BM2106

OPERATIONS MANAGEMENT AND THE ORGANIZATION

IMPORTANCE OF OPERATIONS MANAGEMENT (Stevenson, 2021)
Operations is the part of a business organization that is responsible for producing goods and/or services.
Goods are physical items that include raw materials, parts, subassemblies such as motherboards that go
into computers, and final products such as cell phones and automobiles. Services are activities that
provide some combination of time, location, form, or psychological value.

The operations function in business can also be viewed as the collective success or failure of companies’
operations functions that impact the ability of a nation to compete with other countries and on the
nation’s economy. The ideal situation for a business organization is to achieve an economic match of
supply and demand. Excessive supply or capacity is wasteful and costly; having too little means lost
opportunity and possible customer dissatisfaction. The key functions on the supply side are operations
and supply chains and sales and marketing on the demand side. While the operations function is
responsible for producing products and/or delivering services, it needs support and input from other areas
of the organization.

Business organizations have three (3) basic functional areas, which are the following:

• Finance – It is responsible for securing financial resources at favorable prices, allocating those
resources throughout the organization, budgeting, analyzing investment proposals, and providing
funds for operations.
• Marketing – The business function responsible for assessing consumers’ wants and needs, and selling
and promoting the organization’s goods or services.
• Operations – This is responsible for producing the goods or providing the services offered by the
organization.

It doesn’t matter whether the business is a retail store, hospital, manufacturing firm, or other business
types; all business organizations have these three (3) basic functions.

Operations Management is the management of systems or processes that create and/or provide services
(Stevenson, 2021). It is chiefly concerned with planning, organizing, and servicing. As such, it is delivery-
focused, ensuring that an organization successfully turns inputs to outputs in an efficient manner. The
inputs themselves could represent anything from materials, equipment, and technology to human
resources such as staff or workers (Dhoul, 2021).

To maximize revenues, the business should stock fast-moving items that customers are willing and happy
to pay for. The business should also negotiate friendly credit terms with suppliers to get the required
products on credit to prevent stock-outs (the situation where an item is out of stock).

Operations and supply chains are intrinsically linked, and no business organization could exist without
both. A supply chain is the sequence of organizations involved in producing and delivering a product or
service.

Figure 1. Simple product supply chain

Source: Operations Management, (14th ed), p. 4

01 Handout 1 *Property of STI

 courseware.feedback@sti.edu Page 1 of 7
 BM2106

The sequence begins with basic suppliers of raw materials and extends all the way to the final customer.
Facilities might include warehouses, factories, processing centers, offices, distribution centers, and retail
outlets. Functions and activities include forecasting, purchasing, inventory management, information
management, quality assurance, scheduling, production, distribution, delivery, and customer service.

The essence of the operations function is to add value during the transformation process. Value-added is
the term used to describe the difference between the cost of inputs and the value or price of outputs.

• In nonprofit organizations, outputs (such as highway construction, police and fire protection) are
their value to society. Thus, the greater the value-added, the greater the effectiveness of these
operations.
• In for-profit organizations, the value of outputs is measured by the prices that customers are
willing to pay for those goods or services. Firms use the money generated by value-added for
research and development, investment in new facilities and equipment, worker salaries, and
profits. Consequently, the greater the value-added, the greater the amount of funds available for
these purposes.

Many factors affect the design and management of operations systems. Among these factors are the
degree of involvement of customers in the process and the degree to which technology is used to produce
and/or deliver a product or service.

1. The greater the degree of customer involvement, the more challenging it can be to design and
manage the operation.
2. Technology choices can significantly impact productivity, costs, flexibility, quality, and customer
satisfaction.

Figure 2. The operations function

The operations function starts with the input or the resources mobilized, then proceeds to the
transformation or conversion process (where the input is converted into output) and produces the
output or the product or service. The output is then marketed to or experienced by the customers
(Morato, 2016).

Key Benefits of Effective Operations Management (Exeed College, 2021)

1. Product Quality. Operations management sees that the quality of products or goods will suit
customers’ standards on and after delivery. When a product is of quality, it gives you an edge compared
to your competitors.

01 Handout 1 *Property of STI

 courseware.feedback@sti.edu Page 2 of 7
 BM2106

2. Productivity. It is defined as the ratio of input to output and is the only way to verify employees’ input.
Operations management ensures appropriate staffing of employees to resources to get maximum
results.
3. Customer Satisfaction. One of the best feelings for a manager or retailer is achieving the utmost
satisfaction from their customers. Operations management rightly ensures this coupled with a quality
product. Customers make an organization thrive, and they must be treated well in every way necessary
and possible.
4. Reduced Operating Cost. Through productivity, quality products, and customer satisfaction, the cost
incurred on product servicing is maximally reduced. It simultaneously leads to increased revenue. Only
operations management can make this possible. Waste reduction, or the practice of preventing waste
by decreasing or eliminating the amount of materials initially used (Clinton County, n.d.), is an efficient
activity in reducing operating costs. The exact number/size of products is produced as requested via
proper operations management.

CAREER OPPORTUNITIES AND PROFESSIONAL SOCIETIES (Stevenson, 2021)

There are many career opportunities in the operations management and supply chain fields. Among the
numerous job titles are the following:

• Operations Manager
• Production Analyst
• Production Manager
• Inventory Manager
• Purchasing Manager
• Schedule Coordinator
• Distribution manager
• Supply chain manager
• Quality Analyst
• Quality Manager

Other titles include:

• Office Manager
• Store Manager
• Service Manager

People who work in the operations field should have a skill set that includes people and knowledge skills.
People skills are the ability to communicate and deal with people effectively, especially in business. These
include political awareness, mentoring ability and collaboration, negotiation, and communication skills.
Meanwhile, knowledge skills are necessary for credibility and sound decision-making. These include
product and/or service knowledge, process knowledge, industry, global knowledge, financial and
accounting skills, and project management skills.

Production Supervisor Supply Chain Manager Social Media Product Manager

• Manage a production staff of • Have general knowledge of • Identify ways to increase
10-20 materials management, consumer engagement
information systems, and
basic statistics.

01 Handout 1 *Property of STI

 courseware.feedback@sti.edu Page 3 of 7
 BM2106

Production Supervisor Supply Chain Manager Social Media Product Manager

• Ensure the department
meets daily goals through the
management of productivity
• Enforce safety policies
• Coordinate work between
departments.
• Have strong problem-solving
skills, and strong written and
oral communication skills
Table 1. Sample operations management job descriptions
• Direct, monitor, evaluate, • Analyze the key performance
and motivate employee
performance.
• Be knowledgeable about
shipping regulations.
• Manage budgetary accounts.
• Manage projects.
indicators and recommend
improvements
• Lead cross-functional teams
to define product
specifications
• Collaborate with design and
technical team to create key
product improvements
• Develop requirements for
new website enhancements
• Monitor the competition to
identify the need for changes

SCOPE OF OPERATIONS MANAGEMENT (Stevenson, 2021)

Operations management people are involved in product and service design, process selection, selection
and management of technology, design of work systems, location planning, facilities planning, and quality
improvement of the organization’s products or services.

The operations function includes many interrelated activities, such as forecasting, capacity planning,
scheduling, managing inventories, assuring quality, motivating employees, deciding where to locate
facilities, and more.

Illustration: An airline company’s system consists of airplanes, airport facilities, and maintenance facilities,
sometimes spread out over a wide territory. The activities include the following:

• Forecasting weather and landing conditions, seat demand for flights, and the growth in air travel.
• Capacity planning to maintain cash flow and make a reasonable profit. (Too few or too many planes,
or even the right number of planes but in the wrong places, will hurt profits.
• Locating facilities is according to managers’ decisions on which cities to provide service for, locate
maintenance facilities, and locate major and minor hubs.
• Facilities and layout in achieving effective use of workers and equipment.
• Scheduling of planes for flights and routine maintenance; scheduling of pilots, flight attendants,
ground crews, counter staff, and baggage handlers.
• Managing inventories such as foods and beverages, first-aid equipment, in-flight magazines, pillows
and blankets, and life preservers.
• Assuring quality where the emphasis is on safety. It is important in dealing with customers at ticket
counters, check-in, telephone and electronic reservations, and curb service, emphasizing efficiency
and courtesy.
• Motivating and training employees in all phases of operation.

KEY ISSUES FOR TODAY’S BUSINESS OPERATIONS

Several issues are considered high priorities of many business organizations. Primary issues involve the
following (Stevenson, 2021):

01 Handout 1 *Property of STI

 courseware.feedback@sti.edu Page 4 of 7
 BM2106

• Economic Conditions. Trade disputes and tariffs have created uncertainties for decision-makers.
• Innovation. Finding new or improved products or services are only two (2) of the many possibilities
that can provide value to an organization. Innovations can be made in processes that reduce costs,
increase productivity, expand markets, or improve customer service.
• Quality problems. The numerous operations failures related to product design and testing, oversight
of suppliers, risk assessment, and timely response to potential issues emphasize the need to improve
the way operations are managed.
• Risk management. The need for managing risk is underscored by recent events that include financial
crises, product recalls, accidents, global health crises, natural and man-made disasters, and economic
ups and downs. Managing risks starts with identifying risks, assessing vulnerability and potential
damage (liability costs, reputation, demand), and taking steps to reduce or share risks.
• Cybersecurity. The need to guard against intrusions from hackers whose goal is to steal the personal
information of employees and customers is becoming increasingly necessary. Moreover,
interconnected systems increase intrusion risks in the form of industrial espionage or the illegal and
unethical theft of business trade secrets for use by a competitor to achieve a competitive advantage
(Kenton, 2020).
• Competing in a global economy. Low labor costs in third-world countries have increased pressure to
reduce labor costs. Companies must carefully weigh their options, including outsourcing some or all
of their operations to low-wage areas, reducing costs internally, changing designs, and improving
productivity.

Key Trends in Operations Management in a Post-COVID World (Zamolo, 2021)

Times are changing more quickly than individuals can adapt. Operations managers are expected to be
flexible and predict some of the emerging trends to help the operations of the organization.

Business operations managers, in particular, will be leaned upon more than ever to see companies
through their recovery and help them run more efficiently through the aftermath of COVID-19.

Here are five (5) key trends every operations manager should know for the post-pandemic period:
1. Information Everywhere
A greater reliance on mobile devices will be an integral part of an organization’s IT infrastructure.
Companies should prepare for the maximization of all the information generated from these devices.
Businesses are also encouraged to invest in an information accessibility program (programs or
applications that allow companies to disseminate information to every user ‘on an equal basis with
others’) with a superior user-experience design. For instance, STI Education Services, Inc. has websites
where employees and students can easily access important information, and these websites can be
easily accessed using mobile phones.
Data and experience show that digitally enabling the frontline workforce is an impactful investment
that can optimize productivity, increase safety, and reduce costs in the current uncertain climate.
With access to real-time information, digital empowerment adds to a front liner's capacity to leverage
data-driven decision-making and eliminate barriers between employees and managers (Howell,
2021). For example, suppose the staff in operations can access the information about the number of
customers who ordered a specific product or availed a particular service. In that case, they might help
assess what products should have more stock in a store or how many more staff the team will need
to deliver important services.

01 Handout 1 *Property of STI

 courseware.feedback@sti.edu Page 5 of 7
 BM2106

Furthermore, this will help employees better utilize the time and the organization’s money by
providing a single point of contact for all their communications and tools. For instance, the Microsoft
Teams application is used by several companies for managers and employees as a communication
tool to update progress in sales and other outputs, equip everyone with the company's current
situation, and additional valuable information that might be within the interest of the organization.
The platform should provide easy access, be highly user-friendly, and offer security in a single, intuitive
interface.
2. Company-Wide Communication/Mobilization
Communications will prove more crucial than ever for companies after the pandemic. Hierarchical
structures or organizations that consist of several departments will give way to “flatter” models or
the organization structures with few middle management levels, or in some cases, no middle
management at all. These flatter organizational structures will facilitate the flow of information
without continuing dated models that only served the upper management while isolating whole
departments to take part in critical decision-making when these departments represent 80% of the
global workforce. Moreover, flat organizational structures make the front liners feel involved and hold
important conversations in operations (Nouri, 2019). Good operational communication is the core
driver of efficiency and productivity in any organization. It technically connects strategic alignment to
real-world problem-solving to deliver quality results. Good communication improves efficiency and
productivity and impacts how employees perceive the organization, which, likewise, improves
satisfaction and workforce retention.
3. Safety First
As companies work through and recover from the impact of COVID-19, maintaining the health and
safety of both employees and the public will be a top priority for operations managers. It will be
necessary for operations managers to look for new ways to reduce health incidents and workplace
accidents. This means companies will need to understand new regulations around safety and
compliance. It will be up to operations leaders to implement swift changes to internal processes and
procedures to remain compliant.
4. Demand in Hand
The global health crisis caused rapid shifts in consumer behavior, which has led to huge issues for the
supply chain. Many retail physical stores made digital pivots and strengthened their online presence.
With this kind of velocity in the changing consumer demand, operations managers will continue to
hone and develop demand-responsive supply chains.
Operations managers must find ways to be prepared for anything. An agile, highly responsive supply
chain can help ensure that production levels can steadily meet demand without creating excess
inventory. Maintaining a healthy balance between inventory and meet market demands will be a
tricky dance that operations managers will have to master quickly.
5. Customers Are Always Right
Operations managers must understand the factors that influence buying decisions and optimize the
business accordingly. The role of an operations manager and the entire operational management
team is evolving beyond simply acting as an agent of cost control. Operations are increasingly tied to
global performance objectives encompassing product quality and delivery time to customer service.
Going forward, operations managers will work closely with customer service departments to better
understand their end-users. Relationship management is more important in running a successful

01 Handout 1 *Property of STI

 courseware.feedback@sti.edu Page 6 of 7
 BM2106

business than ever, so it’s no surprise that operations managers will find new ways to optimize the
process. Strengthening customer relationships will be critical as the world begins the long and steady
road to recovery from the impact of the pandemic. Thus, being customer-centric is now everyone’s
job — including operations managers.

References
Exeed College. (2021). Importance of operations management in business organizations. In
Exceedcollege.com. https://exeedcollege.com/blog/importance-of-operations-management-in-
business-organizations/
Dhoul, T. (2021, April 20). What is operations management? Top MBA. https://www.topmba.com/mba-
programs/what-operations-management
Howell, D. (2021). Harvard business review report reveals the importance of empowering frontline
workers with real-time data. Beekeeper. Retrieved July 13, 2021 from
https://www.beekeeper.io/blog/empower-frontline-workers-digital-enablement/
Kenton, W. (2020, September 24). Industrial espionage.
https://www.investopedia.com/terms/i/industrial-espionage.asp
MITSDE. (2020, February 28). Role of retail operations management in retail. MIT school of distance
education. Retrieved July 12, 2021 from http://blog.mitsde.com/role-of-retail-operations-
management-in-retail/
Morato, E. (2016). Entrepreneurship. Rex Bookstore.
Nouri, C. (2019, November 4). Hierarchical vs. flat organizational structure and benefits of each.
Pingboard. Retrieved July 13, 2021 from https://pingboard.com/blog/hierarchical-vs-flat-
organizational-structure-and-benefits-of-each/
Stevenson, W. (2021). Operations management (14th ed.). McGraw Hill
Zamolo, A. (2021, May 23). 7 key trends in operations management in a post-covid world for 2021.
Beekeeper. Retrieved June 23, 2021 from https://www.beekeeper.io/blog/trends-operations-
management/

01 Handout 1 *Property of STI

 courseware.feedback@sti.edu Page 7 of 7