Operations
management is
an area of business concerned with the production of goods and services, and
involves the responsibility of ensuring that business operations are efficient
in terms of using as little resource as needed, and effective in terms of meeting customer
requirements. It is concerned with managing the process that converts inputs
(in the forms of materials, labor and energy) into outputs (in the form of
goods and services).
Operations
traditionally refer to the production of goods and services separately,
although the distinction between these two main types of operations is
increasingly difficult to make as manufacturers tend to merge product and
service offerings. More generally, Operations Management aims to increase the
content of value-added activities in any given process. Fundamentally, these
value-adding creative activities should be aligned with market opportunity for
optimal enterprise performance.
According
to the U.S. Department of Education, Operations Management is the field
concerned with managing and directing the physical and/or technical functions
of a firm or organization, particularly those relating to development,
production, and manufacturing. Operations Management programs typically include
instruction in principles of general management, manufacturing and production
systems, plant management, equipment maintenance management, production
control, industrial labor relations and skilled trades supervision, strategic
manufacturing policy, systems analysis, productivity analysis and cost control,
and materials planning.
ORIGINS
The origins of Operations Management can be traced back through cultural
changes of the 18th, 19th, and 20th centuries, including the Industrial Revolution, the development of interchangeable manufacture, the Waltham-Lowell system, the American system of manufacturing, scientific management, the development of assembly line practice and mass
production, and the Toyota Production System. Combined, these
ideas allowed for the standardization and continuous improvement of production
processes. Key features of these early production systems were the departure
from skilled craftsmen to a more thorough division of labor and the transfer of
knowledge from within the minds of skilled, experienced workers into the
equipment, documentation, and systems.
A
comparison of the origins of operations management and operations research
reveals that both are an innovation of the 20th century. The origin of
operations research was in England, circa 1937, and has its roots in scientific
management, with its first significant applications to military operations in
both World War I and World War II. Operations management had its origins in the
early factory system, and was more associated with physical production in a
factory environment and it too was strongly influenced by the scientific
method. Operations management however, by way of distinction, is more commonly
applied to the management of organizational resources in terms of both
effectiveness and efficiency and has equal application in the service sector as
well as the manufacturing sector. Both OR and OM are mathematically oriented,
utilize the scientific method, and produce information output for managerial
decision making.
There
are scores of people who can be viewed as thought
leaders whose life's
work laid the foundations for operations management (only some of which have
name recognition among the general population). A very cursory list would
include (in approximate chronological order) Adam Smith, Jean-Baptiste Vaquette de Gribeauval, Louis de
Tousard, Honoré Blanc, Eli Whitney, John H. Hall, Simeon North, Frederick Winslow Taylor, Henry Gantt, Henry Ford, Sakichi
Toyoda, Alfred Sloan, Frank and Lillian Gilbreth, Tex Thornton and his Whiz Kidsteam,
and W. Edwards
Deming and the
developers of the Toyota Production System (Taiichi Ohno, Shigeo Shingo, Eiji Toyoda, Kiichiro
Toyoda, and others).
Whereas
some influences place primary importance on the equipment and too often viewed
people as recalcitrant impediments to systems (e.g., Taylor and Ford), over
time the need to view production operations as sociotechnical systems, duly
considering both humans and machines, was increasingly appreciated and
addressed.
Operations research as a subdiscipline gained prominence
during World War II, when mathematicians applied analytical tools to optimize
operational questions, initially with a military context, and later also within
general operations.
MANAGING
OPERATIONS
The Goal of Managing Operations is
to make a productive system that would transport resource inputs to create
useful goods and services as outputs.
An operation is
some step in the overall process of producing a product or service that leads
to the final output.
- Product
– Tangible things that we can carry away with us.
- Service
– Intangible and perishable and are consumed in the process of their
production.
FOUR BASIC CRITERIA FOR MEASURING THE
PERFORMANCE OF A PRODUCTIVE SYSTEM
1. Cost - In business, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is
not available for use anymore. In economics, a cost is an alternative that is given up as a
result of a decision. In
business, the cost may be one of acquisition, in which case the amount of money
expended to acquire it is counted as cost. In this case, money is the input
that is gone in order to acquire the thing. This acquisition cost may be the
sum of the cost of production as incurred by the original producer, and further
costs of transaction as incurred by the acquirer over and above the price paid
to the producer. Usually, the price also includes a mark-up for profit over the
cost of production.
2. Quality - Quality in business, engineering and manufacturing
has a pragmatic interpretation as the non-inferiority or superiority of something. Quality is a perceptual,
conditional and somewhat subjective attribute and may be understood differently
by different people. Consumers may focus on the specification
quality of a product/service, or how it compares to
competitors in the marketplace. Producers might measure the conformance quality, or degree to which the product/service was
produced correctly.
3. Supply Chain - A supply chain is a
system of organizations, people, technology, activities, information and
resources involved in moving a product or service from supplier to customer.
Supply chain activities transform natural resources, raw materials and
components into a finished product that is delivered to the end customer. In
sophisticated supply chain systems, used products may re-enter the supply chain
at any point where residual value is recyclable
4. Service - A service is the intangible equivalent of an economic good.
Service provision is often an economic activity where the buyer does not
generally, except by exclusive contract, obtain exclusive ownership of the thing purchased. The benefits
of such a service, if priced, are held to be self-evident in the buyers
willingness to pay for it. Public services are those society pays for as a
whole through taxes and other means.
By
composing and orchestrating the appropriate level of resources, skill, ingenuity, and experience for effecting specific benefits for
service consumers, service providers participate in an economy without the restrictions of carrying stock (inventory) or the need to concern
themselves with bulky raw materials. On the other hand, their investment in expertise does require consistent
service marketing and upgrading in the face of competition which has equally few physical
restrictions. Many so-called services, however, require large physical
structures and equipment, and consume large amounts of resources, such as
transportation services and the military.
Providers of services make up the tertiary sector of the economy.
SOURCES
Books:
Buffa,
Elwood S., et. al.Modern
Production/Operations Management. 8th ed. John Wiley and
Sons Publishing. 1994.
Journal:
Production
and Operations Management Journal, 2009.
World Wide Web Links:
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