Operation Management - Introduction

 Operation Management is a part of management sciences. Operation Management is

concerned with the production of quality goods and services and ensures that the business
operations are performed smoothly, efficiently and effectively.
 It is a field of management that deals with effective planning, scheduling, use and control of
a manufacturing or service organization.
 Operations management is the business function that plans organizes, coordinates and
controls, the resource needed to produce a company’s goods and services.
 Operations Management is the process whereby resources, flowing within a defined system,
are combined and transformed by a controlled manner to add value in accordance with
policies communicated by management.

Operation Management – Definitions

According to S.Buffa ‘production or operation management deals with decision making related to
production process so that the resulting goods and services are produced according to
specifications, in the amount and by the schedule demanded and at a minimum cost’.
The Association of Operation Management defines operation management as ‘the field of study
that focuses on the effective planning ,scheduling, use and control of manufacturing or service
organizations through the study of concepts from design engineering, industrial engineering, MIS,
quality management, production management, industrial management and other functions as they
affect the organization’.
Operation management is the business function that manages that part of a business that transforms
raw materials and human inputs in to goods and services of higher value. Operation management is
a business activity that deals with the production of goods and services. The term operation
includes management of materials, machines, and inventory control and storage functions.
Operations management includes a set of activities performed to manage the available resources in
an efficient manner in order to convert inputs in to desired outputs.
The value addition to an input can be done in the following ways. They are mentioned below:
1.Alteration
It refers to the transformation of the state of input. This transformation can be a physical change in
the input to produce goods.
2.Transportation
It refers to physical movement of goods from one location to another.
3.Storage
It refers to preserving goods in a protected environment.
4.Inspection
It refers to the verification of and confirmation towards the requirements of an entity.
All the above activities in one way or another are making a product more useful. The operations
managers have the prime responsibility for processing inputs into outputs. They must bring
together the materials, capacity and knowledge available for the purpose achieving its production
objectives. The definition of the operations Management contains the concepts such as Resources,
Systems, transformation and Value addition Activities etc. A brief explanation about such words is
given below:
1.Resources
Resources are in the forms of the human, material and capital inputs. Human resources are the key
resources of an organization. By using the intellectual capabilities of people, managers can
multiply the value of their employees. Material resources are the physical inputs, which are needed
for production.
2.Systems
Systems are the arrangement of components designed to achieve objectives. The business systems
are subsystem of large social systems. Business system contains subsystem such as personnel,
engineering, finance and operations. The ability of any system to achieve its objective depends on
its design and control mechanism. System design is a predetermined arrangement of components. It
establishes the relationships between inputs, transformation activities and outputs in order to
achieve the system objectives. System control consists of all actions necessary to ensure that
activities conform to preconceived plans.
3.Productivity
The objective of combining resources is to transform the inputs into goods and services having a
higher value than the original inputs. The effectiveness of the production factors in the
transformation process is known as productivity. The productivity refers to the ratio between
values of output per work hour to the cost of inputs.

Nature of Production
Among all the functional areas of management, production is considered to be crucial in any
industrial organisation. Production is the process by which raw materials and other inputs are
converted into finished products. The other word synonymously used with production is
manufacturing. Some people try to draw distinction between the two terms: production and
manufacturing. Manufacturing is understood to refer to the process of producing only tangible
goods, whereas production includes creation of both tangible goods as well as intangible services.
Though distinction of this type is sought to be made, we use the terms production and
manufacturing synonymously in this book.
Nature of production can be better understood if we view the manufacturing function from three
angles: production as a system, production as an organisational function and decision making in
production.

Production as a system

A system is understood as a whole which cannot be taken apart. It must be studied as a whole.
While looking from this perspective, we may note that there are three systems:

(i) production system,

(ii) conversion sub-system, and

(iii) control sub-system.

Production System:

A system whose function is to convert a set of inputs into a set of desired outputs.

Conversion Sub- System:

A sub-system of the larger production system where inputs are converted into outputs.

Control Sub-system:

A sub-system of the larger production system where a portion of the output is monitored for
feedback signals to provide corrective action if informed.

Production system receives inputs in the form of materials, personnel, capital, utilities and
information. These inputs are changed in a conversion sub-system into desired products and
services, which are called the outputs. A portion of the output is maintained in the control sub-
system to determine if it is acceptable in terms of quantity, cost and quality. If the output is
acceptable, no changes are required in the system. If, however, the appropriate standards are not
met, managerial corrective action is required. The control sub-system ensures a uniform level of
system performance by providing feedback information so that corrective action may be taken by
managers.

The historical development of Operations Management (OM)

It involves the evolution of principles, practices, and methodologies aimed at improving the
efficiency and effectiveness of business operations.

Craft Production Era (Pre-Industrial Revolution):

 Craftsmen were responsible for the entire production process.

 Small-scale production with limited standardization and specialization.

Industrial Revolution (Late 18th to 19th centuries):

 Introduction of machinery and mass production.

 Frederick Taylor's Scientific Management principles emphasized efficiency through time

and motion studies.

 Focus on division of labor, standardization, and specialization.

Human Relations Movement (1920s-1930s):

 Elton Mayo's Hawthorne Studies highlighted the importance of human factors in

productivity.

 Recognition of the social and psychological aspects of work.

 Shift towards employee satisfaction and motivation.

Post-World War II Era:

 Total Quality Management (TQM) emerged, emphasizing quality control and continuous
improvement.

 Operations Research (OR) techniques were applied to improve decision-making and

optimize processes.

 Japanese approaches like Lean Manufacturing and the Toyota Production System gained
prominence.

Information Age (Late 20th Century):

 Adoption of computer technology for process automation and control.

  Development of Material Requirements Planning (MRP) and later, Enterprise Resource
Planning (ERP) systems.

 Integration of information systems to streamline supply chain processes.

Globalization (Late 20th Century Onward):

 Operations expanded beyond national boundaries, leading to global supply chains.

 Increased focus on supply chain management, logistics, and distribution networks.

 Emphasis on flexibility and responsiveness to market demands.

Lean Manufacturing and Six Sigma (Late 20th Century Onward):

 Lean principles, derived from the Toyota Production System, focused on eliminating waste
and improving efficiency.

 Six Sigma, developed by Motorola and popularized by companies like General Electric,
aimed at reducing defects and variation in processes.
Digital Transformation (21st Century):

 Integration of Industry 4.0 technologies, such as the Internet of Things (IoT), artificial
intelligence, and big data analytics.

 Smart factories and the use of advanced technologies to optimize operations.

 Increased emphasis on sustainability and environmental considerations in operations.

Agile and Flexible Operations (21st Century):

 Emphasis on agility and flexibility in responding to rapidly changing market conditions.

 Use of agile methodologies from software development applied to broader business

operations.

 The historical development of Operations Management reflects a continuous effort to

enhance efficiency, quality, and adaptability in response to changing economic,
technological, and organizational environments.

Operation Management – As a Transformation Process

Operation is concerned with the transformation of inputs into the required output or services. Management is the
continuous process, which combines and transforms various resources used in the operations system of the organization
into value added services.
Operation Management is the set of interrelated management activities, which are involved in manufacturing of certain
products or services.

Objectives of Operations Management

The objectives of the operations management are given below:

1. Right Quality: Quality is the important factor, which should be considered at the time of
manufacturing process. All efforts should be taken to ensure the quality of the
manufactured goods.
2. Right Quantity: The manufacturing organization should produce the goods in right
number. If they are produced in excess of demand the capital will block up in the form of
inventory. If the quantity is produced in short of demand, it leads to shortage of products.
3. Timeliness: Timeliness of delivery is one of the important factors to judge the
effectiveness of production department. The production department has to make the
optimal utilization of resources to achieve its objectives.
4. Low Manufacturing Cost: Manufacturing costs are determined before the product is
actually produced. Hence, all attempts should be taken to produce the products at pre-
established cost so as to reduce the variation between actual and standard cost.
Scope of Operations Management
As stated earlier, Operations Management is concerned with the conversion of inputs into outputs using physical resources
so as to provide the desired utilities to the customers. It involves a number of well planned activities.
Following are the activities that come under Production and Operations Management functions:

1. Location of facilities.

2. Plant layouts and Material Handling.

3. Product Design.

4. Process Design.

5. Production and Planning Control.

6. Quality Control.

7. Materials Management.

8. Maintenance Management

1. Location facilities

Location of the proposed factory building is an important consideration in operation management. It is an important
strategic level decision-making for an organization. It deals with the questions such as ‘where our main operations should
be based?’ The selection of location is a key-decision because large amount of investment is required in building plant and
machinery. An improper location of plant may lead to waste of all the investments made in plant and machinery. Hence,
location of plant should be based on the company’s future plan about expansion, diversification, nature of sources of raw
materials and many other factors. The very purpose of the location study is to identify the optimal location facility that will
results in the greatest advantage to the organization.

2.1. Plant layout

Plant layout refers to the physical arrangement of facilities. It is the configuration of departments, work centres and
equipment’s in the inputs conversion process. The objective of the plant layout is to design a physical arrangement that
meets the required output quality and quantity most economically. According to James More ‘Plant layout is a plan of an
optimum arrangement of facilities including personnel, operating equipment, storage space, material handling equipment
and all other supporting services along with the design of best structure to contain all these facilities’.
 2.2. Material handling

Material Handling refers to the moving of materials from the store room to the machine and from one machine to the next
machine during the production process. It is the art and science of moving, packing and storing of products in any form.
Material cost can be reduced by judicious selection of materials and its proper storage. Material handling devices increases
the output, improves quality, speeds up the deliveries and decreases the cost of production. Hence, material handling
should be a prime task in the designing of new projects.

3. Product design

Product design deals with conversion of ideas into reality. Every business organization has to design, develop and
introduce new products as a commercial strategy. Developing the new products and launching them in the market are the
biggest problems faced by the organizations. The entire process of need identification to physical manufactures of product
involves three functions - Design, Product Development, and manufacturing. Operation management has the responsibility
of selecting the processes by which the product can be produced.

4. Process design

Designing of manufacturing process is another functional area of operation management. It deals with how the process
required to produce a product is selected. These decisions encompass the selection of a process, choice of technology,
process flow analysis and layout of the facilities. The major consideration in process design is to analyze the workflow for
converting raw materials into final products.

 Production Planning and Control

Production planning and control can be defined as the process of planning the production in advance, setting the
exact route of each item, fixing the starting and finishing dates for each item, to give production orders to shops and to
follow-up the progress of products according to orders. The principle of production planning and control lies in the
statement ‘First Plan Your Work and then Work on Your Plan’. Main functions of production planning and control include
Planning, Routing, Scheduling, Dispatching and Follow-up.
Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning bridges the gap from
where we are and to where we want to go. It makes it possible for things to occur which would not otherwise happen.
Routing is the process of selection of path, which each part of the product will follow. Routing determines the most
advantageous path to be followed for department to department and machine to machine till raw material gets its final
shape.
Scheduling determines the time programme for the operations. Scheduling may be defined as the fixation of time and date
for each operation as well as it determines the sequence of operations to be followed.
Dispatching is concerned with the starting the processes. It gives authority so as to start a particular work, which has been
already been planned under Routing and Scheduling. Therefore, dispatching is the release of orders and instruction for the
starting of production.
Follow-up is the process of reporting daily progress of work in each shop in a prescribed proforma and to investigate the
causes of deviations from the planned performance and to take necessary actions.

5. Quality Control

Quality Control may be defined as a system that is used to maintain a desired level of quality in a product or service. It is a
systematic control of various factors that affect the quality of the product. Quality Control aims at prevention of defects at
the source, relies on effective feedback system and corrective action procedure. Quality Control ensures that the product of
uniform acceptable quality is manufactured. It is the entire collection of activities, which ensures that the operation will
produce the optimum quality products at minimum cost.
The main objectives of Quality Control are:

 To produce qualitative items

 To reduce companies cost through reduction of losses due to defects.

 To produce optimal quality at reduced price.

 To ensure satisfaction of customers with productions or services or high quality

level, to build customer good will, confidence and reputation of manufacturer.
 To make inspection prompt to ensure quality control.

 To check the variation during manufacturing.

6. Materials Management

Materials Management is that aspect of operation management function, which is concerned with the acquisition, control,
and use of materials needed and flow of goods and services connected with the production process. The main objectives of
Material Management are given below:

 To minimize material cost.

 To purchase, receive, transport and store materials efficiently.

 To reduce costs through simplification, standardization, value analysis etc.

 To identify new sources of supply and to develop better relations with the suppliers.
  To reduce investment made in the inventories and to develop high inventory
turnover ratios.
7. Maintenance Management

Equipment and machinery are very important parts of the total production system. Therefore, their efficient usage
is very mandatory. It is very important to see that the organization maintains plant and machinery properly. The
main objectives of Maintenance Management are given below:

 To reduce breakdown of machineries

 To keep the machines and other facilities in a good condition.

 To ensure the availability of the machines, buildings and services required by

other sections of the factory also.
 To keep the plant in good working condition.

Objectives of Operation Management

Operation Management involves management of the entire process responsible for converting
inputs into outputs. The following are the objectives of Operations Management.

1. To provide customer service

The main objective of any operating management systems is to utilize resources judiciously
for the satisfaction of customer needs and wants. Therefore, customer satisfaction is a key
objective of operations management. Operation management focuses on providing the right
products at a right price at the right time. Hence, this objective will influence the operations
manager’s decisions to achieve the required customer service.

2. Effective utilization of resources

Resources that are used in the business organization must be carefully utilized. Inefficient use
of resources or inadequate customer service leads to commercial failure of an organization.
Operations management is concerned essentially with the utilization of resources. It aims at
obtaining maximum output from the available resources with minimum cost.

3. To reduce cost of production

Operation management aims at reduction in the cost of production of goods and services. The
cost per unit of the product has to be set properly and all efforts should be taken to control the
actual cost to pre-determined cost of production. Cost can be classified in to fixed cost and
variable cost. The variable cost changes with every level of production. This variable cost can
be checked by means of inventory and labor control techniques.

4. To improve product quality

Quality control and maintenance are the two important objectives of operations management.
Quality control consists of all those activities, which are designed to define, maintain and
control specific quality of products within reasonable limits. It is the systematic regulation of
all variables affecting the goodness of the final product. In other words, quality control
involves determination of quality standards and its actual measurement .It is necessary to
ensure that the established standards are practiced and maintained. It does not attempt to
achieve the perfect quality but to secure satisfactory or reasonable quality at a reasonable
level of cost.

5. To fix time schedule

Another important objective of operation management is to establish time schedule for

various operation activities. The schedule fixation includes the operating cycle time,
inventory turnover rate, machine utilization rate, capacity utilization etc..

6. Proper utilization of Machinery

Operation management has to take number of decisions with regard to machinery and
equipment. New machines should be installed and the old machines are to be replaced. It has
to ensure judicious utilization of machinery and equipment.

7. Material control

Based on the sales forecast and production plans, the materials planning and control is done.
This involves estimating the individual requirements of parts, preparing materials budget,
forecasting the levels of inventories, scheduling the orders and monitoring the performance in
relation to production and sales.

Relationship of Operation Management with other Functional Areas

An organizations function can be broadly divided into:

1. Finance

2. Operation

3. Marketing
Operation as a function of management has relationships with marketing, finance,
engineering and other functional areas. Finance department is concerned with securing
adequate financial resources for the organization and its proper utilization. Allocation of the
financial resources throughout the organization is the major function of finance department
including operations department. Marketing department is responsible for identification of
needs and wants of the prospective customers and developing a suitable marketing plan.

In short, operation is a key activity in an organization, which is linked with marketing and
financial activities. For the successful functioning of the organization, co-operative actions of
all section of the organization are needed. All functional departments have to work together.
Here, operational management is central to the functioning of all other parts of organization.
There should be functional collaboration among different departments. For this purpose
information sharing between these departments is essential. In short operation management is
the business function that plans, organizes, coordinates, and controls the resources needed to
produce a company’s products and services. For ensuring this, the co-operation and support
from all other department of the organization are essential.

Material handling equipment

The material handling is an important activity in the operations system. The speed of the
material flow across the supply chain depends on the type of the material handling equipment
is used. In the logistics operation the material handling system is designed in and around the
warehouse. The various operation activities like the unloading of incoming material from
transport equipment, moving the unloaded material to the assigned storage place, lift the
material from its storage place during order picking, move the material for inspection and
packing, and load the packages on to the transport vehicle. These operations are performed
using manual, mechanized controlled material handling equipment’s.

The following are some of the material handling equipment’s commonly used

1. Lifting Equipment

Lifting and transport equipment is used to move product around the production facility, from
loading bay to storage, from storage to production, around production, from production to
storage, and from storage to loading bay. Equipment that falls into this category is fork lift
trucks, order picking trucks etc..

2. Storage Equipment
Storage equipment is used to store materials, components and assemblies. The level of
complexity of this type of equipment is wide ranging, from a welded cantilever steel rack to
hold lengths of stock materials to a powered vertical carousel system.

3. Automated Handling Equipment

Manufacturers of automated handling equipment produce automated guide vehicles, storage

and retrieval equipment and product sortation equipment. The level of automation varies
depending on the handling requirements. Fully automated handling systems ensure that the
materials are delivered to the production line when required without significant manual
intervention.

4. Robotics

The usage of Robotics applications and versatility has increased dramatically. In

manufacturing applications, robots can be used for assembly work, process such as painting,
welding, etc. and for material handling. More recently robots are equipped with sensory
feedback through vision and tactile sense.

Manufacturing and Non-Manufacturing Operations

On the basis nature of operations the organizations can be divided into:

1. Manufacturing organizations

2. Non-manufacturing organizations

The following are the differences between manufacturing organizations and non-
manufacturing organizations:

1. Manufacturing organization produces the goods that are tangible in nature. On the
other hand service organizations render service to the customers instead of tangible products.

2. The products of manufacturing units can be stored in physical form. But the products
of non- manufacturing organization cannot be stored.

3. In manufacturing organization, most of the customers have no direct contact with the
operations. On the other hand, in the case of service organizations the customers are present
during the creation of the service.
Difference between Goods and Services

PRODUCTION OF GOODS VERSUS PROVIDING SERVICES

Although goods and services often go hand in hand, there are some very basic differences

between the two, differences that impact the management of the goods portion versus
management of the service portion. There are also many similarities between the two.

Production of goods results in a tangible output, such as an automobile, eyeglasses, a

golf ball, a refrigerator—anything that we can see or touch. It may take place in a factory,

but it can occur elsewhere. For example, farming and restaurants produce nonmanufactured

goods. Delivery of service, on the other hand, generally implies an act. A physician’s
examination, TV and auto repair, lawn care, and the projection of a film in a theater are
examples of

services. The majority of service jobs fall into these categories:

 Professional services (e.g., financial, health care, legal).

 Mass services (e.g., utilities, Internet, communications).

 Service shops (e.g., tailoring, appliance repair, car wash, auto repair/maintenance).

 Personal care (e.g., beauty salon, spa, barbershop).

 Government (e.g., Medicare, mail, social services, police, fire).

 Education (e.g., schools, universities).

 Food service (e.g., catering).

 Services within organizations (e.g., payroll, accounting, maintenance, IT, HR,

janitorial).

 Retailing and wholesaling.

 Shipping and delivery (e.g., truck, railroad, boat, air).

 Residential services (e.g., lawn care, painting, general repair, remodeling, interior
design).
  Transportation (e.g., mass transit, taxi, airlines, ambulance).

 Travel and hospitality (e.g., travel bureaus, hotels, resorts).

 Miscellaneous services (e.g., copy service, temporary help).

Manufacturing and service are often different in terms of what is done but quite similar in

terms of how it is done.

Consider these points of comparison:

Degree of customer contact. Many services involve a high degree of customer contact,
although services such as Internet providers, utilities, and mail service do not.

When there is a high degree of contact, the interaction between server and customer

becomes a “moment of truth” that will be judged by the customer every time the service
occurs.

Labor content of jobs. Services often have a higher degree of labor content than
manufacturing jobs do, although automated services are an exception.

Uniformity of inputs. Service operations are often subject to a higher degree of variability of
inputs. Each client, patient, customer, repair job, and so on presents a somewhat unique
situation that requires assessment and flexibility. Conversely, manufacturing

operations often have a greater ability to control the variability of inputs, which leads to

more-uniform job requirements.

Measurement of productivity. Measurement of productivity can be more difficult for

service jobs due largely to the high variations of inputs. Thus, one doctor might have a

higher level of routine cases to deal with, while another might have more-difficult cases.

Unless a careful analysis is conducted, it may appear that the doctor with the difficult

cases has a much lower productivity than the one with the routine cases.

Quality assurance. Quality assurance is usually more challenging for services due to the

higher variation in input, and because delivery and consumption occur at the same time.
Unlike manufacturing, which typically occurs away from the customer and allows mistakes
that are identified to be corrected, services have less opportunity to avoid exposing

the customer to mistakes.

Inventory. Many services tend to involve less use of inventory than manufacturing operations,
so the costs of having

inventory on hand are lower than they are for manufacturing. However, unlike manufactured
goods, services cannot be stored. Instead, they must be provided “on demand.” Wages.
Manufacturing jobs are often well paid, and have less wage variation than service jobs, which
can range from highly paid professional services to minimum-wage workers. Ability to
patent. Product designs are often easier to patent than service designs, and some services
cannot be patented, making them easier for competitors to copy.

There are also many similarities between managing the production of products and managing
services. In fact, most of the topics in this book pertain to both. When there are important
service considerations, these are

highlighted in separate sections. Here are some of the primary factors for both:

a. Forecasting and capacity planning to match supply and demand.

b. Process management.

c. Managing variations.

d. Monitoring and controlling costs and productivity.

e. Supply chain management.

f. Location planning, inventory management, quality control, and scheduling.

Note that many service activities are essential in goods-producing companies. These include

training, human resource management, customer service, equipment repair, procurement, and

administrative services.
A system Perspective
A System is a group of interrelated items in which no item studied in isolation will act in the
same way as it would in the system. A system is divided into a series of parts or subsystems,
and any system is a part of a larger system. The system's boundary defines what is inside the
system and what is outside. A system's environment is everything outside the system
boundary that may have an impact on the behaviour of the system. A system's inputs are the
physical objects of information that enter it from the environment and its outputs are the same
which leave it for the environment.

Systems view of operations management states that activities in an operations system can be
classified as inputs, transformation process and output. Inputs are classified into three general
categories-external, market and primaryresources.

Transformation resources are the elements that act on, or carry out, the transformation
process on other elements. These include such elements as labour, equipment/plant and
energy. The nature and mix of these resources will differ between operations. The
transformed resources are the elements which give the operations system its purpose and
goal. The operations system is concerned with converting the transformed resources from
inputs into outputs in the form of goods and services. There are three main types of
transformed resource of materials which can be transformed either physically (e.g.
manufacturing), by location (e.g. transportation), by ownership (e.g. retail) or by storage(e.g.
Warehousing)
These sub systems are present in all the 4 major sections. They are centrally controlled by the
Plant Management Office (PMO).The PMO controls the central decision making and is
responsible for running all the departments in sync. The PMO ensures that the decisions
made by the departments do not contradict and a healthy harmony is maintained so that all of
them work together as a part of a system.

Thus we see how systems view in operations can be put to a practical use. The idea behind
systems model is that the operations function can concentrate solely on transforming input of
raw material into goods and services without considering the external environment. The
systems view gives a very simplified view of the company and thus helps us in understanding
the basic processes in a company. We can see what are the major areas of attention in
accompany and helps us in understanding the hierarchy and layout of an organization.
However the disadvantages of this model includes the slowness of response to change in
environment as they are transmitted through various connected functions and the inability of
operations to develop in response of the needs of the customers. Systems view gives us an
oversimplified view. In real life the processes are much more complex and cannot be
differentiated so easily.

Capacity and Constraint Management

TOC systematically focus efforts, energy and attention on the "system constraint." This
constraint, or bottleneck, restricts the output of the entire system and at the same time
represents the primary leverage point for improving it. Simply put, TOC means identifying
constraints and managing them, resulting in:

• On-Time In-Full (OTIF) delivery to customers

 Elimination of stock-outs across the supply chain
• Better control over operations and far less firefighting
 Reduced cycle times and therefore inventories
 Rapid response culture and fewer chronic conflicts between team members
 Exposing additional production capacity without any investment
 Higher Net Profit, ROCE & Free Cash Flow

To accomplish this, TOC shifts the focus of management from optimizing separate assets,
functions and resources to increasing the flow of throughput generated by the entire system.
TOC's key processes are focused on removing barriers that prevent each part from working
together as an integrated whole.

Constraints are the Key to Unlocking Performance

Like the weakest link in a chain, every system must have a bottleneck or "CONSTRAINT”
which governs it's output. We know this because no system has infinite output ... if you check
the financial results of a company, you will never observe infinite profits! A particular type of
machine, employee, or even shelf space might serve as the constraint. So could supplies,
orders, or cash.

Constraints restrict output whether we acknowledge them or not. When properly identified
and managed, constraints provide the fastest route to significant improvement and form the
bedrock for continuous growth. When ignored, the constraint may lie idle, squandering large
amounts of capacity. An out-of-control constraint may also wreck havoc on delivery
schedules and cause unpredictable delays. It is therefore crucial for any manager to make the
most of their constraint and manage it well.

Functions of Operations Management

Global Strategy
Strategic management looks at the global supply chain and how well it is achieving the
organization's business objectives. Operations strategy looks at high-level performance
metrics / KPIs including:

Customer Satisfaction - Is the supply chain providing products and services that consumers
are satisfied with?

Marketshare - Do consumers choose these products and services over those produced by the
competition?

Profitability - Is the organization able to deliver these goods profitably?

Global operations managers then use business analytics to assess the performance of the
remaining 6 operations functions/processes and how well they are helping the organization
achieve these core goals.

Business strategies at the global level vary, but they may focus on sales targets, how to make
better use of human resources, or the best way to make use of raw materials in terms of less
waste and more money for the business.

Supply Chain Configuration

Essentially, it is the operations manager's job to ensure that the supply chain is properly set
up. From purchasing raw materials, through the production of the product, and even on to the
sale of the finished products to customers, these are all dominos that need to be positioned
correctly to ensure that every aspect of the supply chain is running correctly. This will
prevent delays and lead to faster production and quicker sales.

IT operations management, which involves managing the production systems within the
context of the organization's IT infrastructure, is another critical component of supply chain
and operations management.

Business operations managers oversee the integration and optimization of management

systems like enterprise resource planning (ERP), manufacturing execution systems (MES),
and manufacturing resource planning (MRP). They ensure that these information systems
work well together and support critical business processes.

Operations Management
Looking at the ops of a business involves considering all activities that are required to turn
raw materials or human efforts into a product or service that can ultimately be sold to
customers. This includes activities like production scheduling, production planning, and
control, capacity planning, assembly line configuration, materials management, and logistics
planning.

An operation manager is constantly looking to find ways to make operations run smoother by
eliminating bottlenecks. They often utilize management science techniques, like Six Sigma,
Agile, and Kanban to drive gains in day-to-day process efficiency.

Forecasting

Operations management is also in charge of forecasting, or simply put, predicting the demand
for the product in the future. Marketing operations and sales operations are an important input
into this process because planned marketing promotions and sales initiatives can dramatically
impact product demand.

Forecasting has a direct impact on production and is crucial to a business's success. Too many
products and a business will be left with storage costs and potential waste, too little, and a
business won't be positioned correctly to meet customer demand.

Finance

Being focused on finances in operations management is essential, not only for the profit of
the business but also in ensuring that the product supplied to customers is of a high standard.
The delicate balancing act between creating a good or service that is satisfactory to the
customer, but also allows for a fair profit for the business, is an essential part of operations
management.

Product Design

This is where operations management focuses on the way the product is designed. The most
important aspect here is to make sure that it suits market trends and is a durable product that
customers will favor. For example, customers are becoming increasingly concerned about is
how the production of a product affects the environment. An operations management team
might therefore design a product with a 'greener' state of mind to ensure that the production
of a product has less impact on the environment, making it more attractive to customers.

Quality Management
Quality management also comes under the umbrella of operations management. Here the
operations management may have a dedicated team that ensures consistency. They must
rectify any defects, ensure that the quality is consistent, and ensure that each product is ready
for sale.

Challenges in Operations Management

Operations management has various functions in an organization, including overcoming

challenges. Major challenges faced by the Operations Management team are discussed below.

Simplify and streamline business processes

Simplifying complex tasks, logically organizing processes, eliminating duplication and

streamlining the activities is a challenge operations team has to deal with. Weak and
inefficient systems increase costs and create delay in processing output. Identifying such
areas on a regular basis and making required process redesign is essential for performance
improvement. Streamlining the system in which business operates helps to lower problematic
process areas and facilitate managers to focus on more important and complex issues.
Optimization of business process aids smooth functioning of functional units resulting in
improved performance and quality.

Ensuring market stability

Market today is highly dynamic and demanding. Customized products based on personal
preferences of customers are preferred over mass-marketed products. Such changes and
accessibility to global markets through e-commerce have made customer preferences
unpredictable.

Globalization has paved way to fierce competition across boundaries. Global players try to
pitch in new unexplored geographical areas to market their goods to minimize risk and to
enjoy monopoly, making it hard for the local companies to survive. New trends keep
capturing the market on a regular basis. Operations management is bound to tackle this
challenge to develop new systems to accommodate variety outputs in minimum cost.
Managing resources

Efficient management of workforce, equipment and material towards delivering quality goods
with low operating costs forms the focus of operations management. However, administration
of these factors poses challenge to operations management. Managing an increasingly diverse
workforce, shortage of adequate skill supply, cost and availability of raw materials are
challenges to be met by the operations team. Internal conflict resolution that could flare up
between employees or departments also needs to be addressed. All these challenges come
under the operations team to settle without further escalations.

Technology advancement

Information technology is regarded as one of the significant enablers of business process and
techniques. Computer aided production units, automation software specific to functional units
help ease regular and repetitive tasks. Technology keeps evolving and the challenge is to
identify and invest in the right technology that is a best fit for the business. It can give the
business a competitive advantage and reduce operating costs.

Operations management need to make sure that the existing business processes are effective
and established to leverage optimal efficiency. Adopting technology without ensuring the
performance of existing systems could result in failure of implementation and loss of funds.
Integrating technology in a regular basis to stay updated is practically impossible for small to
medium sized companies. An exhaustive research on the pros and cons of adopting a new
technology should be done prior to investing in technology.

Satisfying customer expectations

Meeting changes in customer trends and preferences is the real change of today’s market.
Customers need more value for their money spent to be satisfied. The pricing and quality of
competitors create a real challenge for the operations team to stay ahead in the market. A new
product with an add-on feature invokes interest in customers than a regular product with the
same price tag. Many factors including technology, marketing strategies, innovative products,
brand value, and service quality are subject to regular changes in the current dynamic market.
Customer trends also change drastically based on these factors making it hard for operations
management to anticipate and deliver within the given infrastructure and support.

Change Management

Change is inevitable for any business to meet market dynamics, but managing change is a
huge challenge for the operations management team. Innovation, development and
operationalization continue as a cycle for performance improvement. Business processes
might need to be redesigned or restructured from time to time to optimize output.

However, adoption of new technologies and processes could lead to employee resistance as
employee’s view change as a threat to their jobs. Communicating, convincing and managing
resistance to change is a huge task. It is also challenging for the operations management team
to streamline activities where employees are reluctant to accept change.

Regulations and economic reforms

Policy regulations and economic reforms add to the hindrances faced by the operations team.
Policies enacted by Government governing business entities, economic reforms made in
taxes, subsidies and change in export import duties are some examples that makes it
necessary to align the business system within the new legal provisions. Such sudden changes
might pose a threat for the operations management to handle. They are also forced to decide
on pricing strategy based on market forces to thrive competition.

Reducing wastage and costs

Controlling and maintaining minimal resource wastage is a true challenge to operations

management. Weak and inefficient systems, underutilized workforce, inadequate control
mechanisms and complex long handoff processes result in resource wastage and high
operating costs. Operations management is responsible for the productive management of
costs and business wastage. Identification of wastage itself is a core challenge to the
operations department. Studies report this as one of the main reason for start-ups to fail.
Operations management should be competitive enough to recognize the activities that bring
value to the company and eliminate those that do not. Techniques through which operating
costs can be reduced should also be looked into to ensure sustainability.
Sustainability

Sustaining stable in the market makes any business successful in the long run. Internal and
external factors can cause turbulence in the smooth operations of an enterprise. Natural
calamities, global crisis like Covid pandemic situation, economic instability; all cause
uncertainty for a business. Such situations create constrained supply chain, disrupted
workforce availability, unstable markets and limited funds. Operations management has to
find ways to face this challenge by evolving new business models to sustain. They are
responsible to find solutions to retain market share and anticipate fluctuating demands to stay
stable amidst such crisis.

Current priorities of Operation Management:

As per an article published by the Wall Street Journal, on Oct 18, 2020, the average time
patients spend waiting to see a healthcare provider is 22 minutes, and some waits stretch for
hours. The report also noted that patient satisfaction dropped significantly with every five
minutes of waiting time. Therefore, time plays a major role in all sectors, from waiting in a
queue to the delivery of a product. So, let us discuss all methods below:

1. Time:

The first and fast delivery is the time elapsed between receiving a customer’s order and filling
it. It is often called as lead time.

An acceptable delivery time can be 2-3 days, weeks, or months if it was a complex and
customized machine.

That is to say, manufacturers can shorten delivery times by storing inventory. Service
providers can do so by having excess capacity.

2. Low-cost operation:

Lowering prices can increase the demand for the product or service. But it also reduces the
profit margin. However, if the production charges are high, lowering the retailing cost may
result in losses.

To compete based on cost, operation managers must address labor, materials, scrap, overhead,
and other costs to design a system. It lowers the per-unit cost of the product or service.

Often lowering costs needs additional investment in automated facilities and equipment.
3. High-Performance Product Design:

High-performance product design includes superior features, greater durability, helpfulness,

convenience, the safety of products, etc.

It determines the level of operations performed in making a product or performing a service.

4. Consistent Quality:

Consistent quality measures the frequency with which the product or service meets design
specifications.

Customers want products or services that consistently meet specifications they contracted,
expected, or saw advertised.

For instance, bank customers expect that the banks won’t make errors when recording
customer account numbers.

To compete on the basis of consistent quality, managers need to design and monitor
operations to reduce errors.

Moreover, it is increasingly expected by customers that you produce consistent quality in

your products or service.

A firm that does not have consistent quality doesn’t last long in a competitive global
marketplace.

5. Development speed:

Development speed measures how quickly you can introduce a new product or service. It
covers the time elapsed from idea generation to the final design and production.

Getting the new product or service to market is given a firm edge on the competition, which
is difficult to overcome in a rapidly changing business environment.

Moreover, development speed is especially important in the apparel industry. Many

companies focus on the competitive priorities of development speed and fast delivery time.

With time-based competition managers carefully define the steps and time need to deliver a
product or service, and critically each step to analyze whether time can be saved without
affecting quality.
Therefore, adopting a process where design engineers, manufacturers, marketers, quality
specialists work jointly to design a product or service.

6. Customization:

Customization is the ability to satisfy the unique needs of each customer by changing the
product or service designs.

However, products or services tailored to individual preferences may not have long lives.

For instance, a hairdresser works with the customer to design a hairstyle that may be unique
to the individual, but the life of that service may not be longer than a week.

In contrast, a customized tumbler may last for years. Customization typically implies that the
operating system should be flexible to handle specific customer needs and changes in deigns.

7. Production Flexibility:

Production flexibility is defined as the quick and easy to handle large production fluctuations
in terms of accelerating or decelerating the production rate.

Moreover, it is an important operating capability that often supports the achievement of other
competing priorities.

Recent Trends
1. Agile - The New Lean:

Agile methodology is an alternative to traditional project management, typically used in

software development. It helps teams respond to unpredictability through incremental,
iterative work cadences, known as sprints. Agile methodologies are an alternative to
waterfall, or traditional sequential development.

Considering individualization and growing complexity, the lean concept is, however, no
longer sufficient. Now and in the future, processes in the supply chain must rather be agile or,
more clearly, flexible and interactive, ensuring high-quality delivery results. To expand upon
Agile in the supply chain management model, agile supply chain management stands for the
ability to cope with unforeseen events through the use of lightning-fast decision making. The
implementation of this management approach requires more than just the commitment of
those involved. An additional technological component is essential and enables people to deal
with the unplannable.
Achieving agile leadership skills is actually more of a process than a supply chain trend.

2. Supply Chains will Look to Go Digital:

Digital technology is disrupting traditional operations and now every business is a digital
business. The impact on supply chain management is particularly great. Businesses cannot
unlock the full potential of digital without reinventing their supply chain strategy.

Many companies understand the elemental nature of these changes and are already working
to introduce digital technology into their operations. However, simply adding digital
technology is not the answer.

This approach overlooks the fundamental difference between traditional supply chains that
have been "digitally enhanced" and truly integrated, re-invented supply chains whose DNA is
fundamentally digital

For digital technology to create significant improvement in business outcomes, businesses

need to:

Reinvent their supply chain strategy

Re imagine supply chain as a digital supply network (DSN) that unites not just physical flows
but also talent, information and finance. This new breed of supply chain is more connected,
intelligent, scalable and rapid than traditional supply chain management. In a metaphorical
sense, the DSN enables people and data-as well as materials, products and supplies-to travel
together across the extended enterprise.

This is vastly different from digitally enhanced supply chains which (because they are never
stronger than their weakest links) have less potential to help companies:

Develop new synergies

Relate more fully to customers

Rapidly reach new markets and quickly build and scale new offerings
In today's global and connected economy, digital supply chains are the on-ramp to innovation
and success. And if you want to be among the winners, you need to get on the highway and
go fast. Start today by re-imagining your supply chain. Develop digital strategies that allow
you to proactively evolve ahead of the competition. Employ comprehensive solutions that
support the entire source-to-settle process and create value for all parties involved in it.

COMPUTER AIDED DESIGN AND MANUFACTURING

After the trend of Scientific Management and automation, the next big step was CAD/CAM.
These computer-aided operations meant that all the designing and manufacturing of the
product would be done with the help of computers making the operations way more efficient.
These systems immensely helped in new product development and redesigning the processes.

General Motors had its first brush with computer-aided systems in 1996 and ended up saving
time and money by using these systems. It helped the company launch new vehicles faster
and more efficiently by making the process much smoother.
SHRINKING PRODUCT LIFE CYCLE

In the past, product life cycle used to be comparatively longer and when a product was
introduced, it generally stayed in the market for a longer period of time. Now with the fast
expansion of technology, product life cycles have become short and almost every product
gets replaced by a new product in shorter time spans (Stevenson, 2005). Due to this reason,
companies are forced to introduce rapid development of new products with encouraging
innovation. This has provided a new challenge and requires redesigning of operations making
the process faster.

SUPPLY CHAIN MANAGEMENT

Supply Chain partners are required to be more in tune with the needs of the end users as a
result of shorter product life cycles, demanding customers, fast changes in technology,
material and processes. And because suppliers can contribute unique expertise, operations
managers are outsourcing and building long-term partnerships with critical players in the
supply chain.

MASS CUSTOMIZATION

In the past, there used to be large-scale standardized mass production to gain economies of
scale. Now with increased flexibility and competition, companies are forced to respond with
creative product designs and flexible production processes that cater to the individual whims
of consumers (Stevenson, 2005). The trend has now been changing towards customized
production of goods, whenever and wherever needed. This has led to change in the way
operations were designed earlier leading to better and more efficient processes.

EMPLOYEE ENVOLVEMENT

In the past, employees were treated as just another input to the production process where they
were treated more or less like machines and worker concerns were generally ignored. The
knowledge explosion and more technical workplace have combined to require more
competence in the workplace.

Operations managers now respond by moving more decision making to individual workers.
With the development of HRM alongside, firms tend to focus more on employee
empowerment, treating employees as resources that bring competitive edge to the firm.
Quality management training based on lean philosophy has been very popular recently,
making employee involvement an essential part of the improvement process.

GREEN MANUFACTURING

In the past, the focus of the production was aimed on obtaining resources at lowest possible
cost ignoring the damage made to the environment. Operations' managers now are
increasingly getting concerned with design of products and processes that are ecologically
sustainable. That means designing and packaging products that minimize resource use, are
biodegradable, can be recycled and generally environment friendly.

In other words, Green production has been seen as a recent trend in operations management
concerning ecological sustainability.

OPERATIONS TURNING LEAN

Interestingly, all the trends discussed above can boil down to the "Lean" philosophy. Be it
Sustainability or Mass Customization, both the trends are two different aspects of lean
operations. Businesses can lead to successful Sustainable Management, only by following a
part of lean philosophy: continuous improvement. In fact, Mass Customization has been
possible just because JIT, since it helps customise the products according to the customers'
needs or preferences without increasing costs or manufacturing time.

LEAN OPERATIONS - JUST IN TIME

JIT is a method of planning and control and an operations philosophy that aims to meet
demand instantaneously with perfect quality and no waste (Slack et al, 2007). Lean
Operations philosophy replaces the past methods of mass production where there were
batches of produced goods sold at mass, generating economies of scale. The recent trend in
operations management era has shifted this to Just in Time production where goods and
services are produced upon the receipt of order with customizations, resultant being a drastic
reduction of inventory cost.

Lean philosophy is based on the principle of moving towards the elimination of all the waste
in order to develop an operation that is faster, more dependable, produces higher-quality
products and services and above all, operates at low cost. An understanding of lean operations
can be developed through the phrase that is often used interchangeably with 'lean' - just in
time or sometimes lean synchronization. This is because apparently the means to achieve the
lean state are less easily explained and sometimes counterintuitive.