Introduction to Operations Management

Introduction to Operations Management

In this lesson, you’re expected to learn:
– the importance of operations as a core function in an organization
– the main components of operations management
– the scope of operations and its interaction with other functions

What is Operations Management?

Operations management is the group of activities for managing the resources which are devoted to the production and delivery of products and services.

It involves the coordinating, directing, planning, and controlling of the day-to-day activities that make a business run including purchasing, production, distribution, customer service, and human resources.

Within the field of operations management, we can highlight the operations function and the role of operations managers:

Operations Function

• The part of an organization that works towards the production and delivery of products and services. Every organization has this function, but it does not necessarily need to be called ”operations”.• Sometimes it is referred to as ”production”, ”supply chain”, ”manufacturing”, or ”project management”.

Reference: Slack et al. (2010)

Operations Managers

• These are the people who are responsible for managing the resources (or part of the resources) related to the operations function.

• Many job titles meet this requirement, e.g. ”store manager”, ”fleet manager”, ”project manager” etc.

Reference: Slack et al. (2010)

History of Operations Management

The history of operations management is based on the origin of general management itself.

Source: Adapted from Dr. André Duarte, 2009
Enlarged version:
[Optional] Operations Management: Definition, Principles, Activities, Trends

Why Study Operations Management?

Operations is one of the three core functions of any organization.

The core functions of an organization are the ones that are directly related to the production and delivery of their products and services – which are the reasons for the organization to exist.

The three core functions of any organization are:

1) Product / Service Development: responsible for creating the products and services offered by the organization.

2) Marketing and Sales: responsible for generating customer requests for the products / services offered by the organization.

3) Operations: responsible for fulfilling the customer requests generated by marketing and sales, related to the products / services offered by the organization.

Almost every organization will have these three core functions because they have a fundamental need to sell their products and/or services, satisfy their customers and create the means to satisfy customers.

Support functions: the other functions in a company are usually considered support functions, because they enable the three core functions to operate. Examples of support functions are finance and human resources.

 Apart from being one of an organization’s core functions, operations involve most of an organization’s resources:

• Most of an organization’s people are usually dedicated to its operations.
• Most of an organization’s cost are usually associated with its operations.
• Operations decisions are expensive and have long term implications (e.g. think about building a new plant or acquiring a new aircraft).
• Also, it is important to be aware of how products and services are produced.

[Optional] Core Responsibilities of an Operations Manager
Component of operation management
The operation function’s scope matches the characteristics of each particular business.
* Source: adapted from Slack et al. (2010). The representation depicted below is non-exhaustive.
Enlarged version:
We can see that the activities of the operations function can vary significantly across different businesses.

For example, for an internet service provider, operations is related to running the technology needed to provide network services.

On the other hand, the operations function for a manufacturing company is related to the activities needed to make the products offered by the firm.

Interaction of Operations with Other Functions
Working effectively with other parts of an organization is one of the most important responsibilities of Operations Management (OM).

* The representation depicted below is non-exhaustive.
Enlarged version:

From the diagram, we can get an idea of the nature of the interaction of OM with other functions, for example:
• The marketing function provides the market requirements for products and services (e.g. fast response, high quality, etc.) and the operations provides the feedback to marketing on what is possible to achieve (operational capabilities).
• The operations function informs the human resources function about the human resources needed to conduct its activities and, thus, the human resources function provides the resources needed (recruitment, development, and training).

Enlarged version:

There is not always a clear division between the three core functions or between the core functions and support activities.

• Several business problems lie at the overlapping boundaries between functions.

• We can consider as part of the scope of operations management some activities related to product/service development, engineering/technical activities, information systems activities, and some of the human resource, marketing, and accounting & finance activities.

• We can also consider as the core operations function all the activities necessary for the fulfilment of customer requests, including sourcing products and services from suppliers and transporting products and services to customers.

… thus, in this course we adopt a broad definition of operations management, considering all the activities necessary to fulfil customers’ requests.
Scope of Operations Management

The following diagram provides an overview of the different activities included in the scope of operations management:

Source: adapted from Slack et al. (2010)
Enlarged version:
[Optional] What Is Operations Management?
Check out this 5-minute introductory video by Samantha Porter to learn more:
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