What is Operations Management?



What is Operations Management?

Operations Management

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It's important to develop good clear mental image for what you are studying.

This activity will help you "see" the nature and scope of operations management, and how operations management relates to other parts of the organization.  "Operations Management"


Activity 1: What is "Operations"?

In order to see and understand better what operations management is about we will consider the components of it, namely "management" and "operations". This activity will focus on the term "operations" first.



Read the text below and answer questions

Every organisation has an operations function, whether or not it is called ‘operations’. The goal or purpose of most organisations involves the production of goods and/or services. To do this, they have to procure resources, convert them into outputs and distribute them to their intended users. The term operations embraces all the activities required to create and deliver an organisation's goods or services to its customers or clients.

Goods are physical items that include raw materials, parts, subassemblies such as motherboards that go into computers, and final products such as cell phones and automobiles.

Services are activities that provide some combination of time, location, form, or psychological value. Examples of goods and services are found all around you. Every book you read, every video you watch, every e-mail you send, every telephone conversation you have, and every medical treatment you receive involves the operations function of one or more organizations. So does everything you wear, eat, travel in, sit on, and access the Internet with. 

While the operations function is responsible for producing products and/or delivering services, it needs the support and input from other areas of the organization. Business organizations have three basic functional areas: finance, marketing, and operations. It doesn’t matter whether the business is a retail store, a hospital, a manufacturing firm, a car wash, or some other type of business; all business organizations have these three basic functions.

Finance is responsible for securing financial resources at favorable prices and allocating those resources throughout the organization, as well as budgeting, analyzing investment proposals, and providing funds for operations.

Marketing and operations are the primary, or “line,” functions. Marketing is responsible for assessing consumer wants and needs, and selling and promoting the organization’s goods or services. Operations is responsible for producing the goods or providing the services offered by the organization. To put this into perspective, if a business organization were a car, operations would be its engine. And just as the engine is the core of what a car does, in a business organization, operations is the core of what the organization does.

In the case of private-sector companies, the mission of the operations function is usually expressed in terms of profits, growth and competitiveness; in public and voluntary organisations, it is often expressed in terms of providing value for money.

Operations and supply chains are intrinsically linked and no business organization could exist without both. A supply chain is the sequence of organizations—their facilities, functions, and activities—that are involved in producing and delivering a product or service. The sequence begins with basic suppliers of raw materials and extends all the way to the final customer.


Facilities might include warehouses, factories, processing centers, offices, distribution centers, and retail outlets. Functions and activities include forecasting, purchasing, inventory management, information management, quality assurance, scheduling, production, distribution, delivery, and customer service. Figure 1.3 provides another illustration of a supply chain: a chain that begins with wheat growing on a farm and ends with a customer buying a loaf of bread in a supermarket. Notice that the value of the product increases as it moves through the supply chain

Supply chains are both external and internal to the organization. The external parts of a supply chain provide raw materials, parts, equipment, supplies, and/or other inputs to the organization, and they deliver outputs that are goods to the organization’s customers. The internal parts of a supply chain are part of the operations function itself, supplying operations with parts and materials, performing work on products and/or services, and passing the work on to the next step in the process. 

Fill in the blanks

The term operations embraces all the activities required to and an organisation's or services to its or clients

Select basic functions in a typical organization

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sequence of organizations—their facilities, functions, and activities—that are involved in producing and delivering a product or service

Activity 2: What is "Management"?

This activity will focus on the second term "management".


Read the text below and answer questions

Management in businesses and organizations deals with coordination of the efforts of people to accomplish goals and objectives by using available resources efficiently and effectively.

Management includes following activities, which are also called functions

Planning function is deciding what needs to happen in the future, setting goals and generating plans for action. Planning is the foundation pillar of management. It is the base upon which all other areas of management are built. Planning requires administration to assess where the company presently is and where it would be in the coming years. From there, an appropriate course of action is determined and implemented to attain the company's goals and objectives.

Planning can be divided into strategic and operating planning. Strategic planning helps to understand in which direction organization should be going in long run. It helps to develop companies’ mission statement, vision for the future, set goals and formulate its strategies and policies. Operating planning helps to develop detailed plans, which will help the company to carry out day-to-day activities.

Organizing is a function of arranging tasks, people and other resources to accomplish achieve goals. The management must organize all its resources beforehand, to follow the course of action decided during the planning process. While determining the hierarchy of the organization, managers must look at the requirements of different divisions or departments. They must also ensure the harmonization of staff, and try to find out the best way to handle the important tasks and reduce unnecessary expenditure within the company. Management determines the division of work according to its need. It also has to decide for suitable departments to hand over authority and responsibilities.

Leading/Directing function is inspiring people to work hard to achieve high performance Working under this function helps the management control and supervise the actions of the staff. It also enables them to render assistance to the employees by guiding them in the right direction, to achieve the company's goals and also accomplish their personal or career goals, which can be powered by motivation, communication, department dynamics, and department leadership.

Controlling function is checking progress against plans. This function of management includes establishing performance standards, which are aligned to the company's objectives. It also involves evaluation and reporting of actual job performance. When these points are studied by the management, it is necessary to compare both these things. This study or comparison leads to further corrective and preventive actions. The controlling function aims to check if the tasks being allotted are performed on time and according to the standards set by the quality department.

Management functions are connected into an ongoing cycle of management activity. Manager should be able to plan, organize, lead and control on a continuous basis.  

Activity 3: Definition and scope of operations management

Finally in this activity we will give definition and scope of operations management


Read the text and answer questions

In simple terms, operations management is the management of systems or processes that create goods and/or provide services. Taking into account the functional content of management and operations, a more detailed definition of opeartions management includes planning, organizing, directing and controlling activities which improve effeciency of processes connected with production of goods and provision of services

As it was mentioned before in the example, where organization was compared to a car, operations is the core function which serves as the heart or engine for the whole car of ogranizaion.  Therefore operations management can be viewed as the mecahnic who is responsible for managing that core, making sure that the engine is working effecively and efficient.

The scope of operations management ranges across the organization. Operations management people are involved in product and service design, process selection, selection and management of technology, design of work systems, location planning, facilities planning, and quality improvement of the organization’s products or services.

The operations function includes many interrelated activities, such as forecasting, capacity planning, scheduling, managing inventories, assuring quality, motivating employees, deciding where to locate facilities, and more.

We can use an airline company to illustrate a service organization’s operations system. The system consists of the airplanes, airport facilities, and maintenance facilities, sometimes spread out over a wide territory. The activities include:

Which of the following are the focus of Operations Management

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product and service design
process selection
location planning
quality improvement
profitability analysis

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Additional Resources

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