Operations Management

This Chapter outlines the fundamentals of operations management, examining the details of planning and control and explores the key aspects of quality management. Operations management is essentially the organisation of resources, such as raw material, people, or equipment to either manufacture or deliver a product or service. If effectively carried out it can provide for a reduction in costs, overheads and investment requirements due to increased efficiency whilst also increasing turnover due to higher customer satisfaction levels. Good operations management approaches can also create the working culture needed to support innovation and business growth.

The Chapter outlines the core elements of process design, noting how operations are fundamentally concerned with the transformation of inputs (such as raw materials, equipment, staff and information) to outputs. The core characteristics of volume, variety, variation and visibility are discussed, noting the importance of managing trade-offs between these elements in order to build the required organisational balance needed to achieve strategic goals. This supports a subsequent examination of the core process types (one-off/project based, job processes, batch, mass production and continuous flow) and the business constructs they are likely to support. In doing so, the importance of establishing appropriate performance metrics is highlighted, along with relevant planning and control mechanisms.

In discussing planning and control, the Chapter reviews inventory management i.e. the management of stock in all of its various forms. Whilst inventory provides a cushion against uncertainty, it also introduces cost implications such as warehousing capabilities and administration/control effort. The importance of inventory planning and control in compensating for the differences in timing between the supply of products and services and the demand for them is therefore stressed. In doing so, the different types of inventory are reviewed - buffer or safety stocks, cycle inventory, decoupling inventory, anticipation inventory and pipeline inventory.

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The tools and techniques of inventory management such as Economic Order Quantity (EOQ) and Economic Batch Quantity (EBQ) are also noted, along with a discussion around the importance of modern technology adoption/adaption to inventory planning and operations management. However, in reviewing such systems, the need to ensure that they are viewed alongside the tacit knowledge (i.e. skills and experience) of relevant staff to accurately meet operational requirements is highlighted.

The Chapter builds appropriate linkages between supply chain management and operations management, noting the need to work closely with supply chain managers as their activities will shape inventory requirements. Supply chains should be designed to operate fluidly/coherently so that the necessary raw materials or products are available when required in the right location and the right quantity for the next step in either the internal or external activity chain. This examination of supply chain management principles sets the context for an outline review of just-in-time (JIT) and ‘Lean’ approaches.

The Chapter closes with a section emphasising the importance of quality aspects to operations management. The need to take both a long-term and short-term view of quality requirements is discussed, along with the need to understand consumer perceptions of value and quality.


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