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Operations Management

Operations management involves planning, organizing, and supervising processes, and make necessary improvements for higher profitability.

Historical Background

The adjustments in the everyday operations have to support the company’s strategic goals, so they are preceded by deep analysis and measurement of the current processes.

Operations management was previously called production management, clearly showing its origins in manufacturing. Historically, it all began with the division of production, starting as early as the times of ancient craftsmen, but spreading more widely only by adding the concept of interchangeability of parts in the eighteenth century, ultimately sparking the industrial revolution.

Still, it was not until Henry Ford took a twist on manufacturing with his famous assembly line concept, otherwise known as “bring work to men,” that the management of production for improving productivity became a hot topic. From the 1950’s and 1960’s, it formed a separate discipline, besides bringing other concepts, such as Taylorism, production planning, or inventory control, to life.

As the economies in the developed world were gradually shifting to be service-based, all the corporate functions, including product management, started to integrate them. The service side also began its approach by applying product management principles to the planning and organizing of processes, to the point where it made more sense to call it operations management.

Multidisciplinary nature

Operations management is now a multidisciplinary functional area in a company, along with finance and marketing. It makes sure the materials and labor, or any other input, is used in the most effective and efficient way possible within an organization – thus maximizing the output.

Operations management requires being familiar with a wide range of disciplines. It incorporates general management, factory- and equipment maintenance management by tradition. The operations manager has to know about the common strategic policies, basic material planning, manufacturing and production systems, and their analysis. Production and cost control principles are also of importance. And last, but not least, it has to be someone’s who is able to navigate industrial labor relations.

Required skills

The skills required to perform such work are as diverse as the function itself. The most important skills are:

Organizational abilities. Organizing processes in an organization requires a set of skills from planning and prioritizing through execution to monitoring. These abilities together help the manager achieve productivity and efficiency.

Analytic capabilities/understanding of process. The capability to understand processes in your area often includes a broad understanding of other functions, too. An attention to detail is often helpful to go deeper in the analysis.

Coordination of processes. Once processes are analyzed and understood, they can be optimized for maximum efficiency. Quick decision-making is a real advantage here, as well as a clear focus problem-solving.

People skills. Flaws in the interactions with employees or member of senior management can seriously harm productivity, so an operation manager has to have people skills to properly navigate the fine lines with their colleagues. Furthermore, clear communication of the tasks and goals serves as great motivation and to give a purpose for everyone.

Creativity. Again, problem-solving skills are essential for a creative approach if things don’t go in the right direction. When they do, creativity helps find new ways to improve corporate performance.

Tech-savviness. In order to understand and design processes in a time when operations are getting increasingly technology-dependent, affinity for technology is a skill that can’t be underestimated. Operations managers have to be familiar with the most common technologies used in their industries, and have an even deeper understanding of the specific operation technology at their organizations.

The major principles of operations management

Some of the fundamentals of the everyday work in operations management worth expanding a little more. Below you will find two major approaches that are important to understand the driving forces behind the decisions about planning, designing and organizing processes.

They are both embracing the idea of focusing on the delivery: supporting the organization to deliver better results, by an optimized input of materials, equipment, technology, and human resources.

The ten principles of OM by Randall Schaeffer

Randall Schaeffer is an experienced manufacturing and operations management professional, an industrial philosopher, and regular speaker at conferences organized by APICS, the leading US association of supply chain and operations management. He presented his list of 10 principles of operations management at an APICS conference in 2007, saying the violation of these principles had caused the struggle US manufacturing companies were experiencing.

Reality. Operations management should focus on the problem, instead of the techniques, because no tool in itself would present a universal solution.

Organization. Processes in manufacturing are interconnected. All elements have to be predictable and consistent, in order to achieve a similar outcome in profits.

Fundamentals. The Pareto rule is also applicable to operations: 80% of success comes from a strict adherence to precisely maintaining records and disciplines, and only 20% comes from applying new techniques to the processes.

Accountability. Managers are expected to set the rules and the metrics, and define responsibilities of their subordinates, as well as regularly check if the goals are met. Only this way would the workers put in the necessary efforts.

Variance. Variance of processes has to be encouraged, because if managed well, they can be sources of creativity.

Causality. Problems are symptoms: effects of underlying causes. Unless the causes are attacked, the same problems will appear again.

Managed passion. The passion of employees can be a major driver of company growth, and it can be instilled by the managers if not coming naturally.

Humility. Instead of a costly trial and error process, managers should acknowledge their limitations, “get help, and move on.”

Success. What is considered success will change over time, but always consider the interest of the customer. In order to keep them, all the other principles have to be revised occasionally.

Change. There will always be new theories and solutions, so you should not stick to one or the other, but embrace the change, and manage for stability in the long term.

The 16 principles of operations management by Dr. Richard Schonberger

Dr. Richard J. Schonberger, renowned researcher of American manufacturing and author of the book “World Class Manufacturing: The Next Decade,” has become widely known in operations management by his set of 16 customer-focused principles.

Team up with customers. Know what they buy and use, and organize product families accordingly.

Continual, rapid improvement. Aim for non-stop improvement to always deliver the best quality, aim for a quicker response to customer demand, and always offer maximum flexibility. Thus, it gives more value, in a more flexible way.

Unified purpose. Involve frontline employees in strategic discussions to make sure they understand the purpose of their work and have their say in what to change.

Know the competition. Know their customers, their best practices, and their competitive edges.

Focus. Allow no variations that the customers don’t buy or demand.

Organize resources. Set priorities in organizing resources in a way the operations are close to the customer rate of use or demand.

Invest in HROffer cross-training options, job rotation, and improvements in work safety and health. Also offer more rewards and recognitions.

Maintain equipment. Always think of improvement of current assets first, instead of a new purchase.

Simple “best” equipment. Keep the equipment as simple and flexible as possible, at a reasonable cost.

Minimize human error. Improve the equipment and keep frontline workers accountable.

Cut times. Shorten product path to customer by making processes and delivery faster.

Cut setup. Be prepared to support different processes and get all information and tools ready for on-demand production.

Pull system. Improve the workflow and cut the waste by producing on demand.

Total quality control. Use only the best materials, processes, and partners.

Fix causes. Focus on controlling the root causes that really affect cost and performance.

Visibility management. Promote corporate achievements, let the market know about your improvements in competence or productivity.