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Operations management is an area of business concerned with the production of goods and services, and involves the responsibility of ensuring that business operations are efficient in terms of using as little resource as needed, and effective in terms of meeting customer requirements. It is concerned with managing the process that converts inputs (in the forms of materials, labour and energy) into outputs (in the form of goods and services).

Operations traditionally refers to the production of goods and services separately, although the distinction between these two main types of operations is increasingly difficult to make as manufacturers tend to merge product and service offerings. More generally, operations management aims to increase the content of value-added activities in any given process. Fundamentally, these value-adding creative activities should be aligned with market opportunity for optimal enterprise performance.

What do Operations Managers do?

Operations managers are responsible for managing activities that are part of the production of goods and services. Their direct responsibilities include managing the operations process, embracing design, planning, control, performance improvement, and operations strategy. Their indirect responsibilities include interacting with those managers in other functional areas within the organisation whose roles have an impact on operations. Such areas include marketing, finance, accounting, personnel and engineering. Source: Open University UK

Operations managers’ responsibilities include:

  • HR management – the people employed by an organisation either work directly to create a good or service or provide support to those who do. People and the way they are managed are a key resource of all organisations.
  • Asset management – an organisation’s buildings, facilities, equipment and stock are directly involved in or support the operations function.
  • Cost management – most of the costs of producing goods or services are directly related to the costs of acquiring resources, transforming them or delivering them to customers. For many organisations in the private sector, driving down costs through efficient operations management gives them a critical competitive edge. For organisations in the not-for-profit sector, the ability to manage costs is no less important.

Operations managers act on three levels: strategic, tactical and operational.

Strategic level

Responsible for, and decisions about:

  • What to make (product development),
  • How to make it (process and layout decisions) – or should we buy it,
  • Where to make it (site location),
  • How much is needed (high level capacity decisions).

Tactical level (intermediate term)

Address material and labour resourcing within strategy constraints, for example:

  • How many workers are needed and when (labour planning),
  • What level of stock is required and when should it be delivered (inventory and replenishment planning),
  • How many shifts to work. Whether overtime or subcontractors are required (detailed capacity planning),
  • Plant layout and structure,
  • Project management methods,
  • Equipment selection and replacement.

Operational level

Detailed lower-level (daily/weekly/monthly) planning, execution and control decisions, for example:

  • What to process and when (scheduling),
  • The order to process requirements (sequencing)
  • How work is put on resources (loading)
  • Who does the work (assignments),
  • Quality control and in inspection
  • Traffic and materials handling
  • Inventory management
  • Equipment maintenance policies

What Skills Do Operations Managers Need?

Must have knowledge of:

Advanced operations technology and technical knowledge relevant to his/her industry.

Interpersonal skills and knowledge of other functional areas.

The ability to communicate effectively, motivate other people, manage projects, and work on multidisciplinary teams.

Multi-disciplinary working, for example:

  • Supply Chains – management of all aspects of providing goods to a consumer from extraction of raw materials to end-of-life disposal.
  • The interface with Marketing – determining what customers’ value prior to product/service development.
  • Operations Management / Finance Interface – capital equipment and inventories comprise a sizable portion of many firms’ assets in addition to normal operating costs.
  • Service Operations – coping with inherent service characteristics such as simultaneous delivery/consumption, performance measurements, etc.
  • Operations Strategy – consistent and aligned with other strategies and legal requirements.
  • Process design and Improvements – managing the innovation process.
This article first appeared on The Chartered Management Institute’s website in The Management Blog

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  • About Alex Milovanovic: Alex Milovanovic is an Ambassador for CMI.

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