Operations Management: Overview and Principles

MODULE 1 OVERVIEW OF OPERATIONS MANAGEMENT  Operations management is a crucial aspect of business management that involves designing Introduction and controlling the production process and redesigning business operations to ensure...

MODULE 1 OVERVIEW OF OPERATIONS MANAGEMENT  Operations management is a crucial aspect of business management that involves designing Introduction and controlling the production process and redesigning business operations to ensure efficiency and customer satisfaction. It involves 1 managing the entire production system, which converts inputs like raw materials, labor, and energy into outputs like goods and services. Operations management covers sectors like banking systems, hospitals, companies, suppliers, customers, and technology. It is one of the major functions in an organization, alongside supply chains, marketing, finance, and human resources. It requires managing both strategic and day-to-day production of goods and services.  WHAT IS OPERATIONS MANAGEMENT? Operations Management -Is about how organizations produce or deliver the goods and services that provide the reason for their existence. -Can be seen as one of many functions (marketing, finance, personnel) within the organization.  HISTORY OF OPERATIONS MANAGEMENT -Operations management was previously called production management, clearly showing its origin in manufacturing. -Historically, it all began with the division of production, starting as early as the times of ancient craftsmen but spreading more widely only by adding the concept of interchangeability of parts in the 18th century ultimately sparking the industrial revolution. -From the 1950’s and 1960’s, it formed a separate discipline besides bringing other concepts such as Taylorism, production planning and inventory control.  -As the economies in the developed world were gradually shifting to be service-based, all the corporate functions including product management started to integrate them. -The service side also began its approach by applying product management principles to the planning and organizing of processes to the point where it made more sense to call it operations management. -Although people have been producing and selling products since the very beginning of civilization, the implementation of operations management is relatively a new phenomenon. -Operations management came to prominence in the 20th century but its roots can be traced back to the 18th and 19th centuries. Pre-Industrial Revolution -Adam Smith, a Scottish philosopher and father of modern economics is one of the first people to address the issues of operations management. -In 1776, Smith wrote “The Wealth of Nations”, in which he described the division of labor. -According to Smith, if workers divided their tasks, then they could produce their products more efficiently than if the same number of workers each built product from start to finish.  Post-Industrial Revolution -During the industrial revolution, machinery allowed factories to grow in capacity and greatly increased their output. Despite this growth, there was considerable inefficiency in production. -Frederick W. Taylor and Henry Ford helped to overcome the inefficiencies in the early 20th century. -Taylor developed a scientific approach for operations management, collecting data about production, analyzing this data and using it to make improvements to operations. -Ford increased efficiency in production by introducing assembly line production and improved the supply chain through just-in-time delivery. Post-World War II -Technological developments during the Second World War created new possibilities for managers looking to improve their operations. -The development of computational technology allowed for a greater degree of data to be analyzed by firms. -The abilities of computers have continued to increase exponentially allowing for a high degree of data analysis and communication. -Modern producers are able to track inventory from raw materials through production and delivery.  Modern Day -Quality management is a system for mapping, improving and monitoring operations processes. -A variety of quality management system are in use among top firms, the most notable systems being the ISO systems and Sig Sigma. These systems aim to increase the efficiency of business processes. -Although operations management has typically dealt with the manufacturing process, the growth of the service industry has created a field of service operations management.  REQUIRED SKILLS FOR OPERATIONS MANAGEMENT Organizational Abilities: Organizing processes in an organization requires a set of skills from planning and prioritizing through execution to monitoring. These abilities together help the manager achieve productivity and efficiency. Analytic Capabilities/Understanding of Process: The capability to understand processes in your area often includes a broad understanding of other functions too. An attention to detail is often helpful to go deeper in the analysis. Coordination of Processes: Once processes are analyzed and understood; they can be optimized for maximum efficiency. Quick decision making is a real advantage here as well as a clear focus on problem- solving.  People Skills: Flaws in the interactions with employees or member of senior management can seriously harm productivity, so an operation manager has to have people skills to properly navigate the fine lines their colleagues. Furthermore, clear communication of the tasks and goals serves as great motivation and to give a purpose for everyone. Creativity Skills: Problem-solving skills are essential for a creative approach of things don’t go in the right direction. When they do, creativity helps finds new ways to improve corporate performance. Tech-savviness: In order to understand and design processes in a time when operations are getting increasingly technology-dependent, affinity for technology is a skill that can’t be underestimated. Operations managers have to be familiar with the most common technologies used in their industries and have an even deeper understanding of the specific operation technology at their organizations.  BENEFITS OF OPERATION MANAGEMENT 1.Profitability Management – Sound operations management causes corporate leadership to challenge conventional wisdom or employees’ sense of what is operationally correct. 2.Competitive Advantage – Businesses adequately manage their operations to get a handle on key internal and external factors. By helping a firm understand its internal and external conditions, operations management improves the company’s competitive standing. This is because the business gets a better understanding of its operating environment and can adapt its tactics more effectively to changing conditions. 3.Manufacturing Edge – Operations management allows a manufacturing firm to change or improve the way it produces goods as well as how it stores items such as raw materials, work-in process merchandise and completely finished products. 4.Regulatory Compliance – By studiously analyzing operating activities, corporate management waves goodbye to the days of hefty government fines and adverse regulatory decisions. THE ROLE OF AN OPERATIONS MANAGER 1.Supervisory Duties – Operations manager are required to supervise or manage teams of staff, including cashiers, stock crews and customer service representatives. The number of individuals and the range of areas they are responsible for vary by industry. 2.Project Management – Operations manager are often responsible for project planning, creating time lines and organizing regular meetings. Goal setting is often an important part of this work particularly where sales targets are concerned. 3.Negotiating Client Needs – Interacting with clients is a big part of the job in most places and in some cases, client needs and requests actually drive the bulk of the work. The manager is often seen as something of a face for the larger business in these situations.  4.Conflict Resolution – The operations manager may also be called to solve problems or resolve debates that arise amongst staff or with customers. This person usually has a final say in questions of pricing, returns and discounts and have also firing and hiring capabilities. 5.Considerations for Consultants – Operations management consultants are typically experts in certain sectors of business who are called on a contract basis to analyze and make recommendations for individual owners.  OPERATIONAL MANAGEMENT CHALLENGES Financial Management Controls – Operational management must ensure that financial accounting and reporting mechanisms are adequate and functional. Dysfunctional mechanisms typically cause a company to report inaccurate financial statements, including balance sheets, statement of profit and loss, cash flow statements and statements of retained earnings. Information Technology – As sound operational management policy helps ensure that a company possesses adequate computer software and hardware to meet business requirements. Without this policy, a firm may be unable to effectively operate and meet profitability goals.   Regulatory Compliance – Operational managers generally must ensure that corporate policies and operating guidelines adhere to top leadership’s stipulations, human resources procedures and professional standards. These policies also must conform to industry practices and government regulations. Safety Management - Safety management is a key challenge that operational managers must confront when performing duties. Managers typically implement safety guidelines to prevent occupational accidents and operating losses resulting from litigation and regulatory fines.  HOW OPERATIONS MANAGEMENT ENHANCES CORPORATE PROFITABILITY Quality Control – Effective operations management includes strong quality control to protect and expand the customer base that generates revenue. Production Efficiency – Central to operations management is the drive for efficiency. Make resources go as far as possible by generating as much revenue as possible without compromising quality. Efficiency in the use of raw materials, labor, supplies and other production inputs means more revenue-generating output and more profit for each money spent.  Inventory Management – Inventory management of some kind is a concern for all companies. Underestimating demand means missing out on revenue. Overestimating demand means you may never recover your expenses. Logistics – Logistics is about managing the flow of stuff: how you get goods and services from suppliers, how you deliver your own goods and services to customers and how you store things in between. Smart logistics gets you more service for your money which enhances corporate profitability.  METHODS AND TECHNIQUES USED IN OPERATIONAL MANAGEMENT Designing Processes – The foundation of operational management revolves around putting a set of processes in place to ultimately improve business bottom line. A process is an automatic system that a business uses to address a specific problem. Processes offers businesses a host of benefits including saving time, eliminating problems and improving productivity.  Project Management – Successful operational management includes the use of project management techniques. Business owners must continually make decisions regarding scheduling, work assignments and sequencing of various projects or processes in the short- and long-term confines of the business. Continuous Improvement – The best organizational managers are never satisfied with their results. Instead, they always seek to improve upon what they have done. The concept of continuous improvement is based on a Japanese philosophy called Kaizen.  10 PRINCIPLES OF OPERATIONS MANAGEMENT The following are the 10 Principles of Operations Management presented by Randall Schaeffer at an APICS Conference: 1.Reality: Operations management should focus on the problem, instead of the techniques because no tool in itself would present a universal solution. 2.Organization: Processes in manufacturing are interconnected. All elements have to be predictable and consistent in order to achieve a similar outcome in profits. 3.Fundamentals: The Pareto Rule is also applicable to operations: 80% of success comes from a strict adherence to precisely maintaining records and disciplines and only 20% comes from applying new techniques to the processes. 4.Accountability: Managers are expected to set the rules and the metrics and define responsibilities of their subordinates as well as regularly check if the goals are met. Only this way would the workers put in the necessary efforts. 5.Variance: Variance of processes has to be encouraged because if managed well, they can be sources of creativity. 6.Causality: Problems are symptoms: effects of underlying causes. Unless the causes are attacked, the same problems will appear again. 7.Managed Passion: Passionate employees are your most valuable asset. They are the key to long-term performance and success of the company. It is crucial to have motivated managers as that can instill a sense of passion in the employees. 8.Humility: Instead of a costly trial and error process, managers should acknowledge their limitations. 9.Success: What is considered success will change over time but always consider the interest of the customer. In order to keep them, all the other principles have to be revised occasionally. 10. Change: Sometimes, change is good. With new theories and solutions available to manufacturing operations, being open to change will ensure that you maintain stable operations in the long run. THE ACTIVITIES OF OPERATIONS MANAGEMENT There are three major groups of activities performed by operations management namely: 1.Designing – In most cases, planning involves designing a new product, from the initial concept to the actual launch with several testing phases involved. During planning, you will have to consider both technical and business requirements. 2.Managing – This is a solid starting base for maximizing the efficiency of operations. There is a need for constant and competent management to correct the accidental mistakes in planning, to adjust production to changing costs or regulations and keep them efficient on many levels. 3.Improving – There is always room to improve when it comes to the processes used, the quality and capacity achieved or as far as the level of inventory and human resources are concerned. THANKS FOR LISTENING MEMBER: ADAYON ELLAH MARIE AGUIRRE JOANNA MARIE BADOY KURT MARVIN BERNESTO ERICA FAYE FM 1A