Introduction to Operations Management

Introduction to Operations Management

• Operations management is a business function focusing on producing goods and services.
• It combines inputs (human and financial resources) to create outputs (goods or services).
• This process applies to primary, secondary, and tertiary sectors.
• Production is the organized process of using resources to make a good or service.
• Operations management is integral to decision-making within an organization, impacting other functions (like human resources, finance, and marketing).
• This function plans, organizes, and controls production elements, ensuring things like stock control in supermarkets.

The Role of Operations Management

• Operations management involves the management process of creating goods and services.
• Businesses aim to add value in the production process to earn a profit (selling price exceeding production costs).
• Effective production requires combining human, physical, and financial resources. These resources are referred to as factors of production.
  • Land: natural resources (water, timber, minerals).
  • Labour: human effort (physical and intellectual).
  • Capital: man-made resources (tools, machinery, infrastructure).
  • Entrepreneurship: The knowledge, skills, and experiences of individuals who manage production with the ability to take calculated risks.

Productivity

• Productivity measures a firm's efficiency at transforming inputs into outputs.
• It quantifies the rate at which value is added in the production process.
• Productivity can be increased through labor-intensive or capital-intensive production approaches.
  • Labor-intensive production relies more on human labor (e.g., teaching profession).
  • Capital-intensive production prioritizes machinery and equipment.

Examples of Labor-Intensive Production

• Artisanal food production
• Construction and building
• Haircuts and hairstyling
• Manicures and pedicures
• Hand-made jewellery
• Home cleaning/domestic services
• Landscaping and gardening
• Massage therapy
• Personal fitness training
• Portrait paintings
• Primary school teaching
• Tailoring and dressmaking

Examples of Capital-Intensive Production

• Biotechnology
• Car manufacturing
• Chemical production
• Coal mining
• Computer hardware manufacturing
• Energy production
• Oil and gas extraction
• Pharmaceuticals production
• Semiconductor manufacturing
• Steel production

Functions/Roles of Operations Management

• Operations methods
• Lean production
• Quality management
• Business location
• Production planning (HL only)
• Research & development (HL only)
• Crisis management and contingency planning (HL only)

Part of the Decision-Making Process

• Operations methods (e.g., flow and job production) may require higher or lower staffing levels based on their requirements.
• Operations need approval from the finance department, especially for large capital-intensive productions.
• Job production (custom-made goods/services) allows premium pricing.
• Marketing research is vital to know what customers want/need, promoting goods efficiently, offering customers suitable channels.
• Funding for research and development is needed.
• Production managers are accountable for their budgets and the organization's spending.
• Operations staff, supervisors, and quality control need appropriate training and recruitment.
• Crisis management teams might be required.

This quiz explores key concepts in operations management, focusing on the processes involved in producing goods and services. It covers the integration of various resources and the impact of operations management on overall business decision-making. Test your understanding of how production processes enhance value and profitability.