Operations Management

Planning and Forecasting

Running an efficient production system requires a great deal of planning. Long-range decisions could include the number of facilities required to meet customer needs or studying how technological change might affect the methods used to produce services and goods. The time horizon for long-term planning varies with the industry and is dependent on both complexity and size of proposed changes. Typically, however, long-term planning may involve determining work force size, developing training programs, working with suppliers to improve product quality and improve delivery systems, and determining the amount of material to order on an aggregate basis. Short-term scheduling, on the other hand, is concerned with production planning for specific job orders (who will do the work, what equipment will be used, which materials will be consumed, when the work will begin and end, and what mode of transportation will be used to deliver the product when the order is completed).

Managing the System

Managing the system involves working with people to encourage participation and improve organizational performance. Participative management and teamwork are an essential part of successful operations, as are leadership, training, and culture. In addition, material management and quality are two key areas of concern.

Material management includes decisions regarding the procurement, control, handling, storage, and distribution of materials. Material management is becoming more important because, in many organizations, the costs of purchased materials comprise more than 50 percent of the total production cost. Questions regarding quantities and timing of material orders need to be addressed here as well when companies weigh the qualities of various suppliers.

BUILDING SUCCESS WITH OPERATIONS

To understand operations and how they contribute to the success of an organization, it is important to understand the strategic nature of operations, the value-added nature of operations, the impact technology can have on performance, and the globally competitive marketplace.

Efficient organization operations are a vital tool in achieving competitive advantage in the daily contest for customers/clients. What factors influence buying decisions for these entities? For most services and goods, price, quality, product performance and features, product variety, and availability of the product are critical. All these factors are substantially influenced by actions taken in operations. For example, when productivity increases, product costs decline and product price can be reduced. Similarly, as better production methods are developed, quality and variety may increase.

By linking operations and operating strategies with the overall strategy of the organization (including engineering, financial, marketing, and information system strategy) synergy can result. Operations become a positive factor when facilities, equipment, and employee training are viewed as a means to achieve organizational objectives, rather than as narrowly focused departmental objectives. In recognition of this evolving viewpoint, the criteria for judging operations are changing from cost control (a narrowly defined operating objective) to global performance measurements in such areas as product performance and variety, product quality, delivery time, customer service, and operational flexibility.

In today's business environment, a key component of operational flexibility in many industries is technological knowledge. Advances in technology make it possible to build better products using fewer resources. As technology fundamentally changes a product, its performance and quality often increases dramatically, making it a more highly valued commodity in the marketplace. But the growth in high-tech business applications has created new competitors as well, making it important for businesses to try to register advantages in any and all areas of operations management.

Over time, operations management has grown in scope and increased in importance. Today, it has elements that are strategic, it relies on behavioral and engineering concepts, and it utilizes management science/operations research tools and techniques for systematic decision-making and problem-solving. As operations management continues to develop, it will increasingly interact with other functional areas within the organization to develop integrated answers to complex interdisciplinary problems. Indeed, such interaction is widely regarded as essential to long-term business success for small business establishments and multinational corporations alike.

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