Different organizations or businesses produce products or services for the benefit of society and to meet the needs of people. Operations management which is one of the main functions of Management administrates the management activities related to the development or manufacturing of products and services.
In every organization, 4 fundamental or basic functions are there i.e. Operations, Finance, Human Resource (HR), and Sales & Marketing. The operation function is responsible for managing all activities that are directly linked to creating products or services. Wherein, the rest functions fulfill the necessary requirement for the smooth running of business operations.
So, we can say that operations management includes designing, managing, and improving those systems that produce goods or services in an organization; in order to achieve efficiency and effectiveness in using resources of the organization up to a maximum extent. This consists of the effective management of equipment and machinery, materials, technology, and workforce to produce products and services of superior quality.
Operation management ensures the proper management of all the above elements in different stages of production i.e. strategic planning, implementation, supervision of production, and final evaluation of output. This facilitates an organization to earn better profits and gain a competitive advantage over its competitors.
According to Joseph G. Monks, Operations Management is defined as “the process through which a defined system’s resources are merged and converted in a controlled way in order to provide value-addition as per the policies conveyed by management”.
Operation management manages the whole production or service-related system which includes a transformation process to convert input (raw material, machinery, labor, etc.) into outputs (finished goods or services).
Activities that are involved in operations management include both tactical and strategic activities. For example, strategic decisions related to the location and size of the manufacturing unit, R&D levels, etc. are required at the senior management level. Wherein, supervisors, and managers mostly deal with tactical aspects such as layout, structure, and design of manufacturing unit, selection, and replacement of equipment.
2. Operations Management and Strategy
Operations management which is considered an important function of any business utilizes resources in an effective way to provide deliverables. To enhance operational efficiency, all functions and other elements such as technology, equipment, finance, marketing, HR, information, etc. are supposed to be aligned together to get a more competitive advantage. So, operations management in an organization should be aligned with strategies that are compatible with the overall business strategy of an organization.
Let’s see first what the strategy is and how strategy and operations are inter-linked. Strategy can be seen as a plan to obtain an objective and operations can be viewed as the medium to achieve them. Both planning and coordination are involved in operations management. From a strategic point of view, this required planning for long-term and organizing work.
Competitiveness is the main element of all types of strategies. To achieve the overall corporate strategy, integration of different management functions including operations management is required. High productivity can be achieved through flexible strategies and a compatible production process. This also helps in satisfying the requirements of customers. Operation level strategies in any organization cover different main strategies such as corporate strategy, market analysis, product or process design, competitive capabilities, and priorities, etc.
Basic Elements of Operations Strategy
Time and quality are considered basic components of operations strategy. These factors are described below in detail:
Time: This aspect is related to the timely delivery of products or services to meet the expectations of customers. In a global business environment, the timelines of developing and marketing new products are becoming crucial. So, to grow the business, the time required at each stage in operations needs to be shortened. Different elements that are supposed to be reduced during operations are planning time, designing time, processing time, delivery time, time involved in providing a response to customer complaints, etc.
Quality: This element or component is the driving force for any business as customers always look to buy any product or service based on the value of the money they are investing in. Customers are often ready to buy products of high quality at a high price even. So, quality is also one of the main factors of operations strategy.
2.1) Process of Strategic Management
The top management takes different decisions that result in a business strategy. This provides an outline for the optimum utilization of resources that are specifically meant for achieving the objectives of an organization. Strategic management also includes formulating and designing action plans with timelines, the hierarchy of authorities, and mechanism for feedback. This also includes considering different situations that may arise such as the likely consequences and contingency plans if any such situation arises.
For example, a production or marketing strategy can be formulated in order to increase the production of a product and decrease the price of that product. This strategic decision may be taken to meet the increasing demand of customers, enter into niche markets, etc. To meet the long-term objectives as defined by business strategy is the operations strategy’s main goal.
2.2) Decision-making from a Strategic Point of View
Decision-making is the most important factor of all functions of management including operations management. This includes different tasks such as data collection, data analysis, and prediction of outcomes. The quality of decisions is affected by data accuracy and the relevance of data. Other factors that influence strategic decision-making include environmental scanning, core competencies of an organization, etc.
2.3) Differentiation Strategies
The process that differentiates an organization from its competitors and the offerings (products and/or services) of competitors is termed as a differentiation process. This process consists of different elements that act as differentiators in providing value addition to the customers and to make the offerings of an organization profitable.
3. Tools for Implementing Operations
Operations may include different functions of an organization such as finance, marketing, purchase, logistics, materials, administration, etc. because all of these functions include different types of inputs i.e. raw materials or any other information. Transformation processes are required in these to convert the input into a usable output.
There is a specialized set of techniques or tools that are useful for easy implementation of operations.
3.1) Implementing Operations
To execute the operations that are already planned is termed as the implementation of operations. This includes both functions i.e. planning and control. The process of planning consists of estimating, scheduling, routing, etc. Wherein, controlling function includes dispatching and expediting.
Estimating: This is the estimation of quantities to be produced at each workstation. This is based on the sales forecasting, purchased quantities, services that are outsourced, estimated shortfalls, etc.
Routing: This includes the operation sequence and the machines associating with them. The purpose of routing is to smooth the workflow that results in minimum inventory.
Scheduling: This is mainly related to the allocation of time slots for various jobs. Scheduling indicates the starting and ending time of jobs at different workstations. Its main aim is to protect any imbalance that occurred in work centers and utilization of labor hours to maintain lead times that are already established.
Dispatching: Moving materials along with fixtures and tools to particular workstations or machines come under dispatching. This also ensures inspections at particular nodes for the purpose of moving materials in the supply chain.
Expediting or follow-up: This includes ensuring all processes mentioned above are being executed properly. This also ensures the generation of reports and removal of any bottleneck.
3.2) Tools for Implementation
For successful completion of any project, a great number of activities need to be controlled to ensure their timely completion. In this scenario, Gantt charts are considered. In Simple words, the Gantt chart is a bar chart that represents a project’s tasks scheduled over a particular time in visual form.
Gantt charts are used to visualize the work, timings, and sequence. These are further useful in recording progress by making a comparison of actual v/s planned activities and to track material flow. Gantt charts include bar graphs that are horizontally aligned on time scales. In operations, these charts are utilized to plan projects of various sizes and highlight the tasks, events, or activities related to a project on a specific time schedule or timescale. All types of projects can be planned through Gantt charts irrespective of the industry or size of the project. Both the start and end dates of a particular project can be viewed in a single simple visual form.
Line of Balance and Line Balancing
Two other tools i.e. Line of balance and Line balancing ensure uniformity of machine centers in order to protect stocks at intermediate levels. There are simulation models that predict the usage of production levels and machines.
-Line of Balance
A management control process that is used for the purpose of collecting, presenting, and measuring facts based on time, cost, and further accomplishing all measures as per a particular plan; is termed as Line of Balance (LOB).
It states different aspects related to project activities such as status, process, timing background, phasing, etc. Line of Balance is considered a graphical device through which a manager is able to view operational activities that are in-balance. For example, it overseas whether different activities that are supposed to be completed at a certain review time, are actually completed or not. It also checks the activities that are running behind the schedule.
The line of Balance technique is based on manual planning and scheduling. It is useful in determining the process of production on the percentage basis of completion of tasks. One crucial factor of this technique is that it works mainly for a job’s crucial or critical operations. It is mainly utilized where large batches are there of complex items that require a lot of operations and need to be finished over a certain time.
To level the workload in all operations in a manufacturing unit in order to demolish excess capacity or any bottlenecks is termed as line balancing. The line consists of different work stations of different tasks. Line balancing is considered a useful tool in production and operations management. This strategy stretches the production lines so that both internal and external indiscretion can be absorbed.
For example, let’s say a production line in a manufacturing unit consists of a, b, and c workstations. Each machine at these workstations can produce 300 items, 200 items, and 150 items in an hour at a, b, and c workstation respectively. In a case where each machine is supposed to produce only 150 items in an hour, then, idle machines would be a and b and these machines have to be idle each hour for 30 and 15 minutes respectively. This type of layout is called an unbalanced layout and balancing is required by the production line in such a situation.
Inventory models are there to facilitate determining the right time to order and the right quantity to order. Inventory is also termed as stocks of raw materials and goods.
The inventory model is considered a mathematical model that businesses use to determine the optimum level of stocks (inventory) that is required to be maintained during the process of production. This also includes other activities such as decisions related to the quantity of raw materials or goods, management of order frequency, ensuring the flawless supply of the stock in order to handover uninterrupted goods or services to customers, and on-time delivery.
Inventory model is mainly of two types:
-Fixed Reorder Quantity System
In this type of inventory model, once the level of inventory goes down than a re-set fixed quantity then an alarm is raised. To meet the demand and to achieve the optimum level of the inventory, new orders are generated. There is a Reorder point to order inventory for restoration. The quantity of inventory at this point is known as Reorder Level and the term Order Quantity is used for a new inventory-related quantity that is ordered.
-Fixed Reorder Period System
To manage inventories, this inventory model system is utilized. In this system, after a fixed time period, an alarm is raised. Further orders are generated for the restoration of the inventory to obtain optimum level as per the demand. Restoration of inventory is considered a continuous process as it is done in periodic intervals.
Different ERP and SAP software are available that consist of various modules to store, analyze, and sort data. This data is then available to the workforce in different manufacturing units that enables managers to smooth their operations.
4. Industry Best Practices
Over the years, different industries would have developed and improved their products, services, and processes. This development would have demanded changes in materials and processes as well. Products and services have to go through certain constant changes in terms of both their features and the way they are configured because they serve the requirement of customers that is an ever-changing process. Research & development has also created the need for improvement in materials and methods.
The latest techniques would be absorbed by new companies, so innovation would be the key to success and stay in business for already established organizations. These practices when refined in a much better way would lead to industry best practices. These practices initiated benchmarking by organizations.
-Best Practice Benchmarking
Benchmarking is considered a process that is used to compare the performance measures and processes of a business to the best practices used by other superior companies based on elements such as time, quality, cost, etc.
This is also termed as process benchmarking or best practice benchmarking. Organizations use this concept in their management practices to evaluate different areas of their processes as per the processes of best-practice companies.