions. In recent years, new design models such as Design for Manufacturing and Assembly (DFMA) have been implemented to improve product quality and lower costs. DFMA focuses on operating issues during product design. This can be critical even though design costs are a small part of the total cost of a product, because, procedures that waste raw materials or duplicate effort can have a substantial negative impact on a business's operating profitability. Another innovation similar to DFMA in its emphasis on design is Quality Functional Deployment (QFD). QFD is a set of planning and communication routines that are used to improve product design by focusing design efforts on customer needs.
Process design describes how the product will be made. The process design decision has two major components: a technical (or engineering) component and a scale economy (or business) component. The technical component includes selecting equipment and selecting a sequence for various phases of operational production.
The scale economy or business component involves applying the proper amount of mechanization (tools and equipment) to make the organization's work force more productive. This includes determining: 1) If the demand for a product is large enough to justify mass production; 2) If there is sufficient variety in customer demand so that flexible production systems are required; and 3) If demand for a product is so small or seasonal that it cannot support a dedicated production facility.
Facility design involves determining the capacity, location, and layout for the production facility. Capacity is a measure of an company's ability to provide the demanded product in the quantity requested by the customer in a timely manner. Capacity planning involves estimating demand, determining the capacity of facilities, and deciding how to change the organization's capacity to respond to demand.
Facility location is the placement of a facility with respect to its customers and suppliers. Facility location is a strategic decision because it is a long-term commitment of resources that cannot easily or inexpensively be changed. When evaluating a location, management should consider customer convenience, initial investment necessary to secure land and facilities, government incentives, and operating transportation costs. In addition, qualitative factors such as quality of life for employees, transportation infrastructure, and labor environment should also be taken under consideration.
Facility layout is the arrangement of the workspace within a facility. It considers which departments or work areas should be adjacent to one another so that the flow of product, information, and people can move quickly and efficiently through the production system.
Once a product is developed and the manufacturing system is designed, it must be implemented, a task often more easily discussed than carried out. IF the system design function was done thoroughly, it will have rendered an implementation plan which will guide activities during implementation. Nonetheless, there will inevitably be changes needed. Decisions will have to be made throughout this implementation period about tradeoffs. For example, the cost of the originally planned conveyor belt may have risen. This change will make it necessary to consider changing the specified conveyor belt for another model. This, of course, will impact upon other systems linked to the conveyor belt and the full implications of all these changes will have to be assessed and compared to the cost of the price increase on the original conveyor belt.
Planning and Forecasting
Running an efficient production system requires a great deal of planning. Long-range decisions could include the number of facilities required to meet customer needs or studying how technological change might affect the methods used to produce services and goods. The time horizon for long-term planning varies with the industry and is dependent on both complexity and size of proposed changes. Typically, however, long-term planning may involve determining work force size, developing training programs, working with suppliers to improve product quality and improve delivery systems, and determining the amount of material to order on an aggregate basis. Short-term scheduling, on the other hand, is concerned with production planning for specific job orders (who will do the work, what equipment will be used, which materials will be consumed, when the work will begin and end, and what mode of transportation will be used to deliver the product when the order is completed).
Managing the System
Managing the system involves working with people to encourage participation and improve organizational performance. Participative management and teamwork are an essential part of successful operations, as are leadership, training, and culture. In addition, material management and quality are two key areas of concern.
Material management includes decisions regarding the procurement, control, handling, storage, and distribution of materials. Material management is becoming more important because, in many organizations, the costs of purchased materials comprise more than 50 percent of the total production cost. Questions regarding quantities and timing of material orders need to be addressed here as well when companies weigh the qualities of various suppliers.
BUILDING SUCCESS WITH OPERATIONS
To understand operations and how they contribute to the success of an organization, it is important to understand the strategic nature of operations, the value-added nature of operations, the impact technology can have on performance, and the globally competitive marketplace.
Efficient organization operations are a vital tool in achieving competitive advantage in the daily contest for customers/clients. What factors influence buying decisions for these entities? For most services and goods, price, quality, product performance and features, product variety, and availability of the product are critical. All these factors are substantially influenced by actions taken in operations. For example, when productivity increases, product costs decline and product price can be reduced. Similarly, as better production methods are developed, quality and variety may increase.
By linking operations and operating strategies with the overall strategy of the organization (including engineering, financial, marketing, and information system strategy) synergy can result. Operations become a positive factor when facilities, equipment, and employee training are viewed as a means to achieve organizational objectives, rather than as narrowly focused departmental objectives. In recognition of this evolving viewpoint, the criteria for judging operations are changing from cost control (a narrowly defined operating objective) to global performance measurements in such areas as product performance and variety, product quality, delivery time, customer service, and operational flexibility.
In today's business environment, a key component of operational flexibility in many industries is technological knowledge. Advances in technology make it possible to build better products using fewer resources. As technology fundamentally changes a product, its performance and quality often increases dramatically, making it a more highly valued commodity in the marketplace. But the growth in high-tech business applications has created new competitors as well, making it important for businesses to try to register advantages in any and all areas of operations management.
Over time, operations management has grown in scope and increased in importance. Today, it has elements that are strategic, it relies on behavioral and engineering concepts, and it utilizes management science/operations research tools and techniques for systematic decision-making and problem-solving. As operations management continues to develop, it will increasingly interact with other functional areas within the organization to develop integrated answers to complex interdisciplinary problems. Indeed, such interaction is widely regarded as essential to long-term business success for small business establishments and multinational corporations alike.
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Magnuson Coe, Thomas. Electronic Supply Chain Collaboration for Small Job Shop Manufacturers. Universal Publishers, March 2005.
Nie, Winter. "Waiting: Integrating Social and Psychological Perspectives in Operations Management." Omega. December 2000.
Ruffini, Frans A. J., Harry Boer, and Maarten J. Van Riemsdijk. "Organization Design in Operations Management." International Journal of Operations and Production Management. July 2000.
Sharma, Anand, and Patricia E. Moody. The Perfect Engine: Driving Manufacturing Breakthroughs with the Global Production System. Simon and Schuster, 2001.
Thrun, Walter. Maximizing Profit: How to Measure the Financial Impact of Manufacturing Decisions. Productivity Press, October 2002.
Hillstrom, Northern Lights
updated by Magee, ECDI
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