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What is Operations Management

What is Operations Management and Why is it Important?

Operation is that part of as organization, which is concerned with the transformation of a range of inputs into the required output (services) having the requisite quality level.

Management is the process, which combines and transforms various resources used in the operations subsystem of the organization into value added services in a controlled manner as per the policies of the organization.

The set of inter-related management activities, which are involved in manufacturing certain products, is called as production management. If the same concept is extended to services management, then the corresponding set of management activities is called as operations management.


What is operations management

Operations Management

What is Production? 

Production is defined as ‘the step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the user’. Thus production is a value addition process. At each stage of processing, there will be value addition.


operations management


Pic Courtesy: Minds.com


Edwood Buffa defines production as ‘a process by which goods and services are created’.

Some examples of production are: manufacturing custom-made products like, boilers with a specific capacity, constructing flats, some structural fabrication works for selected customers, etc., and manufacturing standardized products like, car, bus, motor cycle, radio, television, etc.


Characteristics of a Production System

1. Production is an SYSTEMATIZED activity, so every production system has an objective.

2. The system transforms the various inputs to useful outputs.

3. It WORKS IN TANDEM with the other organisation systems.

4. There exists a feedback about the activities, which is essential to control and improve system performance.


Evolution of Production Management

evolution of opeartions management

Why Operations Management is Important?

  1. Increases productivity of every organization
  2. Leads to economic growth and development
  3. Helps employees to receive high wages
  4. Earns profit for a company
  5. Also plays a strategic role in a firm’s competitive success

Want to Learn Some Interesting Operations Management Terms?

  • Capacity planning—The process of determining the production capacity needed by an organization to meet changing demands for its products. Different types of capacity exist. For example, design capacity is the maximum amount of work that an organization is capable of completing in a given period; effective capacity is the maximum amount of work that an organization is capable of completing in a given period due to constraints such as quality problems, delays, and material management.

  • Efficiency—Performing activities at the lowest possible cost.

  • Enterprise resource planning (ERP)—Large, sophisticated software systems used for identifying and planning the enterprise-wide resources needed to coordinate all activities involved in producing and delivering products.

  • Forecasting—The process of predicting future events, including product demand.

  • Just-in-time—A philosophy designed to achieve high-volume production through elimination of waste and continuous improvement.

  • Lean systems—Sometimes synonymous with just-in-time, it is a philosophy that takes a total system approach to creating efficient operations through the elimination of waste.

  • Location analysis—Identifying the best location for facilities.

  • Mass customization—The ability of a firm to highly customize its goods and services at high volumes through its operations management function.

  • Product design—The process of deciding on the unique and specific features of a product.

  • Process selection—The process of identifying the unique features of the production process that will give the product its unique characteristics. Process selection typically goes hand in hand with product design, as we need to create a process that gives rise to the particular product design desired. An excellent product design is worthless if a process for its creation cannot be developed.

  • Productivity—A measure of how efficiently an organization converts inputs into outputs. It is usually measured by a ratio of output divided by input. Productivity is essentially a scorecard of how efficiently resources are used and a measure of competitiveness. Productivity is measured on many organizational levels—from measuring labor and machine productivity to measuring the productivity of an entire organization or even a nation. As a result it is of interest to a wide range of people.

  • Quality management—The process used to ensure the quality of a product, including measuring quality and identifying quality problems.

  • Reengineering—The process of redesigning a company’s processes to increase efficiency, improve quality, and reduce costs. In many companies things are done in a certain way that has been passed down over the years. Operations management is a key player in a company’s reengineering efforts.

  • Scheduling—The process of deciding on the timing and use of resources within an operation; it addresses questions such as who will work on what work schedule and in what sequence jobs will be processed.

  • Total quality management (TQM)—A philosophy that seeks to improve quality by eliminating causes of product defects and by making quality the responsibility of everyone in the organization. With TQM everyone in the company is responsible for quality. Practiced by some companies in the 1980s, TQM became pervasive in the 1990s and is an area of operations management that no competitive company has been able to ignore.

  • Value added—A term used to describe the net increase created during the transformation of inputs into outputs. The OM function seeks to create value added in the transformation process.

Courtesy: FTPRESS.com