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What Is Operations Management?
Generally, operations involve a series of tasks which must be undertaken in a set order to be able to provide a product or service and requires the organisation of resources such as materials, people and equipment that are vital for manufacturing processes or when delivering a product or service. All organisations will have to adapt and tailor their process to meet the specific needs of their products, services and clients needs.
Even though different organisations will have different operations and products such as a bakery and aeroplane manufacture, both organisations will desire to have effective operations management to be able to deliver the high quality of product and reduce any forms of waste which will affect them finicality either positively or negatively. There are four advantages associated with effective operations management (Ukessays, 2020):
- Reduction in costs and overheads due to increased efficiency
- Increase in turnover due to increased customer satisfaction and product quality
- Reduction of capital costs or investments due to improved efficiency.
- Possible increase in innovation which will lead to business growth and profitability.
Five indicators will affect the performance of an operation: quality, speed, cost, flexibility and dependability (figure 1 and 2).
Figure 1: Five performance indicators.
Speed – This is about doing things quickly and having the quickness and responsive so be supply and deliver products and services. Having high operational speed can reduce both delivery times and costs by eliminating costs due to make-to-stock systems leading to better customer service.
Cost – Making costs savings to maximise profits, and involves the expenses due to the delivery of products and services to the client.
Dependability – Doing things consistently and on time, this is customers service which entails being reliable in your delivery of products and services to the client, which can lead to better efficiencies in checking and other activates which can lead to less time being used up and lowering costs.
Quality – Getting things right, being able to perform the tasks the clients want and meeting their specifications and satisfying them.
Flexibility – There are four types of flexibility:
- Product or services – the ability of the operations to adapt and respond to the client’s needs.
- Mixability to provide a wider range of products or services.
- Volume – being able to increase or decrease the output or services.
- Delivery – ability to react to delivery time changes, such as changing prioritise and still being able to deliver on time.
Figure 2: External effects of the five performance objectives (Ukessays, 2020).
The Four V’s
It is recognised in operations management that ‘Four V’s’ form the overall process design concept, the ‘Four V’s’ are:
- Volume of operational output.
- Variety of the output.
- Variation in product demand.
- Visibility which customers have of the output’s creation.
The combination of these four will determine the optimum may for maximum operational efficiency. What must be taken into account that the ‘Four V’s’ make organisations make trade-offs must be made between costs, resources and service levels, look at the below figure to understand this trade-off better (figure 3) (Ukessays, 2020).
Figure 3: Four V Trade-Offs (Slack at al., 2012).
High volume operations – The transformation of the output is highly repeatable and repeatability leads to specialisation, which leads to output customisation. This adds to unit costs if made in small volumes, but will have a lower unit cost if high volume created.
Low volume operations – The transformation of the output isn’t highly repeatable, and involves employees doing multiple tasks which require less systematisation and due to the low volume, there are high unit costs.
High variety operations – The transformation process is highly flexible but can be very complex, which is to give the client the customisation they require, that comes at a premium thus having a greater unit cost.
Low variety operations – The transformation process is well-defined and requires a routine standard process, which limits the variety of the output and leaders to lower unit costs.
High variation operations – Operations that will change due to demand patterns and must be flexible to able to quickly adapt to these changing demands. Furthermore, organisations must have the capacities to anticipate future customer demands and change output and capacity and change input capacity accordingly.
Low variation operations – A stable transformation process which is routine and the demand and out are predictable, which leads to high utilisation of inputs and a low product variety.
High visibility operations – These operations have short waiting tolerances with service perceptions playing a role in the quality of service. Furthermore, there is a high degree of client contact skill required as the client will be involved in the transformation process. There is also a high degree of variety, and the operation will be able to adapt to the client’s demands which results in a high unit cost as the service is not standardised.
Low visibility operations – There is a time lag during the transformation process and requires centralisation (performing tasks in one place). Furthermore, employees don’t require any high-level skill and only need to focus on a few tasks within this standardised process, which has low unit costs.
Slack, N., Brandon-Jones, A., Johnston, R., and Betts, A., (2012) Operations and process management, principles and practice for strategic impact. (3rd Ed) London: FT Prentice Hall.
Ukessays. (2020). Operations Management. Retrieved from Ukessays: https://www.ukessays.com/courses/business/business-management/operations-strategy/detailed.php