Introduction to Operations Management PDF

Summary

This document provides an introduction to operations management, explaining its role in combining inputs to produce outputs such as goods and services. It outlines the factors of production (land, labor, capital, and entrepreneurship) and the importance of productivity within an organization. Different production methods and operational functions are also highlighted.

Full Transcript

Introduction to operations management What is it? Operation management is the business function that combines inputs (such as human and financial resources) to produce outputs (goods and services). It applies to activities in the primary, secondary and tertiary sectors. It is essentially abou...

Introduction to operations management What is it? Operation management is the business function that combines inputs (such as human and financial resources) to produce outputs (goods and services). It applies to activities in the primary, secondary and tertiary sectors. It is essentially about production. Production is the process of organizing resources in order to make a good or to provide a service, i.e. the output of goods and/or services. Operations management deals with planning, organizing, and controlling the different elements and stages of the production process, e.g., stock control at supermarkets is vital to ensure shelves are never empty. It is an integral part of an organization’s decision-making process as it directly impacts on the other functional areas of a business (human resources, finance and accounts, and marketing). The role of operations management Operations management is about the management process of creating goods and services that people want to purchase, using the resources that are available to the organization in question. Businesses earn a profit from the production process by adding value in the production process, i.e. the price that customers pay for the good or service is greater than the costs of producing that product. To produce goods and services, businesses need to combine human, physical and financial resources in an effective way. These resources are collectively known as the factors of production: 1. Land – These are natural resources needed to produce goods and services. Examples include water, timber, sand, minerals, metal ores, plants, and animals. 2. Labour – This refers to human effort used to produce goods and services, in terms of physical and intelletual human input. 3. Capital – This refers to non-natural (or man-made) resources used in the production process. Examples include tools, machinery, motor vehicles, physical premises, and infrastructure. 4. Entrepreneurship – This refers to the knowledge, skills and experiences of individuals who have the capability to manage the overall production process. Entrepreneurs have the ability and willingness to take risks in order to produce goods and provide services to customers, profitably. Productivity Productivity is a measure of a firm’s efficiency level in terms of how well things are done within the organization. It calculates the rate at which inputs (factors of production) are transformed into outputs (good and services), adding value in the production process. Productivity can be increased by opting for labour-intensive production or capital-intensive production. When an organization relies more on labourers to produce its output, rather than machinery or capital equipment, it can be described as a labour-intensive firm. Essentially, this means that wages and salaries account for the most significant proportion of the firm’s costs of production. An example is the teaching profession, where staff salaries accounts for the largest share of a school’s operational costs. Examples of labor-intensive production 1. Artisanal food production 2. Construction and building 3. Haircuts and hair styling 4. Hand nail care (manicures and pedicures) 5. Hand-made jewellery 6. Home cleaning and domestic services 7. Landscaping and gardening 8. Massage therapy 9. Personal fitness training 10. Portrait paintings 11. Primary school teaching 12. Tailoring and dressmaking Examples of capital-intensive production 1. Biotechnology 2. Car manufacturing 3. Chemical production 4. Coal mining 5. Computer hardware manufacturing 6. Energy production 7. Oil and gas extraction 8. Pharmaceuticals production 9. Semiconductor manufacturing 10. Steel production Functions/roles of operations management 1. Operations methods 2. Lean production 3. Quality management 4. Business location 5. Production planning (HL only) 6. Research & development (HL only), and 7. Crisis management and contingency planning (HL only) Part of the decision making process 1. Certain operations methods (methods of production) or decisions may require higher or lower levels of staffing. For example, flow production and capital-intensive output require the approval from the finance department because of the large amount of money needed for mass production. 2. Producing exclusive, one-off products using job production (customized production) enables the marketing department to sell these goods or services at a premium price. 3. Market research is required prior to the operations management department producing the goods or providing the services to meet the needs and wants of customers. 4. The organization's goods and services need to be promoted by the marketing department so that customers are informed and persuaded to purchase these. In addition, the products need to be made available to customers using an appropriate range of distribution channels. 5. Funds needed for research and development expenditure, including finance for creating and testing prototypes, need approval and support from the finance department. 6. Production managers are held accountable for their budgets and the organization's various items of expenditure. 7. Production operatives need to be recruited, trained, and developed to work effectively, irrespective of what goods or services are being provided. Similarly, supervisors and quality control inspectors may also need to be hired with the support of the human resources department. 8. A crisis management team might need to be created and trained appropriately.

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