What is operations management?

Operations management (OM) typically involves overseeing business practices to optimize organizational efficiency. It generally transforms materials and labour into goods and services while maximizing an organization’s profit. Operations management teams often balance costs and revenue to attain the highest net profit possible.

Understanding operations management

Operations management aims to efficiently and effectively transform inputs (such as raw materials, labour, and technology) into outputs (goods and services) to meet customer demands while maximizing profitability and minimizing costs. It can optimize processes, resources, and systems to achieve organizational objectives and deliver customer value. This management process typically involves different strategies for various sectors, such as determining the scale of manufacturing plants, implementing project management methodologies, and establishing the structure of information technology networks. It can also include managing inventory levels, including buying raw materials and work-in-process, materials handling, quality control, and maintenance policies.

Managers often use various formulas, including the economic order quantity formula, to study raw material application and waste reduction. These formulas can help determine the best timing and quantity for inventory orders and manage appropriate inventory levels.

Operations management responsibilities

An operations manager typically has many responsibilities. Below is a summary of some of these duties:

Business forecasting

As your organization thrives, increased product demand can significantly influence company decisions. Operations managers are often responsible for forecasting potential business changes in response to market demands. They typically oversee factors such as seasonal bottlenecks, capacity planning, and production scheduling. By learning to monitor and analyze these business changes, operations managers can make informed decisions that optimize production scheduling and streamline company processes.

Supply chain management

A supply chain is the people, information, and businesses necessary to create a product. It can be beneficial when your product relies on external sources for raw materials, as these inputs can directly influence the manufacturing process. Operations managers typically acquire timely materials and leverage labour costs effectively to meet customer expectations. Careful monitoring of inventory levels can ensure that quantities are more than sufficient. Operations managers are also typically responsible for identifying vendors who can provide reasonably priced goods and deliver products as required.

Understanding product development

Product development generally refers to the entire design and implementation of a product for the end consumer. Operations managers may not directly oversee product creation, but it can be vital for them to understand the complete production process, including monitoring performance in the market. This knowledge can help business leaders make informed decisions, ensuring products align with and satisfy future customer demand.

Delivery management

Delivery management often involves ensuring that final products meet customer satisfaction standards. It can require understanding quality control processes, general assurance, and other quality management forms. Operations managers typically implement review workflows to maintain company standards, overseeing safe and efficient product delivery. This can include reviewing shipping logistics, packaging, and collaborating with customers. They can then distribute customer feedback to relevant departments for process improvements.

Skills of an operations manager

Operations managers often coordinate and develop new processes while re-evaluating current structures. They use innovation and versatility in their decisions, making productivity and organization two key drivers of their success. Operations managers generally require specific skills to achieve daily tasks and help grow your business. Below are some common competencies for operations managers:

• Organizational: Operations managers have in-depth knowledge of production systems, requiring meticulous information organization, such as reports, budgets, project files, and schedules. Strong organizational skills can also be important for managing personnel and materials, especially when sharing information cross-functionally.
• Analytical: This skill can include an aptitude in risk analysis and mitigation when implementing new projects. Operations managers often analyze processes to identify challenges and develop solutions.
• Eye for detail: Operations managers consistently monitor quality standards in manufacturing procedures, raw materials, delivery process, packaging, and the finished product.
• Decision making: Making quick and informed decisions, especially under stress, can be common in this role.
• Technology: While an operations manager may not require expertise in technology, understanding the fundamentals of a company’s technology can be beneficial.
• Social: Operations managers often engage with diverse people, from external service providers to the company’s COO. Effective communication, attentiveness to nonverbal cues, conflict resolution skills, leadership, and forging consistent partnerships with vendors can contribute to long-term business success.

Operations management methodologies

There is more than one way to manage business operations, with some general methodologies coming about through trial and error and testing theories. Below are some examples of some common operations management methodologies:

Business process redesign

Business process redesign (BPR) can involve studying and reshaping company workflows and processes to optimize efficiency, enhance profits, and minimize excess. Operations managers often use specific metrics tied to profitability to gauge the success of a BPR. To lead an effective business process redesign, consider establishing clear goals and identifying areas for improvement. After implementing your BPR, communicate with those involved and evaluate its effectiveness. For example, a team focusing on increasing daily product output can measure effectiveness by comparing daily pre- and post-BPR production numbers.

Six Sigma

Six Sigma is an operations management methodology developed in 1986 by American engineer Bill Smith at Motorola that focuses on process improvement. The term originates from the statistical quality control field, emphasizing a detailed approach to achieving high-quality products and efficiency. There are two primary Six Sigma methodologies: DMAIC and DMADV.

DMAIC optimizes existing processes and stands for:

• Define the system.
• Measure the key characteristics of the current processes.
• ​Analyze the data and validate the cause and effect.
• Improve the current processes.
• Control future processes.

DMADV, or DFSS (Design for Six Sigma), helps create new products or process designs. Its acronym stands for:

• Define your design goals and be consistent with customer demands.
• Measure and identify specific aspects critical to quality (CTQ).
• Analyze ideas to create alternatives.
• Design an improved alternative.
• Verify the design and initiate pilot runs.

Six Sigma incorporates tools and techniques from statistics, quality management, and process improvement methodologies to achieve its goals.

Lean manufacturing

Lean manufacturing is a procedure that systematically eliminates waste in the manufacturing process. Based on the Japanese philosophy of kaizen, this methodology leverages continuous improvement theory with lean processes that eliminate three types of waste:

• Muda (wastefulness): Actions that consume resources with no added value.
• Mura (unevenness): Producing more than required, leading to a build-up of waste.
• Muri (overburden): Putting too much pressure on resources, resulting in strain and inefficiency.

Just-in-Time (JIT)

Just-in-Time (JIT) is a production strategy focused on minimizing inventory and production lead times by producing goods only when needed. By reducing inventory levels and overproduction, JIT can reduce waste, lower costs, and improve efficiency. It can optimize production processes, leading to smoother operations and faster output. However, implementing JIT requires careful coordination with suppliers, reliable demand forecasting, and efficient logistics.

Reconfigurable manufacturing systems

A reconfigurable manufacturing system is a modular setup that allows for quick adjustments in response to sudden market changes, enabling companies to adapt to competitive pressures promptly. A significant benefit of this system is that it contributes to sustainability by producing products within the same category. For instance, during the COVID-19 pandemic, a textile company producing sustainable clothing could shift its operations to manufacture face masks in response to increased demand, showcasing the flexibility and adaptability of reconfigurable manufacturing systems.

Agile operations

Agile operations typically apply principles from agile software development to manufacturing and service industries, prioritizing flexibility, collaboration, and rapid response to customer demand changes. It emphasizes short-term goals and repeated tasks, enabling quick adjustments to evolving requirements. Cross-functional teams foster communication and cooperation, using their expertise to generate innovative solutions. With a customer-centric approach, organizations can adapt operations to meet changing preferences and market trends, staying ahead of competitors. Agile operations represent a shift towards decentralized workforces, enhancing agility, resilience, and competitiveness in diverse business environments.