What is operations management?
Operations management is the area of a business that focuses on optimising its operations and processes in order to maximise organisational efficiencies, productivity, and profits. It is an area of business management that is fundamental to running a successful enterprise, concerned with converting inputs – such as raw materials, labour, equipment, technology – into outputs – such as products and services – as effectively as possible.
Business operations managers are responsible for:
- creating, implementing, and administering effective operations systems, processes, and practices: this is known as process design
- balancing resources, revenue, and costs for the highest possible profits
- influencing and steering product and service design based on customer or client needs
- overseeing the organisation’s operations strategy
- streamlining and optimising production, logistics, and supply chain management workflows
Depending on the size and type of organisation, operations management may be overseen by an individual, a team, or an entire operations function or department.
It’s also worth noting that while operations management in the private sector is focused on profits, operations management is also a powerful tool for public sector and voluntary organisations. Operations management strategies are often employed in the public sector – for example, healthcare services – to help achieve goals and maximise value for money.
The benefits of operations management
Effective operations management is often credited with the following.
Creating – and maintaining – an organisation’s competitive advantage
By prioritising operational efficiency, productivity, and profit, businesses can set themselves apart from their competitors, offering better products and better prices. Businesses with solid processes and firmly established efficiencies are also typically better positioned to weather economic downturns or other challenges within the market.
Increasing product quality
Because operations management is focused on production from the initial development stage all the way through manufacturing and delivery of the final product, operations managers can optimise and innovate at every stage of the production process, ensuring quality control is embedded at each level.
A key area of operations management is waste reduction. For example, operations managers will ensure that raw materials are used as efficiently as possible, and that inventory is stored properly to avoid damage. They also implement business processes and procedures to save employees’ time, and make good use of technologies – such as automation – to reduce labour costs.
Increasing internal collaboration
An operational focus on efficiency frequently requires strong communication and teamwork between different departments and individual employees. This can help to break down internal silos within organisations and open up idea-sharing between colleagues, from human resources and procurement to manufacturing staff and senior stakeholders.
Improved customer satisfaction
With operations management – and its sub-area, service operations – ensuring optimal product quality alongside organisational innovation, efficiencies, and a reduction in waste, customers typically benefit from high-quality products and services at competitive prices.
Important areas of operations management
There are a number of areas or functions that can fall under the umbrella of operations management.
Operations managers play a key role in the development of new products and services. They oversee the teams that gather important market research, identify new trends, and feed into the design process. In essence, before the production of goods or other services can begin, operational forecasting is required to ensure there is a desire for the product in question within the market.
Operations teams will also use data and research to steer future marketing campaigns, determine long-term inventory requirements, and estimate the projected cost of materials for prototype or hypothetical products.
Closely linked to forecasting is product design. Operations managers help determine the most appropriate materials and production methods for new products and services, and ensure they are suitably delivered to market, whether this is retailers, other businesses, or direct to consumers. For example, operations managers might decide:
- how and where a product is manufactured
- which materials to use to ensure a high-quality product
- whether there is sufficient market demand for a particular product or service
- how to best incorporate environmental and financial sustainability into the product’s design and development.
Operational planning is the bread and butter of operations management. It helps determine the fundamentals – those essential plans and practices needed for the day-to-day running of the business. For example, operational planning can outline the:
- systems used for inventory management
- budgets set aside for embedding new technologies
- processes used for sourcing new materials or equipment
- methods used for project management
- practices around risk management.
Quality assurance is an important area of operations management, ensuring that products or services meet agreed quality standards and are free from defects, bugs, or issues. This is often managed using the Six Sigma methodology, which is a quality-focused method for eliminating defects, errors, or deficiencies in everything from processes to products. It aims for 99.99966% perfection through either the DMAIC (define, measure, analyse, improve, control) or the DMADV (define, measure, analyse, design, validate) approach.
Supply chain management
Virtually every business relies on the supply chain to source materials and equipment, produce goods and services, and then ship them to market so that they can be delivered to the end consumer.
Operations teams aim to develop strong, effective working relationships with providers and suppliers within the chain. This helps ensure that the business:
- secures fair, competitive pricing for raw materials, equipment, and so on
- avoids bottlenecks within the supply chain wherever possible
- can safely and securely transport products
- can implement efficient supply and distribution processes, as well as new systems and technologies, in partnership with suppliers.
Develop your expertise in operations management
Learn how to successfully manage business operations with the Master of Business Administration (MBA) at the University of York. This programme is studied part-time and 100% online, so you can continue to work full-time as you focus on your professional development.
A key module taught on this MBA is in managing business operations, giving you the opportunity to explore the interplay between strategy and operations, and how this can be managed. You will also learn about the activities of modern operations management and examine how business strategy affects business operations.