What is operations management?
Operations management is the organisation of all day-to-day activities of a business. It covers each individual activity that the business conducts during the course of a day.
It works in partnership with other business management techniques, such as project management and strategic management. Project management covers one project or initiative of a business, while strategic management covers long-term business development goals.
For example, strategic management may analyse the feasibility of selling a new product. This may include the business’s capability to source the product, the intended customers, and the profit margin that can be obtained by selling it.
Project management may involve bringing the product to market. This may include devising a launch date and advertising the product for sale.
Operations management involves the ongoing sale of the product. This may include ensuring enough product stock is available to customers each day, and sufficient staff are available on the shop floor to sell the product to them.
Why operations management is important
When a business functions haphazardly, it is not operating productively or efficiently, which has the potential to reduce income.
For example, time may be wasted when employees wait for other functions to be completed before they can attempt their task. Products may be wasted if they are not used within a certain time. All waste comes at a financial expense to the company, affecting profit margins and ongoing sustainability.
Customer satisfaction can also be put at risk when operations are not well managed. If, for example, a customer’s job is completed 3 days later than originally outlined, they may not be as impressed with the customer service as they might have been if it was completed in the original timeframe.
Operations management may increase business activity and therefore revenue. For example, more products or more services may be completed during the day when problems that arise are dealt with swiftly. This leads to an increase in the amount of income generated.
How to conduct effective operations management
For many business leaders, effective operations management in many areas may be second nature because they have honed their skills over many years of working at the business or in the industry. However, reviewing processes and policies at regular intervals can ensure that they are continuing to meet modern demands. It also ensures the business is operating as productively as it can.
For those leaders as well as those new to operations management techniques, there are 4 key areas to analyse: supply chain, human resources, quality control and costs.
Supply chain
In a business that sells a physical product, the supply chain involves the flow of the materials through the business from when they are first brought on to the premises to when the product is sold. Operations management may include, for example, a café analysing where or from which company it sources its coffee beans, the delivery of the beans, the preparation of the beans to make a coffee, and the time the barista takes to make the coffee for a customer.
Supply chain problems may occur if, for example, the beans are delivered too far in advance. This means they may not be fresh when the coffee is made for the customer, leading to them being sold a bad-tasting coffee. Or, another supply chain problem may arise if the barista prepares a fresh coffee, but there is a delay in delivering it to the customer. That can mean it is cold when it is served.
In a business that provides a service, there may still be supply chain operations management issues to consider. For example, a plumber may require a particular part or tool to repair a leaking shower in a home. Operations management of the supply chain may consider whether all parts should be available in all work vehicles at all times for each plumber to be able to respond to any situation. The business leader may decide that to cut costs, only some plumbers in their crew will have certain parts to hand in their vehicle. They will only be called by a colleague to come and take over the job if they do not have the parts required.
Operations management considers the benefits and disadvantages that changes to the supply chain can bring and tweaks the process to achieve optimum results.
Human resources
It is no good having the products required to run a business if there are insufficient employees to do the work required with them. Likewise, if there are too many employees, there are greater staffing costs that offset the income brought in from products and services.
There are other human resources issues to consider for effective operations management, too. Annual leave and long service leave are 2 employee entitlements that leaders need to consider when planning their daily workforces.
Operations management of human resources requires analysing the ideal number of employees required to do the work. Then, contingencies are factored in, such as rostering or employing extra staff in case of sick leave, or to cover for those on annual leave. It may also involve finding other tasks for employees to undertake if there are more staff than required for the initial task.
Operations management may also involve recruitment, and organising training and development to ensure staff have the skills required to continue doing their work. Or, it may involve organising for overtime to be completed if workloads require it. It may also involve determining the time when shifts begin and end.
Quality control
Operations management also involves achieving a certain standard to deliver a product or service that continues to meet customer expectations.
For example, an ageing computer may no longer work as fast as it did when it was new. However, it is required to be functioning swiftly at all times of the day for the receptionist to be able to take phone bookings from clients, without putting them on hold to wait for the computer to load. Operations management involves regular reviews of the functionality of equipment and determining when it needs to be replaced. This includes whether a work shutdown needs to be undertaken to replace it.
Quality control may also analyse the quality of the product being sold. For example, operations management at a bakery may find the taste of their pies has changed, and they are not as popular with customers as they used to be. On investigation, they find that a new baker has inadvertently left out an ingredient, and they need to be given the correct recipe.
Costs
From electricity to wages, there are numerous costs that businesses incur through daily operations that need to be balanced with revenue.
For example, as the price of fuel increases, costs increase for staff who operate on the road, such as salespeople or delivery drivers. Operations management may include better mapping the driver’s daily route and delivery schedule to minimise the distance between deliveries or the amount of time they spend in peak-hour traffic.
Or, operations management may determine it is cheaper for the business to pay existing staff overtime or offer them increased hours, rather than hiring more staff.
Tools that can help improve operations management
Software is a common operations management tool, and there are many programs that can help businesses manage their operations step by step. These can be useful to automate basic tasks such as collating information into graphs and charts. They may also help identify areas that previously were not considered important areas to manage.
Some businesses may choose to employ an operations manager to oversee day-to-day activities and review effectiveness regularly. These employees often hold qualifications specific to operations management.
By making operations management a priority, business leaders are ensuring that their business is achieving the best it can during every moment that it operates. This may lead to more positive outcomes in all areas of the business and ensure its future success.
