Strategic Role of Operations Management

Operations management (OM) applies to every type of organization. OM encompasses every

aspect of production, from inspiration to implementation. It is the "who, what, where, when
and why" that goes into every finished product and provided service.

What is Operations Management?

The definition of operations management is the activities that relate to the creation of goods
and services through the transformation of inputs into outputs. One of the key elements of
OM is production, or the creation of goods and services. In the case of manufacturing, the
output is very obvious, because it produces a product. You know the end product in a Harley
manufacturing plant is going to be a Harley Davidson motorcycle. It is tangible.

The production of less tangible products, such as booking a hotel room, is services. These
products are less obvious or "hidden" from the public or even the customer. Regardless of
tangibility, any activity that goes into production is a function of operations management.

Why study OM?

Operations management is one of the three functions every organization performs to achieve
its goals. These are not only for production, but for survival in the marketplace.

1. Marketing generates the demand for the product. Unless consumers know it is available,
they might not want it or know they need it. Marketing puts the product or service within
view and explains how it benefits the consumer.

2. Production/operations create the product. Without the product, there is no way to create or
meet demand.

3. Finance/accounting collects money, pays the bills, and tracks how well the organization is
doing in regard to its bottom line. Yet without a product and a demand, this function is
unnecessary.

Every type of business – hospitals, nonprofits, trucking companies, factories, etc. – has these
components.

So we study operations management for four main reasons, no matter what industry:
1. To learn how people organize themselves to be productive and profitable at their chosen
enterprise

2. To learn how goods and services are produced

3. To learn what operations managers do so it can be put to use in numerous opportunities

4. To learn what makes it such a costly part of an organization, and how to manage those
costs through informed decisions

What Operations Managers Do

The reason all good managers study operations management is to effectively accomplish the
next layer of basic functions in the management process. Those are: planning, organizing,
staffing, leading, and controlling.

To do any of those things, operations managers need to evaluate all the information at hand
and decide on a course of action. There are seven major decisions in which operations
managers play an integral part. Each are summarized here, .

1. Product and Service Management. What good or service do we offer, and what is the
design of it?

2. Operations and Supply Chain Management. Should we make -- or buy -- what we need to
produce our good or service? If we purchase it, who can supply it?

3. Inventory Management. How much should we keep on hand? When do we re-order?

4. Forecasting and Capacity Planning. What does the short-term and long-term schedule look
like? How much can we make in what period of time?

5. Operations Scheduling. What do we need for materials? Personnel?

6. Management of Quality. What quality system should we use? What impact does quality
have on our organization?

7. Facilities Planning and Management.