Operations management influences every part of how you run a company. That includes how you produce a product or service, how you track and improve your efficiency and how you contribute to the bottom line. Simply put, operations management drives efficient workforces, processes and supply chains. Show
This guide explores the types of operations management and how they bring value to a business. Explore the ins and outs of operations management strategy and learn the best practices to achieve success. Inside this article: What Is Operations Management?Operations management is the practice of handling day-to-day business functions in a manner that is efficient and that maximizes profitability. This discipline focuses on formulating strategies and taking actions to optimize production and supply chain performance. Key Takeaways
What Is the Purpose of Operations Management?The purpose of operations management is to promote and support efficient business processes. The practice focuses on the staff, processes and physical resources required to operate a business. Operations management also refers to how an organization coordinates and oversees the flow of information among its departments; how successful it is at complying with business and regulatory requirements; how well it ensures customer satisfaction; and how efficiently it manages daily operations, not just resolving problems that occasionally arise. Goals of Operation ManagementThe goals of operations management are about maximizing the organization’s efforts, mainly around producing goods and/or services and managing the supply chain and infrastructure. The focus is on controlling costs, maximizing profitability and properly allocating resources. Operations managers seek to reduce operating costs by coordinating business tasks, ensuring qualified people are in the right positions and continuously monitoring performance metrics. Importance of Operations ManagementAn effective operations management practice makes a business more competitive and prevents it from wasting time and money on activities that don’t forward the company’s strategic vision. An effective operations manager ensures the organization meets business goals. Operations management is necessary for companies to stay competitive in any industry, but healthcare, technology and manufacturing firms often have a particular focus. Without efficient operations management, critical business functions like research, client service delivery, IT and inventory control may fall prey to mismanagement. Types of Operations ManagementThe three main types of operations management focus on the objective, the task or the individual employee. Which you use depends on your company’s needs and goals, and a manager might use different types based on the situation.
Some facets of operations management may require additional functions. For example, tasks may consist of planning and researching; creating operational budgets; and managing physical inventory, supply chains and vendors. In addition to the types of business functions, there are three categories of modern operations management environments:
Operations Management Eco-SystemThis image shows the relationship of the various elements of operations management, from control and inputs to resources and strategy.Strategic vs. Tactical Operations Management DecisionsStrategic operations management focuses on long-term success, while tactical operations decisions are about reacting and adjusting in the short term. Use a combination of these approaches for the best results. Strategic operations decisions involve estimates, predictions, goals and comparative analyses. This approach concentrates on the future to meet long-term objectives and ensure lasting success. One key aspect is using operational data to analyze results and adjust long-term strategic plans where necessary. Tactical operations decisions, on the other hand, involve how the company responds to changing operational conditions. For example, an organization might need to adjust production schedules or workforce planning as the marketplace fluctuates. Business Management vs. Operations ManagementCompanies may combine the practices of business and operations management, but there is a difference. Business management focuses on long-term planning, while operations management concentrates on daily activities. Operations managementIs a broad term used to describe the process of overseeing the day-to-day activities at a business. These functions could include scheduling staff, making payroll, receiving and processing payments, organizing equipment and supplies and more. Business managementFocuses on planning and strategizing for future results. Business management requires extensive general knowledge and incorporates external factors, while operations management requires a high level of operational expertise. Examples of general business management goals might include maximizing revenue, minimizing costs and maintaining customer satisfaction. Operations management goals include:
What’s the Difference Between Business Management and Operations Management?Project Management vs. Operations ManagementWhich One Does Your Small Business Need?Project ManagementOperations ManagementProject management is the process of planning, executing, monitoring, controlling, and delivering a specific goal with a definite time, scope, and budget.Operations management is the process of administering, managing, and altering business practices to boost productivity and maximize profit.Features:Features:Task management This graphic compares and contrasts the business management and operations management, and also gives a summary of each. Operations and Supply Chain ManagementOperations management is vital for any company that relies on logistics management and the supply chain. The practice protects supply chain operations, boosts productivity and reduces costs. Operations management is critical in companies that have complex supply chains because it provides a framework for process-specific technology, tools and activities to support a steady flow of materials and finished goods and gives managers the means to efficiently direct resources toward reaching goals. Operations managers rely on strong logistics management and supply chain management. A mature operations management practice helps create processes and systems to manage and measure supply chain activities. For example, when customers cancel orders or return goods to the warehouse, the operations management team is responsible for having procedures in place to reduce administrative overhead, adjust production levels and/or maximize the resale value of the items. Effective operations management touches all aspects of essential work, including supply chain, and ensures the company is meeting key performance indicators (KPIs). Managers use operations management KPIs to make informed decisions and coordinate efforts across the supply chain and organization as a whole. What Are the Main Functions of Operations Management?The main functions of operations management are developing effective processes, ensuring production is efficient and determining the most cost-effective way to achieve goals. Operations managers help organize resources using sound HR concepts, the right technology and up-to-date best practices. Functions often are cross-departmental and include:
Operations Management ProcessThe operations management process is about making a company’s daily actions as sharp and effective as possible. The process involves smart use of resources and data to reach goals while keeping costs down. Operations management also refers to the processes, tools and resources necessary to support an organization’s full workflow. It requires communication with clients, stakeholders and business units. Three categories of operations management processes, based on desired business outcome, include:
The ideal operations management process for a given company varies by industry, company size and other factors. Generally, it captures the process of managing the daily flow of tasks and information to ensure consistent and effective performance across projects. This process can include variables such as finance, human resources, information technology, facilities management, inventory management and more. Role of Operations ManagementThe role of operations management boils down to driving optimal results while reducing costs. An effective operations manager allocates a company’s resources to achieve goals and meet standards. Most companies have an operations department for this reason, although the specific role may vary from company to company and industry to industry. The responsibilities of an operations manager include the overall direction of company operations, financial planning and resource allocation for specific projects and service offerings. In general, ops managers direct their companies’ day-to-day business activities. They ensure that the workforce conducts daily operations following company policies and standards and relevant laws and regulations. Their key responsibilities include overseeing daily business activities, studying processes and preparing operational and financial reports. In addition, these managers measure the impact of business operations by collecting, processing and communicating operational KPIs. Effective operations management requires a holistic view of the business, including resource allocation, documentation review, quality control, coordination of efforts, sharing information across departments and initiating appropriate actions when needed. Typically, operations managers have a cross-departmental view, carry out duties assigned by leaders, ensure the efficient use of resources and help plan and prepare to achieve future goals. Day-to-day operational management tasks include record-keeping and operational reporting. Depending on company size and scope, ops managers may take on business development or marketing roles. For example, ops management teams may include financial analysts, sales leaders, software developers and IT support. The practice typically includes cross-functional coordination among department heads and units. Operations Management ExampleTo understand operations management, consider these examples. The first is a manager who oversees a company’s production, workflow, inventory, equipment and people. Another one in is a manager overseeing a service, such as IT. The field has evolved to include service-related tasks involved in making efficient, value-driven operational decisions. For example, IT operations management includes maintaining the hardware and software to enable IT strategy, planning, decision-making, research and technical support. Operations workflows in IT ops management include the techniques that support the organization’s efficient and safe use of technology resources and deal with the design, implementation, administration, monitoring and performance of security measures in information systems. Those tasks protect the integrity, confidentiality and availability of data. This role requires a comprehensive knowledge of IT security policies and operational awareness combined with proactive thinking and problem-solving skills. Best Practices for Operations ManagementOperations management best practices start with modern methods that allow employees to do their jobs efficiently and deliver a desirable product or service to customers. However, best practices may vary by company and need to evolve in tandem with changing priorities. While there is no single path to efficient operations, organizations and individuals have found effective ways to improve modern operations management. These include:
BPR for ops management refers to overhauling your critical business processes using information and data gleaned from operations management performance metrics. BPR can improve return on investment, reduce operational costs, increase production capacity and enhance service capabilities. BPA for ops management refers to using technology to assist with or replace manual tasks and processes. BPA can increase efficiency, save time and money, reduce errors and increase transparency. Automating ops management is most effective when replacing tasks that involve inefficient use of time and resources. Challenges in Operations ManagementOperation management challenges include decision-making, resource allocation and time management; the goal is to ensure objectives are met on time and within budget. Common operation management challenges include:
Operations management is partly responsible for shaping the organizational policies and practices essential for safe, efficient and secure departmental functions. It involves planning, controlling, supervising and controlling the work of assigned employees necessary to accomplish set goals and objectives. An operations manager has two primary purposes: Manage operational resources and meet the organization’s goals and objectives. Understanding common operations issues allow ops managers to prevent or eliminate operational inefficiencies that affect an organization's ability to perform its core functions efficiently. Human Behavior and Operations ManagementThe field of behavioral operations management examines the decision-making role. This is key because human beings don’t always base their decisions on logic and factual information. Many organizations are undergoing a transformation — from being purpose-built for one market to being massively complex with dozens of functions. As a result, operations management techniques must become more agile and cross-functional. Unfortunately, small to midsize businesses may lack cross-functional leadership and accountability in operations management. When leadership is lacking, inefficiencies and behavioral issues can grow and spread throughout an organization. Research in this field from the Journal of Operations Management focuses on understanding human behavior to improve operations management and realize its benefits. For example, risk aversion is a behavioral issue that research shows can hinder ops management. This issue manifests in many forms and can also harm performance. An Example of How Technology Fuels Operations ManagementThe family-owned, online furniture company casalife needed an integrated business solution to become more efficient to stay competitive with larger online retailers. The small retailer couldn’t afford the high up-front IT investment and maintenance costs associated with typical on-premises solutions. With NetSuite’s SuiteCommerce solution, casalife was able to meet the demands of its ecommerce operations and become more agile and able to take on growth opportunities. The result was an estimated savings of $120,000 a year in personnel and other costs using NetSuite for purchasing, operations management and CRM compared to the competing solution. #1 Cloud ERP NetSuite Has Powerful Tools to Propel Your Operations and BusinessRedefine your operations workflows and more effectively monitor manufacturing processes by integrating industrial monitoring devices and software with NetSuite’s Advanced Manufacturing solution. NetSuite eliminates the gap between operational intelligence and business outcomes with real-time visibility and reporting and customizable operations dashboards that bring clarity and context to ops management. Gain a more cohesive picture of your manufacturing operations and empower quicker response times to ensure optimal production. The system’s built-in business intelligence toolkit helps you create more informed strategic decisions through real-time analysis of supply chain data that drives system improvement. Empower your ops managers, put ops data into action, and get products to market faster and more efficiently with unified global manufacturing management in the cloud. How does operations management improves the efficiency of a business operation?Operations management is focused on converting resources into quality products and services. It involves overseeing the organization's production processes to create the highest level of efficiency. It helps your organization increase profits while reducing costs and ensures maximum productivity.
How does operations affect other business functions?It is the centre of the organisation and it oversees various functions of the business, acting as a mechanism for control. Operations management acts as an umbrella, and connects all facets of the business, from HR to project management and supply chain management to finance and facilities.
What is the function of operations management?The term operations management encompasses planning, implementing, and supervising the production of goods or services. Operations managers have responsibilities in both strategy and day-to-day production, in either manufacturing or services.
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