Operations management is an important part of running a business. It encompasses all the management activities that go into planning, coordinating, and supervising the overall day-to-day operations of the company. These operations could involve multiple tasks across multiple departments such as manufacturing, project management activities, supply chain, and more.
Operations management takes care of all the human resources aspects of the many tasks and resources across the company. It is the job of operations management to make the best use of the company’s resources and optimize the various day-to-day tasks carried out within the company.
Why is OM important?
Operations management is one part of business management that often goes unnoticed, as it is mostly a background process. But that does not give it any less significance in making a company successful and profitable. Without efficient operations management, companies could lose money and be unable to use their resources economically.
Here are some major benefits that OM brings to the table:
Improves product quality
Consistent and efficient processes are important to ensure consistency in your product quality. OM ensures consistent product delivery and makes sure that your products are well tested and put through various quality checks.
Boosts productivity
OM takes care of staffing issues by ensuring adequate staffing measures are in place.
Improved customer satisfaction
Operations management manages the entire product life cycle - including customer expectation management. This helps you deliver quality products that satisfy your customers and increase your growth prospects.
Reduces operating cost
Operations management also helps you identify any productivity issues and process misconfigurations, and helps you deal with them in the most economical way possible. It helps you optimize your spending and aids you in finding new ways to improve your existing processes.
Key principles and roles of operations management
The major responsibilities of operations management are closely related to the basic functions of OM. In general, many companies have a hierarchy of operations management personnel who take care of OM-related activities. Here are some of the common roles associated with OM:
Chief Operating Officer (COO)
Often ranked just below the CEO, the COO is responsible for the overall day-to-day operations of the organization.
Operations Manager
An operations manager is a managerial role that involves supervising and overseeing the various departments and functions within the OM.
As operations management encompasses a wide range of activities and tasks, it can be broadly said to consist of 7 key functions listed below.
Operational planning
This function involves planning and executing the daily tasks within the organization, and typically includes processes such as manufacturing, inventory management, performance management, production planning, and more. The main goal is to improve operational efficiency and find areas of contention that could be improved upon.
Finance management
Finance management revolves around the expenditure across the company and thus entails budgeting and allocating budgets to various departments.
Product design
Product design involves crafting customer deliverables to satisfy the customer’s expectations. As a result, it involves understanding what the customer needs, their expectations, current market trends, and insights into market conditions. OM helps designers gather all this valuable information by consolidating the required data from multiple sources.
Quality control
Quality control is achieved by ensuring proper risk analysis, product inspections, efficient test planning and execution, and keeping track of every defect and its resolutions. OM helps enforce quality standards and directs product development to adhere to these standards.
Forecasting
OM performs market forecasting operations as part of its operations to gauge the demand for the product. They also derive the insights required to craft the relevant promotional campaigns and sales initiatives, as well as estimate inventory costs (among other costs) to meet the predicted demand.
Strategizing
OM acts as the steering guide for the organization toward meeting its goals. It provides strategic plans, cost control measures, and customer relationship management strategies.
Supply chain management
Supply chain management requires you to continuously track all your raw materials throughout the product life cycle until it reaches the customer. And then based on the customer demand, you procure more raw materials and start the production cycle again. Operations management helps identify and eliminate any bottlenecks that could occur during supply chain management and helps you optimize the day-to-day operations involved in this cyclical process.
The history of OM
The term ‘operations management’ may sound modern, but it has been one of the oldest business management tactics since ancient times. Ancient Sumerian tablets dated to 5000 BC are proof of an operations management system followed by the Sumerian priests. Organizations have always, in one way or another, employed some measures to keep track of their finances, inventories, and day-to-day production activities. But the real development into a defined management discipline came after the industrial revolution in the early 1800s.
People started developing methods to keep track of productivity and efficiency. The stopwatch method was introduced in 1883, and predetermined motion time systems (PMTS) were used in 1912. These methods were an improvement on the simple record-keeping operations management that were employed previously.
As the manufacturing process became the focus of operations management, the terms ‘production management’ and ‘operations management’ were used interchangeably for a while. But as service-based companies have started to emerge in recent times, operations management has come to include many activities across various departments and functions.
Operations management in different industries and sectors
Operations management may have different priorities for its functions based on the type of organization. For instance, for a manufacturing company, operations management may often be considered synonymous with product management. But for a service company, operations management could be related more to customer relationship management, market forecasting, and other customer-centered processes.
But for any company, the bottom line with operations management is achieving a good operational level of excellence that ensures a quality service/product and optimized resource utilization.
What are operations management KPIs?
There are a multitude of various metrics that can be used to measure operational excellence. But some important KPIs apply to almost every company and are useful indicators of efficient operations management:
- Marketing metrics such as conversion rates, bounce rates, and customer satisfaction levels
- Compliance metrics such as safety and policy compliance
- Employee performance metrics such as productivity, satisfaction levels, and efficiency of work
- Financial metrics including revenue, expenses, gross profit, net profit, profit margins, etc.
- Customer-related metrics such as customer retention rates, acquisition costs, customer satisfaction metrics, and more
Read on: Have you properly defined your KPIs to your best advantage?
What skills does an operations manager have?
Operations managers are expected to work across multiple departments, coordinate the day-to-day operations across multiple departments, communicate the right information and ensure that OM functions are carried out efficiently. Here are some important skills an operational manager is expected to possess to be able to manage their responsibilities:
- Good organizational abilities
- Communication skills
- People management skills
- Process coordination skills
- Problem-solving skills
- Technical skills as relevant to the company’s various processes
- Financial management and planning skills
Read on: The importance of communication and evaluation to growth.
Operations management software
There are many advanced digital tools and systems that allow you to integrate all your OM tasks and operations. These software applications can be effectively used to streamline your business processes and implement your optimization strategies well. Some popular operations management software includes Vault-ERP, Trello, Asana, Zoho, and Cflow. You can get both free and paid OM software packages from the market, but make sure that the software you choose can support the OM functions your business needs and is worth your investment.