Operations Management and the role of an operations manager

Operations management refers to the activities, decisions and responsibilities of managing the
resources which are dedicated to the production and delivery of products and services.
The part of an organisation that is responsible for this activity is called the ‘operations function’ and
every organisation has one, as delivery of a product and/or service is the reason for existence.
Operations managers are the people who are responsible for overseeing and managing the resources
that make up the operations function. The operations function is also responsible for fulfilling
customer requests through the production and delivery of products and services.
Depending on the type of industry or business, other titles can be used interchangeably, such as a
‘fleet manager' in a distribution company or a ‘store manager' in retail businesses.
Although the operations function is central to any organisation, it is only one of the three main core
functions, the others being marketing and finance. The marketing function is responsible for
communicating the organisation's products and services to its markets and researching customer
wants and needs. The finance function is responsible for providing information to assist in economic
decision making and the overall management of financial resources.
There are also other functions which are not core to an organisation; however, their contribution is
crucial to the smooth running of any organisation. Commonly known as support functions, they
include accounting, information systems, human resources and engineering.
Often, there is no clear division between the various functions and one of the biggest difficulties faced
by management is the ability to work effectively with other parts of the organisation. It is critical to
the success of your business that functional boundaries do not interfere with efficient internal
processes.
Being a small business owner, you may feel as though operations management does not apply to your
business. However, this is far from the truth and in reality, the concepts and principles behind
operations management is applicable to all businesses. The only difference is that you may have to
take on several roles as many smaller organisations simply don't have the resources to dedicate
individuals to specialised roles.
Benefits of Operations Management
Operations management can significantly contribute to the success of your business by using your
available resources to effectively produce products and services in a way that satisfies customers.
To do this you must be creative, innovative and energetic in improving processes, products and
services. The four main advantages an effective operation can provide to your business include:
▪ Reducing the costs of producing products and services and being efficient
▪ Increasing revenue by increasing customer satisfaction through good quality and service
▪ Reducing the amount of investment that is necessary to produce the required type and
quantity of products and services by increasing the effective capacity of the operation
▪ Providing the basis for future innovation by building a solid base of operations skills and
knowledge within the business
Role of the Operations Manager
Being an operations manager involves overseeing and having responsibility for all the activities in
the organisation which contribute to the effective production of goods and services. Depending on
the organisational structure, the exact nature of tasks that are classified under the operations
function may differ from business to business. However, the following activities are usually
applicable to all types of operations:
▪ Understanding strategic objectives: Operations managers must clearly understand the goals
of the organisation and develop a clear vision of exactly how operations will help achieve them.
 This also involves translating these goals into implications for the operation's performance,
objectives, quality, speed, dependability, flexibility and cost.
▪ Developing an operations strategy: Due to the numerous decision-making involved with
operations, it is critical that operations managers have a set of guidelines that are aligned with
the organisation's long-term goals.
▪ Designing the operation's products, services and processes: Design involves determining
the physical form, shape and composition of products, services and processes.
▪ Planning and controlling: This involves deciding what the operations resources should be
doing and making sure that it is getting done.
Nature and Scope of Operations Management
Nature
▪ Dynamic: Operations management is dynamic in nature. It keeps on changing as per market
trends and demands.
▪ Transformational Process: Operation management is the management of activities concerned
with the conversion of raw materials into finished products.
▪ Continuous Process: Operation management is a continuous process. It is employed by
organizations for managing its activities as long as they continue their operations.
▪ Administration: Operation management administers and controls all activities of the
organization. It ensures that all activities are going efficiently and there is no underutilization or
mis-utilization of any resource.
Scope
▪ Increase Productivity: Operation management plays an important role in increasing the
productivity of business. It manages all aspects of production activities to achieve highest
efficiency possible. Operation manager are responsible for designing production plan for
carrying out the operations. They ensure that all inputs used by organisations are efficiently
transformed into outputs that is products or services. It is crucial for all business for properly
managing their day-to-day activities and efficient utilisation of all its resources which helps in
raising productivity.
▪ Raises Revenue: Operational management directly influences the profitability of the business.
It works on reducing the cost of operations to business by reducing the wastage of resources.
Operations managers monitor every production activity and take all necessary steps for
maintaining efficiency in the organisation. They try to maintain an appropriate balance between
cost and revenue. Maintenance of quality of products and delivering them as per customer needs
is another function played by these operation managers. It helps in attracting more and more
customers which increase the overall revenue of business.
▪ Achievement Of Organisation Goals: Every organisation strives towards achievement of its
desired goals. Proper management of production activities helps business to properly implement
their strategic plans in their operation. Operation management ensures that all operations of
business are going in desired direction. It regularly monitors every activity and takes all
corrective measures as required according to prevailing situations. Proper functioning of
business as per strategic plans helps in achievement of desired goals.
▪ Improve Customer Satisfaction: Customer satisfaction is necessary for every business to
improving its relations with its customers. It helps them in retaining them for the long term.
Operation management monitors the quality of products manufactured by organisations. It
ensures that high quality products are produced in accordance with the requirements of
customers. When products manufactured by business completely fulfil the needs of customers,
their satisfaction level will improve.
▪ Reduce Investment Need: Operation management reduces the additional capital requirements
of the business. It ensures that all capital employed in the business are efficiently used.
Management of operations ensures that all production activities go uninterrupted without any
shortage of capital. By increasing the efficiency and avoiding the wastage of employed resources,
it avoids any deficiency of capital in business. Businesses are not required to invest more in their
production activities.
▪ Enhance Goodwill: Maintaining proper goodwill in the market is the goal of every business.
Operation management focuses on improving the position of the organisation in the market. It
ensures that business works for providing better services to its customers. Business should
manufacture durable and high-quality products that may provide better satisfaction to users.
Customers will gain confidence in their products which will improve their market image.
▪ Improve Innovation: Operation management helps in implementing innovative changes in
organisational activities. All decision regarding production planning is taken by operation
managers by doing research and analysis of prevailing market situations. It takes into account
all technological changes and builds a strong base of knowledge and operations. This helps in
bringing various innovations in operations of the business.
▪ Improving the performance of operation: Operations managers are expected to continually
monitor and improve the overall performance of their operation.
Operations strategy and the four stages of strategy
Operations Strategy can be seen as a plan specifying how an organization will allocate resources in
order to support infrastructure and production. An operations strategy is typically driven by the
overall business strategy of the organization, and is designed to maximize the effectiveness of
production and support elements while minimizing costs.
Companies and organizations making products and delivering, be it for profit or not for profit rely on
a handful of processes to get their products manufactured properly and delivered on time. Each of
the process acts as an operation for the company. To the company this is essential. That is why
managers find operations management more appealing. We begin this section by looking at what
operations actually are. Operations strategy is to provide an overall direction that serves the
framework for carrying out all the organization’s functions.
Understanding operations: Have you ever imagined a car without a gear or the steering wheel? Whilst,
what remains of utmost importance to you is to drive the locomotive from one location to another
for whatever purpose you wish, but can only be made possible with each and every part of the car
working together and attached. Organisations behave in the same manner. The company has an
ultimate goal of delivering goods to a client, but the processes of designing, manufacturing, analysing
and then finally being delivered are the driving forces for the company's success. All these chunks, of
works, processes, that collectively define a bigger purpose the operations for that particular
organisation. The more effective these processes or operations would be the more productive and
profitable the business would be.
"Operations strategy is the total pattern of decisions which shape the long-term capabilities of any type
of operations and their contribution to the overall strategy, through the reconciliation of market
requirements with operations resources".
- Slack and Lewis
Operations Strategy Examples
An operations strategy for a business is the company's plan for how the business will operate to
achieve a set of goals. Compare it to a machine; the machine is used to achieve a certain purpose or
function, but all components of the machines must operate correctly and in conjunction with each
other for the machine to work successfully. An operations strategy in a business is essentially the
same thing. It defines how different components of the business will work together to achieve
success. Companies define operations strategies differently, based on the management style and
needs of the company.
Retail: Wal-Mart is one of the most successful and largest retailers in U.S. history. Its operations
strategy is to use low inventory levels and prices to generate faster sales based on low prices and
value. Keeping inventory low allows the company to keep prices low for their customers, as well as
replace products with new items once inventory is gone. This also increases demand. High demand
combined with low prices leads to increased sales for the company.
Online: Online merchants typically have very different operations strategies than brick-and-mortar
retailers. For example, the operations strategy for an online merchant likely involves creating and
maintaining a website that is easy to use and reliable, so when customers come to the site, they can
easily navigate through it to make a purchase. An online merchant's operations strategy puts a lot of
emphasis on the design and usability of the site, which includes product photos and descriptions that
entice visitors to make a purchase. The checkout process also must be easy and fast.
B2B: Business to Business, or B2B, companies sell products and services to other businesses and also
have different operations strategies than retailers, who sell products and services to consumers. An
operations strategy for a B2B company might be to establish the company or management team as
industry experts and thought leaders. This is done in a variety of ways, including obtaining speaking
engagements at trade shows, publishing articles on different angles within the industry and
expanding the company's professional network as much as possible. Companies that have a
reputation as the experts in a certain industry are more likely to get business than companies with
no reputation in the industry.
Non-Profit: Non-profit companies often operate similarly to other companies, though the ultimate
goal of a non-profit is not about making as much money as possible. Thus, the operations strategy for
a non-profit is different than a for-profit company. Non-profit company operations strategies might
include fundraising efforts to pay employee salaries and partnering with local organizations to
improve or resolve a situation. For example, in an area with high population of homeless people, a
non-profit agency might arise to help create free meal service and shelter to help those in need.
Four Stages of Strategy
Strategic planning is a process that helps companies focus on how to succeed for the future. Every
company, large or small, should participate in the strategic planning process at least every three
years. This planning will help you, your customers and employees understand what the core business
is, what the expectations are, and what measurements are important.
Here are the Strategic Planning Steps and Phases:
▪ Define where the Company wants to be (i.e., business goals)
▪ Gather information (internal and external)
▪ Develop alternative strategies, then select a strategy that will provide the best chances of meeting
Company goals
▪ Implement the plan
▪ Evaluate and revise when needed
Phase I: Strategy Formulation - Strategic management begins with the formulation phase, where
the firm's management develops an overall strategy for achieving the firm's objectives (vision,
mission and values developed).
Phase II: Strategy Development - SWOT Analysis (internal strengths and weaknesses, external
opportunities and threats).
Phase III: Strategy Implementation - Strategies are usually implemented from the top down. To
begin with, the top management team will inform line managers about the strategic changes, and line
managers will, in turn, pass this information on to their subordinates (short term objectives
established, action plans and resources allocation).
Phase IV: Strategy Evaluation - When a strategy is implemented, it will hopefully be successful, but
managers cannot assume that every strategy will be. They will, therefore, need to measure the
success of a strategy. To measure this success, the strategy must be evaluated against the firm's goals
{strategy review and measurement (scorecard)}.