5.1+The+ROLE+of+Operations+Management

5.1 the Role of "Operations Management"


This Unit used to be called 'Production' - and it still has many of the same topics. Production used to be loosely translated into "the process of making things". So what exactly is Operation Management? - and how does it fit into the overall process of running a business?

The IB expects its students to.. (i) __know what OM is and__ (ii) how it relates to other process areas (iii) understand the similarities and differences in OM between a firms that produces services and goods, - (iv) analyse the OM strategies and practices relating to the 3 sustainability cornerstones of OM : Ecological, Social and Economics

Each organisation produces something - could be a huge Texas Oil Firm, or a local chain of Barbershop : production is occurring in every business.

The Oil Firm will require massive machinery, huge investment and the majority of the production will be done by the pumps and drills. There will be a tangible output : oil The Barber Shop will require less machinery, - and the service will still largely depend on human skills, the production is done (mainly) with the scissors in the hand. There is an intangible output : a new haircut.

THE ART OF __MANAGING PRODUCTION TO GET THE BEST POSSIBLE OUTPUT__ IS KNOWN AS OPERATIONS MANAGEMENT.

This 'managing Production' thing, will obviously involve a wide variety of tasks - depending on whats being produced. But i hope its clear, Operations Management is about //doing whatever needs to be done to ensure the intended output is a good one.//

Typicall//y// this is what Production is about //:// //taking the factor inputs - AND PROCESSING THEM - into quality outputs..// This is often represented as a diagram. . - here are two different examples showing you the Production Process (bearing in mind OM is kind of like 'managing the production process')



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The IB expects its students to (i) know what OM is and (ii) __how it relates to other process areas__

You will remember from Unit 1.1 how running a businesses will involve 4 functions areas - Operations Management being 1 - the full 4 are:

we also said the running of a business must involve these function areas //cooperating with each other// - here are a few examples of how OM Dept will coordinate their efforts with the other 3..


 * the OM Dept will have a workforce! The __Human Resources__ will help them recruit, will be a confidant if their staff have issues, organize training, they will recommend ways to motivate etc. The HRM will often organize 'whole firm' events too, which the OM staff will be part of..
 * the OM Dept will be more aware of certain costs, best suppliers, rates of depreciation etc etc - therefore the __Finance__ dept will liaise closely with them on the construction of accounts and other financial related decisions/issues.
 * the OM Dept - in a // service firm // is very closely related to __Marketing__, as the Customer Service provided by the staff is a key tool in developing the reputation of the brand, but also in a // product firm // there is a connection. The OM will often be aware of the firms USP - are they building the // fastest // car, or the // lightest // shirt, or the // smoothest // chocolate ? The Marketing Dept will use this USP to build their promotional campaign around.

etc etc .........................................................................

The IB expects its students to.. (i) know what OM is and(ii) how it relates to other process areas (iii) __understand the similarities and differences in OM between a firms that produces services and goods__, -

This is really about building on a point made earlier : //__all__ firms are producers//. A masseuse is a producer as much as Coca Cola is a producer, in terms of meeting the definition of what Production is. And there is __**no rule**__ that says firms must limit themselves to one type of production.

in fact many firms offer a product and a service - think of a restaurant for example : certainly they manufacture a product, the raw materials in terms of ingredients (like rice, oil, salt etc) enter the restaurant and they are processed (mixed, boiled, fried, served) to create a final good, an output : a meal on a plate. However many customers choose a restaurant for factors other than the food. The decor for example can be beautiful, cosy, romantic, exotic, the ambiance can be attractive, gentle music, good views etc - or even the friendly service provided by the staff. Most restaurants produce a mixture of goods and services.

//**__Just a thought__**// : production can occur anywhere, sometimes in rather nebulous places. A songwriter writes a song, this she either performs or sells as a product, to meet some kind of need or want. Production has occurred. Where though? - //mainly in her head!//

It is common to refer to a continuum here ....



remember you don't need to analyse the situations here - just understand that its not always easy to determine exactly where and how and when production is occurring - but production is always occurring : and Operations Managers have the responsibilities of ensuring the Production Process occurs effectively as possible to create the best possible output.

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The IB expects its students to.. (i) know what OM is and (ii) how it relates to other process areas (iii) understand the similarities and differences in OM between a firms that produces services and goods, - (iv) __analyse the OM strategies and practices relating to the "3 sustainability cornerstones" of OM : Ecological, Social and Economics__

"Sustainability" has several similar definitions, but for our purposes in this section we will use the term to refer to how something might be sustainable if //it is able to carry on in its current form without problems//.


 * If you are running a marathon and start the race with a sprint - this would be unsustainable. If you keep on at a sprint you will soon collapse of exhaustion. Sprinting in a marathon is unsustainable - you will need to change the way you are running very quickly.

// (Fossil fuels on the other hand are unsustainable. there is a limited supply, and sooner or later we will run out and have to change the way we use energy). //
 * Using solar energy to run the lights in your house is sustainable. Each day - whether there is cloud cover or not - the sun will rise and you can keep on collecting its energy every day, pretty much for ever. No problems with the current system.

To link back to the cornerstones if the OM Dept get any one wrong then Production will stop. It is possible to get one wrong for a short while and survive, or Production not stop but slow down - however if we want to //continue// operating at the existing level (ie sustainably) we must get all 3 right.

ECONOMIC : Out of control costs create excessively high prices. Customers reject the product. ** Production stops **. Equally if production does not lead to outputs that can create some shareholders wealth, these shareholder could disinvest and production ** slows down **.

ENVIRONMENTAL : If the production process leads to waste that has a negative impact on the environment then in extreme cases this could lead to a government-enforced closure. ** Production stops **. Equally possible is that the actions of pressure groups affect your production and it ** slows down **

SOCIAL : If workers are not treated fairly then in extreme cases they might go on strike. ** Production stops **. Equally likely any unfair treatment will affect levels of motivation and performance and production ** slows down **

To RECAP : the point is that the OM Manager - while seeking to create that "best possible output" must do so while considering these 3 cornerstones, or else failure is inevitable.