What is Operations Management?
Operations management refers to the function of business that entails the administration of business practices/operations to ensure the highest level of efficiency possible within an organization. Notably, operations management allows organizations to achieve their goals by facilitating efficient acquisition and utilization of resources. The field focuses on converting labor and materials into goods and services in an efficient manner to facilitate profit maximization and add value for the customer. Individuals in charge of operations management perform various strategic functions geared toward balancing costs with revenue so that the organization achieves the highest net operating profit possible (Barnes, 2018). Therefore, operations management’s goal is to maximize efficiency while producing commodities that maximize profits and fulfill customer needs and maximize.
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Factors that Have Contributed to the Evolution of Operations Management
Since the late 19th century when the functions of operations management first came into being, the field has significantly evolved. Notably, in earlier decades, operations management primarily referred to manufacturing production. Over the decades, the field has expanded to incorporate service systems as well (Zhang et al., 2020). According to Zhang et al., this evolution stems from the fact that operations permeate every functional area of an organization from purchasing, logistics, accounting, marketing, information management, human resource management, to engineering. Various factors have contributed to the evolution of operations management including environment, task environment, and organizations. As a result, operations management has evolved from managing flows to building capabilities.
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Environment
Over the decades, the operations management field has seen a growing implementation of mass production principles to achieve economies of scale with the aim of lowering costs. Moreover, the increased use of computers for decision-making has encouraged tremendous developments in information systems since the 1970s. Additionally, stiff competition by companies in the global market has continually created a need for improved efficiency in both manufacturing production and service systems. This has shifted the attention of companies to just-in-time practices such as Kanban, Kaizen, and total quality management on top of cost, quality, and speed (Zhang et al., 2020).
Task Environment: Stakeholders
In the infant days of operations management, organizations considered shareholders to be the stakeholders of an enterprise only. In the late 20th century, with the advancement of quality management applications and quality concepts, operations management made customers the main focus as a major stakeholder group. The paradigm shift initiated an evolution from “sell what you produce” to sell what the customer wants.” As a result, organizations started considering quality under the total quality management concept as a new competitive weapon. This led to quality becoming a main driving force for effective operations management (Zhang et al., 2020).
Organizations
Structure. Traditional organizations were mostly functional and typically organized themselves around four management responsibilities namely money, demand, design, and operations management. Collaboration and communication among departments were weak and, as a result, fully-integrated organization-wide operations management practices were hard to practice. Over the decades, with the introduction of collaboration of just-in-time, employee involvement has become an essential component of operations. The characteristic has also influenced organizations to restructure to facilitate flatter organizations to allow for collaboration and communication among departments. This has led to increased scope and effectiveness in operations management (Zhang et al., 2020).
Concepts. One of the earliest methods of replenishing stocks was the Re-Order Point system. The advancement of computers saw the introduction of material requirements planning (MRP) to production planning. In the late 20th century, the scope of MRP expanded to include resource planning to incorporate concepts such as shop activity control, purchasing, customer service, capacity requirement planning, et cetera. This evolution allowed the integration of several organizational functions to operations management hence the evolution to its modern state (Zhang et al., 2020).
Philosophies/Approaches. As opposed to viewing quality as a distinct concept, total quality management as a management philosophy addressed the long-held notion of quality being exclusively a part of the production process. Total quality management stressed the concepts of customer satisfaction, employee involvement in decision-making, and continuous improvements in quality. It also stressed benchmarking, process design, product and service design, and problem-solving tools. This evolution coupled with the just-in-time principle eliminated the need for organizations to maintain huge inventories by emphasizing delivering the right product to the right people at the right time. This polished operations management by creating self-disciplined simplicity and efficiency in the work environment (Zhang et al., 2020).
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Application of Operations Management in Achieving Organization’s Strategy
In the modern business world, the primary organizational goal is to maximize efficiency while producing commodities that add value for the customer. Operations management plays a major role in helping organizations achieve their strategy by contributing to strategic and tactical operations decisions. Operations management contributes to the organization’s strategy through informing facility location decisions, technologies that the organization will use, determining labor and equipment organization, and the long-term capacity of the organization in meeting customer demand.
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Regarding tactical strategies, operations management inform workforce scheduling, contracting with vendors, establishing quality assurance procedures, managing inventory, and establishing quality assurance. Notably, both strategic and tactical decisions are essential to how well an organization accomplishes its goals. Moreover, they offer an organization opportunities to achieve a competitive advantage (Berry, 2016). Due to its involvement in decisions that are both tactical and strategic in nature, operations management has both short and long-term implications.
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