Operations Management: Maximizing Production Efficiency in Any Organization
Every organization either has a service they provide or a product they sell. Even non-profit organizations provide services to people.
You have to make sure that your product/service is of high-quality and beneficial enough for your customers to purchase. This is why the process of creating a product or service is very important.
High-quality products or services attract customers, give you a competitive edge in the market, increase revenue, and make you a force in your industry.
How do you ensure that your products are manufactured and services rendered efficiently to help you achieve all these? Through operations management.
Operations management takes charge of the production process entirely and ensures that every step is efficiently carried out to ensure maximum productivity. The result is a high-quality product/service that meets the demands of the consumers.
Every organization, despite the size or industry, needs operations management. It ensures that organizations meet their goals, and it helps to maximize profitability.
In the next few minutes, I will introduce you to the profitable world of operations management. You will learn what operations management is, how it benefits your organization, and everything you need to know to make operations management work in your organization.
Operations Management Full Guide Chapter Index
Chapter 1: What Is Operations Management?
Operations management is managing the planning, organizing, and supervising of the production of goods and services. It ensures that your organization successfully converts inputs (labor, materials, technology, etc.) into outputs (products) in a very efficient manner.
It involves managing information, human resources (such as staff), equipment, technology, and other resources needed to produce goods and services. Simply put, it involves getting the most out of a company’s resources.
Operations management is an integral function of every organization regardless of its size, industry, whether it is service or manufacturing, or whether it is for-profit or not.
The goal of operations management is to help maximize efficiency within an organization, increase the organization’s productivity, increase profits while reducing costs, and ensure the production and delivery of high-quality products or services that suit consumers’ needs.
More importantly, operations management ensures that every single day-to-day operation in an organization supports and helps to achieve that organization’s unique goals.
- Operations management is focused on converting resources into quality products and services.
- It involves overseeing the organization’s production processes to create the highest level of efficiency.
- It helps your organization increase profits while reducing costs and ensures maximum productivity.
Here is a video that will help you further understand what operations management is. It is pretty self-explanatory, and it contains practical and relatable examples. So, before you continue reading, pause for a minute to watch this.
Now, you have an idea of what operations management is. But before we move forward to the juicy parts, where I explain why you need operations management and how you can effectively manage your operations, let us take a trip down history lane.
History Of Operations Management
The history of operations management is a long one because it dates to ancient times. Its origins can be traced as far back as 5000 B.C. when Sumerian priests created a system that helped them record inventories, taxes, loans, and other business transactions.
When the Industrial Revolution came, between the 1760s to the early 1800s, it introduced two essential keys to efficient production: division of labor and interchangeability of parts.
In 1883, Frederick Taylor timed tasks for complex jobs using the stopwatch method. This method became important in studying productivity and efficiency.
Move forward to 1912, where Frank and Lillian Gilbert took this a notch further. They laid the foundation for a system called predetermined motion time systems (PMTS). This helped people predict the time it would take to complete tasks.
Just a year after, Henry Ford implemented the famous assembly line concept that focused on “taking the work to the man, and not the man to the work.” He was able to reduce the production time for a car from 12 hours to less than three.
Thanks to this concept and how well it worked, production management for improving productivity became a hot topic among manufacturers. From the 1950s to the 1960s, it developed into a separate discipline, bringing to life other concepts like Taylorism, production planning, inventory control, etc.
At this point, it was called “productions management” because it was primarily used in manufacturing. As the world developed and service-based companies began to flourish, people began to integrate the numerous functions in manufacturing, including operations management, into services.
For example, in 1973, FedEx began overnight package deliveries. And today, service-based companies like Amazon offer same-day delivery on orders.
Once service-based companies began using product management principles in planning and organizing their processes, the name changed to operations management.
If you want to learn more about how operations management came into being, save this slideshow for later reading. It will lead you through the historical evolution of operations management.
Chapter 2: Importance Of Operations Management
The role of operations management is essential in every organization.
It serves as the “engine room” of an organization. The success of an organization solely depends on its operations and how they are effectively managed.
For organizations to compete in a constantly changing market, their operations managers have to maximize productivity, efficiency, and profit—these three are essential to a company’s survival.
It is no surprise that some companies have several operations employees and allocate a huge budget to that department.
Forbes made a report in 2011 that three-quarters of CEOs come from an operations background. This reinforces the fact that understanding a company’s operations and managing these operations is vital to a company’s success.
Operations management can help your organization achieve:
1. Quality of product and service
Proper operations management makes sure that the products manufactured and services rendered are top-notch. The operations management unit examines the durability and reliability of every product before it is delivered to the consumers.
This unit also ensures that there are laid-down processes that make sure that service-based companies deliver top-notch services to their clients.
2. Customer satisfaction
One way to guarantee customer satisfaction is by delivering quality products or services.
The operations manager’s job is to ensure that the product is of high quality and meets the consumers’ needs.
Operations management also ensures that customers are treated well.
With all these in place, customer satisfaction is guaranteed.
Operations management gives room for maximum productivity.
It makes sure that all the resources (from raw materials to human resources) are utilized adequately during the production process. The outcome of this is increased productivity.
The only way you can ensure productivity is through effective operations management.
4. Competitive advantage
Effective operations management gives you a competitive advantage over your competitors.
If operations management is carried out successfully, you will have better outputs, which means your products and service will become better and more tailored for the market.
This makes it possible for your organization to stand out from the competition and gain new customers.
5. Reduced cost of operations
The cost of producing products or rendering services will be significantly reduced when productivity, production of quality products, and customer satisfaction are adequately maximized.
Reduced cost of operations, in turn, leads to increased revenue. It also leads to waste reduction. Only effective operations management can make this happen.
Apart from these discussed above, operations management also helps boost technological advances within an organization, ensuring that there are correctly functioning processes and ensuring profitability.
By now, you already know how operations management can transform your organization. The next question is: if you want to implement operations management in your company, who should be in charge?
Whose job is it to ensure that operations are effectively managed? Let’s discuss this next.
Chapter 3: Roles And Responsibilities In Operations Management
There are two specific roles in operations management. These two people ensure that operations within an organization are effectively carried out.
There is the chief operating officer and the operations manager.
Chief Operating Officer (COO)
The chief operating officer is one of the highest-ranking executive personnel in an organization. This person is responsible for the day-to-day operations of the company. The COO is often the second in command and reports to the chief executive officer.
He/she works closely with the CEO to ensure that every part of the company is run smoothly.
This is the person responsible for operations management in a company.
An operations manager oversees product development, inventory, operations staffing, production, etc. The specific roles of an operations manager are usually dependent on the type of product or service the company produces.
However, there are general responsibilities of an operations manager, notwithstanding the industry. They include:
1. Cooperating with other departments
First, you need to note that operations are cross-departmental. That means an operations manager must work with other departments.
For example, an operations manager must work with the marketing team to understand the customers’ needs to ensure that the products manufactured or services rendered suit those needs.
Also, an operations manager must work with the purchasing department to understand the cost, quality issues, availability of materials, sources of supply, etc.
Having this information helps the operations manager maximize resources for optimal productivity during the production process.
2. Product design
An operations manager is involved in the product design process.
This involves creating a product or service that the company can sell to a customer. New ideas are created, old ideas are revived, and current ones are expanded to produce new products or offer new services.
The operations manager must ensure that both new and existing products are designed and produced to suit the needs of the consumers.
An operations manager should be able to make necessary forecasts.
Forecasting is all about making accurate predictions of events that will happen in the future based on what happened in the past.
One of the operations manager’s forecasting roles is to predict the consumer’s demand for the company’s products or services. He/she does this by relying on past and present data about the company’s products and services consumption.
This prediction helps the company know the volume of products they have to produce to meet market demand.
4. Delivery management
The operations manager oversees delivery management in an organization.
They make sure that goods and services are delivered to the consumer on time. But that’s not all.
The operations manager follows up with the consumers to confirm that the delivery was made and that the goods/services delivered are what the consumers ordered, and they met their functionality needs.
If the consumer is unsatisfied with the product or service or the delivery, the operations manager gets the feedback and forwards the complaint to the relevant departments.
5. Supply chain management
An operations manager manages the supply chain process.
Supply chain management is the management of the production process of a product, from raw materials to finished products. This includes everything from production, distribution, shipping, to the delivery of the products.
The operations manager’s job is to control the production process, inventory management, sales, and sourcing of suppliers that will supply the finished product at reasonable prices.
If this is done correctly, there will be reduced overhead costs, efficient production process, and timely delivery of products to the consumers.
6. Process improvement and optimization
The operations manager should constantly look for ways to improve the existing process.
They should analyze the operations process, figure out what they are doing right or wrong, check the results received from the current process, and look for ways to improve it.
For example, an operations manager should always be on the lookout for the best way to reduce the cost of production without tampering with the quality of the product.
Ideal Skills of an Operations Manager
For operations managers to effectively perform all the required duties, there are some skills they need to possess. These skills include:
1. Organization abilities
An operations manager should be able to supervise different projects without getting distracted or overwhelmed by the numerous processes. They should be able to plan, execute, and monitor every project from inception to finish without losing focus.
Staying organized is key. If not, uncompleted tasks will pile up, the company will lose valuable time, and important documents may get lost. And this can hinder the success of the project.
Good organizational skills are essential for production efficiency and maximum productivity.
2. People skills
An operations manager is constantly interacting with people. So, they must know how to relate with the organization’s employees, stakeholders, members of senior management, and even customers or clients.
Operations managers know how to communicate, listen, and relate with their colleagues, both on a personal and professional level. They need to show tolerance, understand people’s differences, and resolve conflicts between employees.
3. Coordination of processes
An operations manager must have good coordination skills.
They should know how to carry out specific activities simultaneously and switch between activities without affecting production negatively. Resources, activities, and time should be adequately integrated toward the achievement of the organization’s goals.
Coordination also involves dealing with crises and interruptions, quickly proffering solutions, and efficiently going back to the normal routine functions to prevent delay or further disruption.
4. Tech savviness
An operations manager needs to stay informed of all technological improvements within the industry, especially since we are in the age of rapidly advancing technologies.
This is the only way they can design processes that are efficient and tech compliant. Many modern organizations depend on technology to carry out their operations, giving them a competitive advantage in the market.
If the operations manager stays up to date with the latest tech innovations, they can use the innovations to improve internal processes. For example, processes that used to be conducted manually can become efficient automated processes.
Strategic Versus Tactical Operations Decisions
It is needless to say that there are important decisions that must be made to ensure that operations are smoothly carried out from start to finish.
There are two major kinds of operations decisions, namely strategic operations decisions and tactical operations decisions.
Strategic Operations Decisions
Strategic operations decisions are decisions that are strategic in nature. This means that they have long-term effects and consequences, and they usually require huge expenses and resource commitments.
Decisions that fall under strategic operations decisions include:
- Where facilities will be located
- How labor and equipment should be organized
- What kind of technology will be used
- How much long-term capacity and resources the organization will provide to meet consumers’ demand.
Tactical Operations Decisions
Unlike strategic decisions, tactical operations decisions have short- to medium-term effects on the organization.
These decisions can be changed or revised more easily than strategic decisions, and they involve less commitment of resources.
Some tactical operations decisions include:
- How vendors will be contracted
- How inventory will be managed
- How the workforce should be scheduled
- What procedures will ensure quality assurance
Tactical and strategic operations decisions make it possible for an organization to achieve a competitive advantage over its competitors, making it easier to attract and keep customers.
They also determine how well an organization will achieve its goals.
You should note that the role of an operations manager is centered around the operations systems of an organization. They must understand the nitty-gritty of operations systems to carry out their duties effectively.
So, let’s talk about operations systems.
Chapter 4: What Are Operations Systems?
The idea that operations management covers the production and delivery of products and services from beginning to end can seem overwhelming.
There are many activities involved. The question is: how do these activities or functions stay connected? You are about to find out how.
Let’s begin with what a system is.
What Is a System?
A system can be defined as an organized collection of integrated parts to accomplish a bigger goal. A system usually has several inputs that undergo certain processes and eventually become outputs, which together help to achieve the desired goal for that system.
Now that we have that cleared, what then is an operations system?
What Is an Operations System?
An operations system consists of the primary activities in operations management that are entirely and efficiently integrated to produce valuable goods and services to consumers.
An operations system, for example, includes:
- Inputs: this includes equipment, facilities, technologies, funding, best practices, customer feedback, the organization’s strategies, etc.
- Processes: this includes planning (product/service design, quality control, inventory, production) and managing productivity to produce high-quality goods and services.
- Outputs: These are the finished products and services
- Outcomes: Refer to satisfied customers
This is how a typical operations system looks.
Different Phases of Operations Systems
Going through the operations system from start to finish requires you to go through different phases, one phase leading to another to ensure the overall success of the systems.
Here are the three major phases of the operations system.
Phase 1: Planning Operations Systems
These are the activities involved in the first phase:
a. Product/service planning
The first thing you need to do is plan out your products or services to meet your customers’ needs.
To do this, carry out a market research to:
- Identify the needs of the different groups of customers and how those needs can be met with certain products and services.
- Identify how the new product or service should be best provided to your target markets.
- Identify your key competitors and your potential allies or collaborators.
- Suggest the best pricing terms for the product or service.
- Suggest how best to promote products or services to the different groups of customers.
The results from the research will help you define the product’s specifications. You can go ahead to manufacture a prototype of the product and also conduct a feasibility study.
b. Capacity planning
This involves specifying how many products or how much service will be manufactured or delivered and how often.
At this point, you have to predict and forecast the demand for these outcomes (your products or service). The market research you have done will be instrumental at this stage. To make things easier, you can hire an expert who knows all about developing that product or service.
When you are done planning, you should estimate the inputs needed to manufacture the product or deliver the service. This includes what type of materials to use, kind of expertise required, technologies needed, etc.
c. Facilities and layout planning
Planning out layout and facilities is important because they facilitate the activities necessary for manufacturing a product or delivering a service. Also, facilities and their maintenance are one of the most expensive inputs you need.
d. Job and work design
Work design entails making an arrangement in the workplace that helps employees overcome job dissatisfaction or alienation caused by mechanical and repetitive tasks.
If you have a work design in place, it boosts productivity. It also promotes job satisfaction among the employees.
e. Workflow management
Workflow management involves mapping out workflow within a given process, finding redundant tasks, automating the process, and identifying challenges and areas for improvement.
Your workflow diagram or map should show the flow of activities through the system, including inputs, processes involved, outputs, and outcomes. These maps are sometimes called operations management process maps.
Phase 2: Planning Operations, Inventory, and Quality Control
The activities involved in this phase include:
a. Production planning
Production is the part in the operations system where the inputs get transformed into outputs (products/services).
Here are some things you should consider while planning this process:
- Are there technologies available that could make the production process faster and easier?
- Are there best practices that have been suggested by experts in the industry about that product or service?
- What components are needed to manufacture the product or deliver that service?
- What are the costs incurred in creating the product or service?
- What is the estimated demand for the product or service within the next few months or one year?
You should also create a detailed map of the activities required to produce, assemble, and test the product or service before it is delivered to the consumers.
Scheduling is essential in ensuring that the operations system is highly effective. You need to coordinate the timing of activities to organize, monitor, and optimize the equipment, people, and production activities.
With proper scheduling, you will have a productive operations system.
c. Supply chain management
Supply chain management consists of a system of organizations, activities, people, resources, and information involved in getting a product or service to a customer from a supplier.
Activities involved in the supply chain include product development, production, sourcing, logistics, and the information systems required to coordinate these activities.
Supply chain management aims to achieve a competitive advantage in the market and maximize customer value.
d. Inventory management
Inventory management is a part of supply chain management.
It oversees inventory items right from the manufacturers to where they are stored, down to where they are sold.
Inventory includes raw materials, completed products or services, supplies, and works in progress. There should be a balance between the size of the inventory of items and the rate they are sold.
Having too many items in inventory means that the organization has not recovered its costs from sales in time. It might also mean that the cost of storage is high.
On the other hand, insufficient inventory items means the organization cannot meet consumer demand, leading to a loss in revenue.
e. Service design
Service design is the act of planning and organizing every component of service, including people, infrastructure, communication, and other materials, to improve the quality of service and the interaction between the service provider and its customers.
Your organization must become good at attracting, satisfying, and retaining customers better than your competitors are (if you do not want to lose customers to your competitors!). It would be best if you implemented a carefully designed customer service plan to achieve this.
f. Quality control
Quality control is that part of quality management that ensures that all the quality requirements of a product/service are fulfilled. It plays a significant role in operations management, especially making sure that improvement occurs continuously.
Recent quality advancements, like total quality management and benchmarking, have led to improvements in operations management as well.
Phase 3: Managing Productivity
In operations management, productivity is the ratio of the output to the input of the operations system. The higher the ratio, the more productive the system and vice versa.
In manufacturing industries, one of the standard measures of productivity is output per hour.
The factors that drive productivity are usually job-related, resource-related, and environment-related.
For a detailed overview of the different methods to improve productivity, check out this handbook: Productivity Management: A Practical Handbook.
These three phases of operations systems must be complete for operations management to be effective. The question now is: can the same operating system work for both products and services?
Let’s find out next.
Chapter 5: Service Operations
Even though operations management coversboth services and products, the operational system used in rendering services is different from those used in product production.
Many times, service operations encounter many more difficulties than in products or tangible goods. This is not surprising, especially since operations management was initially used in manufacturing industries before being used in services.
This is why service operations need unique operational considerations.
What Are Services?
Services can be described as beneficial activities that are offered to consumers. They are usually transactions that do not require physical products transferred from seller to buyer.
There are five features of services that make the concept easier to understand. They are:
- Intangibility: They are an occurrence, more like an activity that is experienced, not a tangible good. It cannot be touched, looked at, handled, or shipped.
- Inventory: Services either occur or do not occur. They are not items that can be stored for later use.
- Inseparability: Unlike tangible goods, services cannot be separated or joined into different parts.
- Inconsistency: Services are unique. Each service rendered differs from the next, unlike physical products that look the same every time. For example, even though two doctors treat the same ailment, the way both doctors will interact with patients and administer treatment will differ.
- Involvement: In services, consumers are usually directly involved in the delivery of the service. Therapy, for example, has the consumer (patient) at the center of the service, and every instance of the service is unique, based on the individual involved.
Now you know what services are and how they are different from products. Our next stop is learning how to manage service operations.
Managing Service Operations
Service operations apply the rules of operations management to a service, that is, an intangible good.
It is pretty different from managing a product because, without a tangible good (product) to manufacture and ship, operations managers focus on executing activities to fill a consumer need.
Service operations involve several considerations, and many of them are unique to individual organizations or industries. However, there are core operational decisions that service management specialties consider. They include:
If you have a service-based company, choosing where to open your facility, how big the facility should be, and how efficiently space can be used in relation to its cost are important things to consider.
Different factors determine the location of a facility. For example, a doctor has to choose her facility depending on how many patients she expects to be in the hospital at any given time, how many employees she needs to attend to those patients, what kind of comfort her patients will experience when they come in, etc.
All these will determine what area the hospital will be located in and how big it will be.
Service operators must know when a service should start and how long it will take for the service to be completed.
Maximizing output through proper planning plays a vital role in the operational management of services. It will minimize opportunity costs and increase revenue.
For example, in a dentist’s office, if patients came in whenever they wanted, there would be periods when the staff would have nothing to do, but would still have to stay at the office and be paid for doing nothing.
There would also be times when there would be too much to do, more than the employees could handle. The dentist might lose capital and customers in the process.
A service operations manager has to ensure that there is a high-quality output on all services rendered.
This can be pretty complex because most services are unique. The execution of each service is measured relative to that instance and the specific customer the service is delivered to.
Tools like NPS surveys can be very useful in measuring individual satisfaction and optimizing to make things easier. Operations managers consider the comments made by customers and find a way to infuse the feedback into future services.
If you want to learn more about operations and the activities involved, both for services and manufacturing, bookmark this slideshow for later.
Principles Of Operations Management
Another important aspect of operations management that every operations manager needs to know is the principles of operations management.
Two major approaches will guide you in making decisions about planning, designing, and organizing processes.
Both sets of principles focus on an optimized input of materials and resources to ensure the delivery of products and services and help the organization deliver better results.
The 16 Principles of Operations Management by Dr. Richard Schonberger
Dr. Richard Schonberger is a renowned researcher of American manufacturing. He is the author of the book “World Class Manufacturing: The Next Decade“, and is well known for his set of 16 customer-focused principles of operations management.
Here they are:
- Team up with customers: Know what they use and what they buy. Let this feedback reflect in the production of your products.
- Continual, rapid improvement: Focus on improving your products/service continuously so that you can deliver the best quality.
- Unified purpose: Involve your employees in strategic conversations. Ensure that they understand the purpose of their work and make suggestions about what should be changed.
- Know the competition: Know what competitive advantage your competitors have over you. Know their best practices and who their customers are.
- Focus: Focus on producing only what your customers demand.
- Organize resources: Organize resources in a way that operations are close to customer demand.
- Invest in H.R.: Give more rewards and recognition. Make sure there are cross-training options and improvements in workplace safety.
- Maintain equipment: Maintain and improve on current assets first instead of getting new ones.
- Simple “best” equipment: Keep your equipment simple and flexible.
- Minimize human error: Improve the equipment workers use and keep frontline employees accountable.
- Cut times: Reduce the product path to the consumer by speeding up processes and delivery.
- Cut setup: Get all tools ready for on-demand production and be prepared to support different processes.
- Pull system: Reduce waste by producing on demand and improving workflow.
- Total quality control: Use only the best people, materials, and processes.
- Fix causes: Control and fix the root causes that affect cost and performance negatively.
- Visibility management: Promote the organization’s accomplishments. Let the market know how you have improved.
The 10 Principles of Operations Management by Randall Schaeffer
Randall Schaeffer is a manufacturing and operations management professional. He is a regular speaker at conferences organized by the American Production and Inventory Control Society (APICS), a leading U.S. association of supply chain and operations management.
He explained the ten principles of operations management at the 2007 APICS conference. He said that U.S. manufacturing companies were struggling because they violated these principles.
- Reality: Operations management should not focus on tools and techniques because no tool can present a universal solution. Instead, it should focus on the problem.
- Organization: Manufacturing processes are interconnected. These processes must be organized into a coherent whole. Every element within these processes should be predictable and consistent to achieve a similar outcome in profits.
- Fundamentals: Eighty percent of success is from strict adherence to the fundamentals by maintaining records and disciplines. Only 20% is from applying new techniques to processes.
- Accountability: Workers should be held accountable. There should be rules and metrics that define the responsibilities of the employees. Also, the managers should regularly check if goals are met, and workers are carrying out their duties as they should.
- Variance: Variance should be encouraged, i.e., there should be varying processes. If managed properly, it could be a huge source of creativity.
- Causality: Problems are only effects of underlying causes. Get to the root cause and fix it. If not, the problems will appear again.
- Managed passion: Employees with a passion for the job can drive company growth. Watch out for passion in employees. It can be instilled by the operations manager if it is not coming naturally.
- Humility: Managers should acknowledge their limitations and get help when needed instead of carrying out costly trial-and-error processes.
- Success: The market is ever-changing, and what is considered success will also change over time. Revise your processes regularly and ensure that your results fit into the market standard of success in that period.
- Change: There will alwaysbe new solutions, techniques, technologies, etc. Do not stick to your old ways of doing things. Embrace the change as they come and incorporate them effectively into your operations.
These are the basic principles that should guide operations in any organization. But apart from principles, some theories can help you manage your operations.
Let’s explore those theories next.
Four Popular Theories To Managing Your Operations
Four major theories can help you manage your operations. They include:
1. Business process management (BPM)
BPM involves the constant analysis, improvement, and automation of processes. It is not something you do once and forget. It has to be continuous. You should always be on the lookout for potential improvements.
BPM has a lifecycle that consists of the steps to take when working on any process. Below are the steps.
Designing a process helps to outline and define the process. Here you identify the process, figure out where it begins, what it is made of, and where it ends.
This is where you put the identified process down on paper. This makes it easier to analyze. If it is a simple process, you can use a workflow diagram. If it is not, you can opt for one of the many business process mapping techniques.
Once your workflow diagram is ready, you can begin analysis. Check for steps within the process that do not add value, and look for a way to remove these steps. Also, figure out which steps can be automated using software.
It is impossible to improve a process if you do not know how well it is performing. You should be able to tell if the changes you made had a positive impact on the process or not. This requires close monitoring.
- Improving or automating
Here you use the insights from analysis and monitoring to make necessary changes to the process. You can improve the process either by tweaking the process steps or automating certain steps using software.
2. Business process reengineering
This is a very radical approach to designing core processes.
This approach requires you to take everything you have used before, throw it out, and start again from scratch. It helps to revamp your organization from the ground up.
In most cases, business process reengineering is done with the help of technology.
Business process reengineering can help foster innovation within the organization and speed up improvements on whatever selected measure you are working on. When starting from scratch, focus on the different ways you can add value to your customer.
3. Six Sigma
Motorola, in mid-1980, started improving processes using a data-driven approach.
This approach is based on the Six Sigma measure, which focuses on minimizing deficit rates. The main idea behind this concept is this: only 3.4 deficiencies should be found in a million outputs.
With this in place, production efficiency is nearly 100%. Unlike the previous two theories, this centers around the manufacturing process.
When there is a problem, the Six Sigma approach uses a five-step method called DMAIC to handle the situation. DMAIC is an acronym for define, measure, analyze, improve, and control.
This is a very important trend because it improves the quality of products and services and reduces the cost of production while focusing on customer satisfaction.
Here are the five different steps that make up DMAIC:
- Define: List out the issues with the process. Decide on the improvement goals and what tools and resources will be needed to achieve these goals.
- Measure: Study the process and measure its performance. With the metrics in hand, you will have a better idea of how to improve the process.
- Analysis: Figure out the root cause of the problem.
- Improvement: Figure out potential solutions to the problems.
- Control: Implement the solutions on a small scale and see how they perform before making the changes permanent.
4. Supply chain management
Supply chain management is a relatively recent theory. It originated in 1982, but the term was not commonly used until the 1990s.
It oversees every part of a product or service, from its creation to its sale. It involves the strategic process by which materials, information, resources, and finished goods flow from suppliers to business and consumers.
Keeping the supply chain healthy is essential because it affects production efficiency, costs, and profits.
The good thing with these theories is that they are very practical, and they can be easily infused into your operations. They even work better when you apply them alongside some operations management strategies.
Keep on reading to find out the key strategies of operations management.
Chapter 6: Operations Management Strategies
The operations manager must develop strategies that will make the production process much more productive.
Here are some key operations management strategies:
- Process design: This involves researching, forecasting, and developing a sound process.
- Use of data: This involves using analytics for planning and adjustments of the operations. It is vital for decision-making.
- Inventory analysis involves using Pareto Analysis (also called ABC analysis) to manage and analyze inventory. This type of analysis divides inventory into three categories, namely A, B, and C. “A” contains items with the most value and tightest controls, while “C” has the least.
- Forecasting and goal setting: This involves setting goals for operations and making predictions. Good forecasting combines the analysis of changing conditions with historical data.
- Collaboration among departments: Good communication and collaboration make it easy for the operations management department to work with other departments, like finance, sales, human resources, marketing, etc.
- Being green: Your operations should be ecologically friendly. It is now a legal necessity, especially in manufacturing processes.
- Managing people: Despite the numerous technological advancements, people remain vital to operations. An operations manager should be able to manage his workers.
To help you further understand operations management strategies and the processes involved, take a few minutes to watch this video:
With your theories and strategies in place, let’s check out some trends you can adopt to keep your organization relevant in the marketplace.
Recent Trends In Operations Management
The market is constantly changing.
Regularly, we experience new trends in the labor market, ever-changing environmental concerns, digitization of processes, and more. Therefore, it is necessary to keep up with recent trends in operations management and learn new and innovative ways to manage operations so you can keep up with the competition.
Here are some recent trends that have made a significant impact on operations management:
Lean and agile manufacturing
The term “lean manufacturing” was established by the Toyota Corporation, and it has become a mainstream trend in the manufacturing industry.
Lean manufacturing requires you to make constant improvements to processes to reduce inventory and waste and maximize the output of low-cost but high-quality products and services.
However, there is a new twist to the concept. That is where the word “agile” comes in. It is also called “the new lean.” Agile manufacturing has its origin in software development. This concept gives room for product development done in small increments but with really fast decision-making.
The adoption of this concept became necessary when processes started becoming complex. Using these concepts together will help you navigate the unpredictable changes in market demand and pivot very quickly.
Reconfigurable manufacturing system (RMS)
RMS is a production system that is designed for flexibility with sudden market changes. It is used with different functionalities within a product family. Using this approach helps you make quick adjustments in production cost-effectively.
This is a recent trend that has impacted the human resources management activities in operations. It allows for the increasing involvement of employees in the planning process.
Listening to employees’ opinions spurs up new ideas and a different perspective on what problems should be solved and how to go about it. You also get new insights on how to make the operations within the organization more effective.
Thanks to constraining environmental regulations, businesses have to reduce their harmful impact on the environment while still growing.
This issue affects all levels of operations and therefore needs the insights of operations management on ways an organization can meet these ever-changing expectations.
Sustainability helps you maintain ecologically-minded practices under changing laws.
Behavioral operations management
Because of its complex nature, operations management is a field that is prone to frequent deviances in problem-solving.
Behavioral operations management is a trending research area that studies the impact of human behavior on operations management. It helps to understand the most critical factors that influence an operations manager’s decisions. It also provides efficient problem-solving methods to managers.
This, in turn, helps managers make rational decisions, thereby improving the overall efficiency of operations.
At this point, you have almost everything you need to manage operations in your organization successfully. However, this would not be complete if I did not prepare you for some issues you are bound to face in operations management.
Major Issues In Operations
An operations manager will encounter some issues while ensuring the production of quality goods and services within the time frames necessary to meet the organization’s goals.
Some of the issues are basic. An operations manager has to deal with problems, no matter what operations system he/she adopts.
1. Designing the system
The process of designing an operations system begins with product development.
The product development stage is where you determine the features of the product or service that will be sold. You must access your customers’ needs, which will be incorporated into the product design.
Equipment and facilities that will be used in production, and the information systems needed to control and monitor performance, are parts of the system design process.
Of all the structural decisions an operations manager makes, the one that has the most significant impact on the success of the operations is the one that answers the question: How will the product be made?
In designing the system, the operations manager has to do:
Product design helps determine the characteristics of a product, the product’s cost and quality, and the product’s functions and performance.
All these are important factors that customers consider before making buying decisions.
There are product design models you can use, such as quality function deployment (QFD). QFD is a set of planning routines used to improve a product’s design by focusing the design efforts on the customer’s needs.
Process design determines how the product/service will be produced.
The process design decision comprises two major parts: a scale economy component and a technical component.
The scale economy component involves using the right number of tools and equipment to make the workforce more productive.
You have to determine:
- if the demand for the product is large enough to justify its mass production,
- if there is enough variety in consumer demand to require flexible production systems, and
- if demand for the product is so small that it cannot support a dedicated production facility.
On the other hand, the technical component involves selecting equipment and selecting a sequence for various phases of operational production.
Facility design includes decisions about the layout and capacity of the production facility.
Facility layout refers to how the workspace within a facility is arranged. It determines which work areas or departments should be close to one another so that workflow is seamless and processes are carried out quickly.
Capacity planning involves deciding the facility’s capacity, estimating demand, and deciding how you enhance the organization’s capacity to respond to consumer’s demands.
Facility location determines the placement of a facility, putting into consideration its customers and suppliers. It requires a long-term commitment of resources that cannot be quickly or inexpensively changed.
When making this decision, you must consider the convenience of your customers, government incentives, quality of life for employees, labor environment, operating transportation costs, and initial capital needed to secure land and facilities.
The system you have designed needs to be implemented.
If the system design was done correctly, developing an implementation plan to guide activities during the implementation phase will be easy.
Nevertheless, making changes to your plan once implementation begins is inevitable. New decisions will be made while old ones will be updated during the implementation period. For example, the prices of materials can increase. This can affect other parts of the production. If this happens, changes to the previously decided amount have to be made.
3. Planning and forecasting
An efficient production system requires a lot of planning.
You have to make long-term decisions like determining the number of facilities needed to meet the consumers’ needs, ways technological change can affect your production method, workforce size, etc.
Long-term decisions also include developing training programs, improving delivery systems, working with suppliers to improve product quality, and determining the number of materials to order on an aggregate basis.
The time range for long-term planning differs with the industry, and it is dependent on the size and complexity of proposed changes.
On the other hand, short-term planning is concerned with production plans for specific job orders. You determine who will do the work, when it will start and finish, and what form of transportation will be used to deliver the product or service once the order is completed.
4. Managing the system
This involves working with people to stir up participation and improve performance within the organization. Teamwork and participative management are essential to the success of operations.
In managing the system, material management and quality are two major areas of concern.
Material management involves decisions concerning the procurement, handling, control, storage, and distribution of materials. It is very important because, in many organizations, the cost of materials comprises more than 50% of the entire production cost.
Here you also address questions regarding quantities and timing of material orders, and weigh the qualities of several suppliers.
These are basic issues you should anticipate. But the good news is that you can build success with operations, and I will show you how next.
Chapter 7: How To Build Success In Operations
The first step to building success with operations is to have a complete understanding of operations, especially operations within your organization.
To fully understand operations and the role they play in the success of an organization, you need first to understand the strategic nature of operations, the impact technology will have on performance and the competitive nature of the marketplace.
You need to achieve efficient organizational operations if you want to have a competitive advantage in the marketplace. You need to know what factors influence your customers’ buying decisions.
For most goods and services, factors like price, quality, features, product performance, product variety, and product availability are essential. They have a significant influence on the buying decision.
Operations greatly influence these factors. For example, when productivity is maximized, product costs reduce, leading to a reduced product price.
Operations can be a significant factor when equipment, facilities, and employee training are seen as a way to achieve the organization’s objectives instead of departmental objectives.
The criteria for judging the effectiveness of operations is no longer cost control. It is global performance measurements in areas like product quality, operational flexibility, customer service, product performance, variety, etc.
In many industries, an essential component of operations flexibility, especially in today’s business environment, is technological knowledge. Technological advances make it possible to build products with better quality and greater performance using fewer resources. This makes the product a high-valued commodity in the market.
Today, the elements of operations management are strategic. It utilizes operations research tools and techniques and management science to solve problems and make decisions in a systematic manner.
As operations management develops, it will increasingly interact with other functional areas to create answers to complex interdisciplinary problems. This interaction, just like the different factors I have talked about in this chapter, is essential to organizations’ long-term business success.
We are getting to the end of this ride, but before I conclude, let us talk about how you can ultimately make operations processes fast, super easy, and yet very productive.
Using Software To Enhance Operations Management
Like I have mentioned, an essential aspect of operations management is the continuous improvement of processes.
One way to increase operations efficiency and productivity is by automating your processes with the help of software.
If all your operations are carried out manually, it can be very tedious. You have to map out business processes and store them manually, continuously track process metrics manually, and your employees will not always follow best practices of the process.
Bottom line is: you need to use software to run your operations. Try using BPM software. And make sure you are using a recently developed and improved one.
Old BPM software is broken and tired, and it never really works for business users. This is why:
- Individual users without I.T. background now use software: Old BPM was always bought by the I.T. department, who generally didn’t care about user experience. Now, user experience is key because all individuals now use software, even those with no I.T. experience.
- Cloud tools are now free to use anytime: Old BPM required you to call the I.T. department, answer numerous questions, and wait for an extended period to get the tools you want running.
- People now share workflow charts with clients: With Old BPM, you could only automate internal processes. Now, you have software that allows you to map all your processes and share your workflow with clients.
- People want to integrate cloud tools without the help of I.T.: Old BPM required the help of engineers to write code so you could make a simple integration. There is now software that allows you to do that with a drag-and-drop function.
- People want to work on their phones: Giant, clunky flow charts used in old BPM are outdated because they do not fit phone screens. This makes it impossible to work with your phone.
- People want to enjoy all the benefits of the cloud: Old BPM was not designed for the cloud. So it deprives you of many benefits of the cloud.
- Small businesses also need process management: Old BPM is complicated and expensive. Small companies could not afford it; only large organizations could. So, many companies were left out.
- People are interested in artificial intelligence (A.I.) but do not know where to start: It was impossible to use old BPM without the help of engineers. However, with the advent of cloud-born software like SweetProcess, it is straightforward to use A.I. to automate your operations processes even without any tech experience.
If you do not want to experience all these old BPM restraints, you need software like SweetProcess to optimize your operations management.
Why you need SweetProcess
The whole process of operations management can be very overwhelming for an operations manager.
You have to ensure that the supply chain is intact, ensure products and services are produced on time, and that they meet consumers’ needs, manage your workers, interact with people from other departments, make sure every step of production is carried out without a hitch, and so on.
And there is pressure to ensure that production is done with maximum productivity.
How do you do all these with ease while maximizing resources, productivity, and profit? The answer is SweetProcess.
How does SweetProcess make your life easier as an operations manager?
With SweetProcess, you can:
Map out and document your operations process
You can easily map out your operations process however you want. This makes the planning process very easy and helps your teammates understand your plans for the operations.
Not only that, but you can also document everything that pertains to your project, however you want—through text or visuals. SweetProcess allows you to create a knowledge base that every team member can access whenever they want.
Collaborate with your team in real time
You can easily collaborate with your team and other departments involved throughout the operations process. You can get your team members working together despite their locations.
Your team members can update their progress alongside tasks completed. You can also discuss your progress, changes to be made, and how these changes affect the productivity of your operations, all within the software.
Track and control the progress of your operations and conduct a productive analysis
With SweetProcess, tracking your progress is very easy. You can see your progress at every stage of the operations, which helps you determine changes to be made, activities to be fast-tracked, and decisions that will ensure you achieve the goals set for your operations.
Do all these with any device and without any technical help
You can do all these on whichever device you choose, making it easy to work even when you are on the move. It has a user-friendly interface that is easy to navigate with ease. So your team members (even those with no technical skills) can easily use the software without seeking technical help.
Access the SweetProcess support team whenever you need help
SweetProcess has a dedicated customer support team you can reach out to whenever you need help. All you need to do is send an email or place a call, and you get all the help you need immediately.
Optiable Case Study
Let’s take a look at how CEO of Optiable, Craig Bayer, improved performance and increased productivity at Optiable once he began using SweetProcess.
Before SweetProcess, Craig and his team found it hard to execute tasks, even the simplest ones. Worse still, when tasks were completed, the results had to be verified multiple times because tasks were not being carried out efficiently. The stress of micromanaging his employees became taxing and prevented him from executing other vital tasks.
However, things took a different turn once he began using SweetProcess. He was able to document business processes effectively, making it easier for his employees to understand and access them. He was also able to organize and streamline their workflow to ensure efficiency and automate recurring tasks, especially minor but significant tasks that could easily be forgotten.
After he kept all these in place, with the help of SweetProcess, the company experienced increased productivity and a boost in employee performance. More projects were completed with brilliant outcomes.
You, too, can enjoy the numerous benefits that come with SweetProcess. The best part is that you can start for FREE. All you need to do is sign up for the 14-day free trial. You don’t even need a credit card.
You now know everything you need to kickstart operations management in your organization and ensure its success. You now know what strategies to apply, principles to follow, systems to adopt, trends to consider, and decisions to make to maximize productivity throughout the operations process.
If done correctly, operations management will increase productivity and increase profits while reducing costs of productions. And with software like SweetProcess, operations management becomes more straightforward.
I know this is a lot to take in.
To make things easier for you, I have created an infographic of the main operations management strategies you can adopt to ensure successful operations.
You can always go through the infographics if you need help instead of rereading the whole article. And it is free.
All you have to do is click on the link below to download it.