Operations Management: Definition and Example

Operations management is critical in ensuring that a business's day-to-day operations run smoothly, efficiently and profitably. A company's chief of operations, or ops management team, work to optimise business process, increase productivity and reduce operational costs. In this article, we will cover the techniques for effective operations management and how a business loan can facilitate a successful operation.

What is operations management?

Operations management involves the planning, coordination, and control of processes and resources within an organisation to ensure efficient production of goods or delivery of services. It encompasses various functions such as production planning, inventory management, quality control, and supply chain management. Operations managers oversee these activities, striving to optimise productivity, minimise costs, and meet customer demands while maintaining quality standards. They employ strategies like lean manufacturing, Six Sigma, and Just-in-Time inventory management to streamline operations and enhance competitiveness. Effective operations management is crucial for achieving organisational objectives, improving efficiency, and delivering value to customers. Working capital cycle plays a vital role in maintaining smooth operations by ensuring adequate cash flow to meet operational needs.

What are the systems of operations management?

Today's competitive business landscape requires streamlined processes and efficient systems of operations management. The application of several key theories and methods such as Lean Manufacturing, Business Process Redesign (BPR), and Six Sigma can fundamentally transform how businesses operate leading to enhanced efficiencies and overall performance. Effective management of assets ensures optimal utilisation of resources to achieve operational excellence.

Lean Manufacturing is a methodology designed to identity and eliminate waste in all forms, such as overproduction, waiting times, unnecessary transportation, excess inventory, and underutilized talent. By optimizing operations and focusing on processes that add value, businesses can maximize customer satisfaction and profit margins.

The Business Process Redesign involves a thorough reevaluation and revamping of existing processes. This critical analysis leads to significant improvements in cost-efficiency, service quality, and speed of operations. BPR couples well with reconfigurable manufacturing systems that are designed to swiftly adapt to changes in production requirements through flexible hardware and software components, effectively responding to market fluctuations and demands.

Six Sigma is a statistical-based approach targeting near-perfect quality. By systematically measuring and reducing defects, organizations can significantly improve the quality of their products or services.

Critical components of operations management such as quality management, inventory management, project management, and supply chain management further bolster operational efficiency. Quality management ensures products or services meet defined standards and customer expectations. Inventory management optimises stock levels, balancing the need to meet demand without overstocking or understocking. Project management is all about efficiently using resources to achieve specific goals. Supply chain management ensures smooth coordination of activities from raw material acquisition to customer delivery.

As businesses continue to evolve and grow, modern theories and systems like lean manufacturing, inventory management, Six Sigma, and supply chain management, along with the practical application of management methodologies, can increase efficiency, reduce waste, and improve overall business performance. By utilizing these systems, organizations can strategically streamline their operations processes to adapt to market changes, enhance competitiveness, and drive sustainable growth.

What is the purpose of operations management?

The purpose of operations management is to ensure the efficient and effective utilization of resources within an organisation to achieve its strategic objectives. Operations managers oversee the design, planning, and control of processes involved in producing goods or delivering services. By optimising production processes, managing inventory levels, and enhancing supply chain efficiency, operations management aims to increase productivity, reduce costs, and improve customer satisfaction. Ultimately, operations management plays a critical role in enhancing organisational competitiveness, profitability, and sustainability by aligning operational activities with broader strategic goals and ensuring that resources are utilized in the most efficient manner possible.

Goals of operation management

The goals of operations management encompass various aspects aimed at achieving efficiency, effectiveness, and competitiveness within an organisation. These goals include enhancing productivity by optimising processes and utilising resources efficiently, reducing costs through improved inventory management and streamlined operations, ensuring quality by implementing rigorous quality control measures, meeting customer demands by delivering products or services on time and meeting quality standards, and fostering innovation by continuously improving processes and adopting new technologies. An effective strategy includes leveraging working capital efficiently to maintain a balance between operational needs and financial stability. Additionally, operations management seeks to enhance flexibility and responsiveness to market changes, maintain a safe and sustainable working environment, and contribute to the overall strategic objectives and long-term success of the organisation.

Importance of operations management

Operations management holds significant importance in ensuring the smooth functioning and success of an organisation. By effectively managing production processes, resources, and supply chains, operations management enables businesses to enhance efficiency, reduce costs, and improve customer satisfaction. It plays a vital role in meeting customer demands promptly, maintaining quality standards, and adapting to market changes swiftly. Furthermore, operations management fosters innovation, drives continuous improvement, and supports strategic decision-making. Ultimately, its effective implementation contributes to organisational competitiveness, profitability, and sustainability, making it a crucial function for achieving operational excellence and long-term success in today's dynamic business environment. Understanding the impact of a company's structure, such as whether it operates as a corporation, can also influence operational strategies.

Benefits of operations management

1. Efficiency enhancement: Operations management is pivotal in eliminating bottlenecks, redundancies, and inefficiencies in processes. This leads to more effective resource utilisation, smoother workflows, and improved time management. It ensures that businesses are running at maximum capacity, extracting the most value from their resources.
2. Cost reduction: Operations management helps businesses integrate cost-effective measures into their workflows. By highlighting wasteful activities, streamlining processes, and optimising resource use, significant cost savings can be realised. This positively impacts the business's bottom line, facilitating financial stability and growth.
3. Quality improvement: Operations management underscores the importance of quality control measures, standardisation, and process consistency. This helps maintain a high and consistent level of quality in products or services, improving customer experience and reducing costly errors or reworks.
4. Customer satisfaction: Emphasising efficiency and quality, operations management can significantly enhance the customer's experience. This leads to improved customer satisfaction, driving customer loyalty, repeat business, positive referrals, and a strong brand reputation.
5. Flexibility and adaptability: Operations management provides the groundwork for flexible and adaptative business strategy. By designing versatile processes and maintaining an agile approach to production or service delivery, businesses can rapidly adapt to changing market demands and unforeseen challenges with minimal disruption.
6. Competitive advantage: Enhanced efficiency, reduced costs, and improved quality lend businesses a competitive edge. Effective operations management means that businesses can deliver products or services faster, with superior quality and cost-effectiveness, outperforming competitors and gaining market share.
7. Strategic decision making: Operations management systems generate crucial data and insights that inform strategic decision-making. Understanding process performance, efficiencies, and costs helps management make data-driven strategic decisions, aligning short-term operations with long-term business objectives.
8. Innovation promotion: Operations management fosters an environment conducive to continuous improvement and innovation. This drives growth, keeps the business relevant, and facilitates adaptation to evolving market trends. Through innovation, companies can improve their product offerings, develop new business models, or find more efficient ways to deliver their products or services.

What is an example of operations management?

Operations management plays a pivotal role across various industries, including healthcare, where optimising processes is critical for effective patient care, resource allocation, and cost management. A compelling example of operations management in healthcare is evident in hospital management systems.

The objectives of operations management for an hospital may include enhancing patient satisfaction, reducing care delivery costs, and optimizing resource utilisation. One effective strategy is to streamline patient flow from admission to discharge using operations management techniques like process mapping and Lean Six Sigma. These methodologies identify inefficiencies and eliminate them, fostering efficient and patient-centric workflows.

Capacity planning is another crucial aspect of healthcare operations management. Hospitals must forecast demand accurately to avoid underutilisation or overutilisation of resources such as beds, equipment, and staff. Robust forecasting models enable proactive planning, thereby minimising costs and ensuring timely patient care.

Strategic resource management is integral to healthcare operations as well. This involves acquiring and managing resources like medical equipment, essential supplies, and scheduling healthcare professionals efficiently. Implementing robust inventory management systems ensures optimal stock levels, reduces waste, and maintains the availability of critical supplies, thereby enhancing overall patient care quality.

Quality management is paramount in healthcare operations. By implementing stringent quality controls, standardising processes, and continually monitoring performance, hospitals uphold high standards of care and patient safety.

What is operations strategy in operations management?

Operations strategy in operations management involves aligning the organization's operational capabilities with its overall business strategy to achieve competitive advantage and long-term success. It encompasses several key aspects:

• Alignment with business strategy: Operations strategy ensures that operational decisions and activities support the broader business goals, whether focused on cost leadership, differentiation, or market focus.
• Design of operations: This includes designing processes, technologies, and systems to maximise efficiency and effectiveness in delivering value to customers.
• Capacity and facilities planning: Operations strategy involves planning capacity to meet current and future demand levels and optimising facilities layout and location.
• Supply chain management: It encompasses decisions on sourcing, procurement, and managing the supply chain to ensure timely delivery and efficient inventory management.
• Quality management: Operations strategy focuses on maintaining and enhancing product or service quality through quality control measures and continuous improvement initiatives.
• Technology and innovation: It addresses the role of technology and innovation in improving operational efficiency, reducing costs, and fostering new product or service development.
• Performance measurement and improvement: Operations strategy defines KPIs and implements continuous improvement initiatives to enhance productivity and optimise processes.

Types of operations management

Objective

• Efficiently manage production processes to meet demand, minimize costs, and maintain quality standards.
• Ensure smooth flow of goods from suppliers to customers, optimizing inventory levels and reducing lead times.
• Deliver high-quality services to customers, meeting service level agreements and enhancing customer satisfaction.
• Successfully plan, execute, and monitor projects to achieve specific goals within defined constraints.
• Implement quality control measures to ensure products or services meet or exceed customer expectations.

Task

• Planning and scheduling production activities to optimize resources and meet production targets.
• Selecting suppliers, negotiating contracts, and managing logistics to ensure timely delivery of materials and products.
• Designing service delivery processes, allocating resources, and monitoring service performance to meet customer needs.
• Creating project plans, assigning tasks, and monitoring progress to ensure projects are completed on time and within budget.
• Implementing quality control processes, conducting inspections, and addressing quality issues to maintain product or service standards.

Individual employee

• Production managers oversee manufacturing processes, coordinate production schedules, and monitor production efficiency.
• Supply chain managers manage supplier relationships, monitor inventory levels, and optimize logistics operations.
  
• Service managers design service delivery processes, train service personnel, and resolve customer complaints.
  
• Project managers develop project plans, allocate resources, and coordinate project teams to achieve project objectives.
• Quality assurance managers implement quality control procedures, conduct audits, and train employees on quality standards.

Techniques for effective operations management

1. Developing a production plan: A good production plan helps in managing inventory efficiently, optimising the production process, and avoiding stockouts. This also assists in ensuring product consistency, timely delivery, and meeting customer demands.
2. Inventory management: Proper inventory management involves keeping track of stock levels in real-time, ordering inventory in a timely manner, and tracking stock to avoid overselling, running out of stock, and tying up cash flow. Efficient inventory management ensures a higher level of customer satisfaction and leads to an increase in repeat business.
3. Automation: Incorporating automated technology in daily operations increases efficiency and productivity in a business. By reducing reliance on manual processes, coordination, and timing, businesses utilise automation technology to free up staff for value-added tasks and improve operation performance.
4. Streamlining processes: Optimising processes such as internal communication, coordination, and processes, facility layouts, and inventory tracking improves efficiency and lower costs. Streamlining processes involves identifying the critical areas of the company's operation that require improvements, developing realistic improvement goals, and designing specific implementation plans to achieve them.

What are the main functions of operations management?

Planning

• Involves setting goals, defining objectives, and establishing strategies to achieve operational efficiency and effectiveness.
• Includes creating production schedules, forecasting demand, and allocating resources to meet production targets and customer demands.

Organizing

• Focuses on arranging resources such as manpower, materials, and equipment in an optimal manner to support production activities.
• Involves defining roles and responsibilities, establishing workflows, and creating organizational structures to facilitate smooth operations.

Controlling

• Encompasses monitoring performance against established standards, identifying deviations, and taking corrective actions as needed to ensure operations run smoothly.
• Includes implementing quality control measures, tracking production costs, and managing inventory levels to maintain efficiency and profitability.

Directing

• Involves guiding and motivating employees to achieve organizational objectives and meet performance targets.
• Includes providing leadership, training, and support to employees, as well as fostering a positive work culture to enhance productivity and morale.

Coordinating

• Focuses on aligning various departments and functions within the organization to work together cohesively towards common goals.
• Involves facilitating communication, resolving conflicts, and promoting collaboration between different teams to optimize operational performance.

Operations management plays a critical role in ensuring the smooth functioning of an organization by effectively planning, organizing, controlling, directing, and coordinating various activities to achieve operational excellence and meet customer expectations.

Operations management process

Forecasting

• The operations management process begins with forecasting, where future demand for products or services is predicted based on historical data, market trends, and other relevant factors.
• Accurate forecasting helps in planning production schedules, allocating resources, and managing inventory levels to meet customer demand effectively.

Planning

• Once demand is forecasted, the next step is planning, where strategies are developed to meet production targets, optimize resources, and ensure efficient operations.
• Planning involves setting production goals, designing production processes, determining resource requirements, and establishing timelines for production activities.

Scheduling

• Scheduling involves creating timetables and allocating resources such as manpower, equipment, and materials to specific tasks and activities within the production process.
• Effective scheduling helps in optimizing production efficiency, minimizing idle time, and ensuring smooth flow of work throughout the production cycle.

Controlling

• Controlling involves monitoring and regulating production activities to ensure they adhere to established plans, standards, and quality parameters.
• It includes measuring performance, identifying deviations from plans, and taking corrective actions as necessary to maintain productivity and quality standards.

Evaluating

• The final step in the operations management process is evaluating performance, where the outcomes of production activities are assessed against predetermined goals and objectives.
• Evaluation helps in identifying areas for improvement, refining operational strategies, and making informed decisions to enhance overall efficiency and effectiveness.

The operations management process encompasses various stages, from forecasting and planning to scheduling, controlling, and evaluating, aimed at ensuring efficient production processes and optimal utilization of resources to meet organizational objectives and customer requirements.

Operations management example

Consider a manufacturing company producing electronic devices as an example of operations management in action. The company's operations management team begins by forecasting demand for the devices based on market trends, historical data, and customer preferences. Once demand is forecasted, the team develops production plans, including setting production goals, designing manufacturing processes, and determining resource requirements such as materials and manpower.

Scheduling comes into play as the team creates production schedules, allocating resources to specific tasks and activities within the manufacturing process to ensure smooth operations. Throughout the production process, the operations management team monitors and controls production activities to maintain quality standards, minimize waste, and maximize efficiency. They regularly evaluate performance against predetermined goals, identifying areas for improvement and implementing corrective actions as necessary to enhance productivity and quality.

For instance, if there is a deviation from the production schedule or a quality issue arises, the operations management team takes prompt action to address the issue and prevent further disruptions. By effectively managing production processes, resources, and quality control measures, the company can meet customer demands, deliver high-quality products, and remain competitive in the market. This example illustrates how operations management plays a crucial role in ensuring the efficient and effective functioning of a manufacturing operation.

Challenges in operations management

List of a few common challenges in operations management:

• Supply chain disruptions: Events such as natural disasters, supplier bankruptcies, or geopolitical conflicts can disrupt the supply chain, leading to shortages of raw materials or delays in production.
• Quality control: Maintaining consistent product quality across various batches can be challenging, requiring rigorous quality control measures and continuous monitoring of production processes.
• Inventory management: Balancing inventory levels to meet customer demand while minimizing carrying costs and avoiding stockouts or overstock situations poses a significant challenge for operations manager.
• Technology integration: Adopting new technologies and integrating them into existing operations can be complex and costly, requiring careful planning and investment in staff training and infrastructure upgrades.
• Labour shortages: Recruiting and retaining skilled workers in industries facing labour shortages can be challenging, affecting production capacity and efficiency.
• Regulatory compliance: Adhering to complex and evolving regulations governing areas such as safety, environmental protection, and product standards requires ongoing monitoring and compliance efforts.
• Global competition: Competing in a global marketplace with competitors from low-cost countries can pressure operations managers to reduce costs while maintaining quality standards and meeting customer expectations.
• Demand volatility: Fluctuations in customer demand due to seasonal trends, market dynamics, or unforeseen events can make production planning and inventory management more challenging.
• Sustainability: Balancing economic goals with environmental and social responsibility objectives requires implementing sustainable practices throughout the supply chain and production processes.

Using a business loan to facilitate effective operations management

Effective operations management is essential to business survival, and business loans can help facilitate and support it. A business loan can finance growth infrastructure, hire new staff, implement automated technology, and improve business processes.

For instance, a business loan can be used to hire new and skilled staff essential to operations and improving productivity. Entrepreneurs can also invest in researching and procuring automation software or tools, lowering costs, and freeing up time for value-added tasks.

Bajaj Finance offers business loans tailored to assist businesses in achieving their goals. With a simple application process, competitive interest rates, and flexible repayment options, Bajaj Finserv Business Loans can be a great funding option. Businesses can secure significant funds of up to Rs. 80 lakh with a convenient repayment tenure starting from 1 year to 8 years.