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:
Forecasting such things as weather and landing conditions, seat demand for flights, and the growth in air travel. Capacity planning, essential for the airline to maintain cash flow and make a reasonable profit. (Too few or too many planes, or even the right number of planes but in the wrong places, will hurt profits.)
Facilities and layout, important in achieving effective use of workers and equipment. Scheduling of planes for flights and for routine maintenance; scheduling of pilots and flight attendants; and scheduling of ground crews, counter staff, and baggage handlers.
Managing inventories of such items as foods and beverages, first-aid equipment, in-flight magazines, pillows and blankets, and life preservers. Assuring quality, essential in flying and maintenance operations, where the emphasis is on safety, and important in dealing with customers at ticket counters, check-in, telephone and electronic reservations, and curb service, where the emphasis is on efficiency and courtesy.
Motivating and training employees in all phases of operations, Locating facilities according to managers’ decisions on which cities to provide service for, where to locate maintenance facilities, and where to locate major and minor hubs. Now consider a bicycle factory. This might be primarily an assembly operation: buying components such as frames, tires, wheels, gears, and other items from suppliers, and then assembling bicycles.
The factory also might do some of the fabrication work itself, forming frames, making the gears and chains, and it might buy mainly raw materials and a few parts and materials such as paint, nuts and bolts, and tires. Among the key management tasks in either case are scheduling production, deciding which components to make and which to buy, ordering parts and materials, deciding on the style of bicycle to produce and how many, purchasing new equipment to replace old or worn out equipment, maintaining equipment, motivating workers, and ensuring that quality standards are met.
Obviously, an airline company and a bicycle factory are completely different types of operations. One is primarily a service operation, the other a producer of goods. Nonetheless, these two operations have much in common. Both involve scheduling activities, motivating employees, ordering and managing supplies, selecting and maintaining equipment, satisfying quality standards, and—above all—satisfying customers. And in both businesses, the success of the business depends on short- and long-term planning.
The operations function consists of all activities directly related to producing goods or providing services. Hence, it exists both in manufacturing and assembly operations, which are goods-oriented, and in areas such as health care, transportation, food handling, and retailing, which are primarily service-oriented.
A primary function of an operations manager is to guide the system by decision-making. Certain decisions affect the design of the system, and others affect the operation
System design involves decisions that relate to system capacity, the geographic location of facilities, arrangement of departments and placement of equipment within physical structures, product and service planning, and acquisition of equipment. These decisions usually, but not always, require long-term commitments. Moreover, they are typically strategic decisions. System operation involves management of personnel, inventory planning and control, scheduling, project management, and quality assurance. These are generally tactical and operational decisions. Feedback on these decisions involves measurement and Control.
In many instances, the operations manager is more involved in day-to-day operating decisions than with decisions relating to system design. However, the operations manager has a vital stake in system design because system design essentially determines many of the parameters of system operation. For Example, costs, space, capacities, and quality are directly affected by design decisions. Even though the operations manager is not responsible for making all design decisions, he or she can provide those decision makers with a wide range of information that will have a bearing on their decisions.
A number of other areas are part of the operations function. They include purchasing, industrial engineering, distribution, and maintenance.
Purchasing has responsibility for procurement of materials, supplies, and equipment. Close contact with operations is necessary to ensure correct quantities and timing of purchases. The purchasing department is often called on to evaluate vendors for quality, reliability, service, price, and ability to adjust to changing demand. Purchasing is also involved in receiving and inspecting the purchased goods.
Industrial engineering is often concerned with scheduling, performance standards, work methods, quality control, and material handling. Distribution involves the shipping of goods to warehouses, retail outlets, or final customers.
Maintenance is responsible for general upkeep and repair of equipment, buildings and grounds, heating and air-conditioning; removing toxic wastes; parking; and perhaps security.
The operations manager is the key figure in the system: He or she has the ultimate responsibility for the creation of goods or provision of services. The kinds of jobs that operations managers oversee vary tremendously from organization to organization largely because of the different products or services involved. Thus, managing a banking operation obviously requires a different kind of expertise than managing a steel- making operation. However, in a very important respect, the jobs are the same: They are both essentially managerial. The same thing can be said for the job of any operations manager regardless of the kinds of goods or services being created.
The service sector and the manufacturing sector are both important to the economy. The service sector now accounts for more than 70 percent of jobs in the United States, and it is growing in other countries as well. Moreover, the number of people working in services is increasing, while the number of people working in manufacturing is not.
The reason for the decline in manufacturing jobs is twofold: As the operations function in manufacturing companies finds more productive ways of producing goods, the companies are able to maintain or even increase their output using fewer workers. Furthermore, some manufacturing work has been outsourced to more productive companies, many in other countries that are able to produce goods at lower costs.
Many of the concepts presented in this book apply equally to manufacturing and service. Consequently, whether your interest at this time is on manufacturing or on service, these concepts will be important, regardless of whether a manufacturing example or service.
Operations management is often used along with production management in literature on the subject. It is therefore, useful to understand the nature of operations management. Operations management is understood as the process whereby resources or inputs are converted into more useful products .A second reading of the sentence reveals that, there is hardly any difference between the terms production management and operations management. But, there are a least two points of distinction between production management and operations management. First, the term production management is more used for a system where tangible goods are produced.
Whereas, operations management is more frequently used where various inputs are transformed into tangible services Viewed from this perspective, operations management will cover such services organization as banks, airlines, utilities, pollution control agencies super bazaars, educational institutions, libraries, consultancy firm and police departments, in addition, of course, to manufacturing enterprises. The second distinction relates to the evolution of the subject. Operation management is the term that is used now a day. Production management precedes operations management in the historical growth of the subject
The two distinctions not withstanding, the terms production management and operations management are used interchangeably.
Scope of Production and Operation Management
The scope of production and operations management is indeed vast. Commencing with the selection of location production management covers such activities as acquisition of land, constructing building, procuring and installing machinery, purchasing and storing raw material and converting them into saleable products.
Added to the above are other related topics such as quality management, maintenance management, production planning and control, methods improvement and work simplification and other related areas.