Operations Management: What Is It and

Why Does It Matter?

Every business relies on processes, and every process requires
efficiency. That’s where operations management comes into play.
Public and private companies all rely on operations management to
ensure things are running on-time and, notably, on-budget. But
what are the functions of operations management? And what are the
skills you need to be a high-performing operations manager in
modern business?

What is operations management?

Operations management (OM) is the administration of business practices to
create the highest level of efficiency possible within an organization. It is
concerned with converting materials and labor into goods and services as
efficiently as possible to maximize the profit of an organization.

What is the purpose of operations management (OM)?

Operations management (OM) is concerned with controlling the production
process and business operations in the most efficient manner possible. OM
professionals attempt to balance operating costs with revenue to maximize
net operating profit.

https://www.coursera.org/articles/operations-management

What Are the Key Factors of Operations Management?

From the start, your operational strategy will revolve around key factors — also called
competitive priorities or performance objectives.

• Operations management (OM) is the administration of business

practices to create the highest level of efficiency possible within an
organization.
 • Operations management is concerned with converting materials and
labor into goods and services as efficiently as possible.
• Corporate operations management professionals try to balance costs
with revenue to maximize net operating profit.
Understanding Operations Management (OM)
Operations management involves utilizing resources from staff, materials,
equipment, and technology. Operations managers acquire, develop, and
deliver goods to clients based on client needs and the abilities of the
company.

Operations management handles various strategic issues, including

determining the size of manufacturing plants and project management
methods and implementing the structure of information technology networks.
Other operational issues include the management of inventory levels,
including work-in-process levels and raw materials acquisition, quality control,
materials handling, and maintenance policies.

Operations management entails studying the use of raw materials and

ensuring that minimal waste occurs. Operations managers use numerous
formulas, such as the economic order quantity formula, to determine when
and how large an inventory order to process and how much inventory to hold
on hand.

What Are the Functions of Operations Management?

Operations management is a multi-tiered, “big picture” process, though some tiers

may get more attention than others, depending on your business or product. For
example, if you’re an operations manager for an online travel company that
specializes in selling rooms to customers, you won’t utilize the supply chain in the
same way a company making energy bars would.

Here are four common functions of operations management:

1. Strategy: When developing strategy for your organization, you will spend
significant time analyzing data and information in order to determine how to reach
your objectives. Multiple factors must be taken into consideration during your
strategy sessions, including the size of your workforce, your budget, your supply
chain configuration, and your timeline.
As an operations manager, your strategic tasks may include:
 • Analyzing data — including identifying the underlying principles, reasons, or facts — by
breaking it down into separate parts

• Estimating the quantifiable characteristics of products, events, or information, such as

sizes, distances, and quantities; and determining time, costs, resources, or materials
needed to perform a work activity

• Planning or directing activities — such as sales promotions — that require

coordination with other department managers

• Developing or implementing product marketing strategies, including advertising

campaigns or sales promotions
2. Forecasting: Predicting the financial future of your organization is known as
forecasting. The process involves knowing how much money you have to work with in
the present, how much you hope to earn from the sale of your product, and how
environmental factors – inflation, consumer demand, technology upgrades, etc. – will
impact your budget and earnings in the years to come.
In an operations manager role, your forecasting responsibilities may include:
• Reviewing financial statements, sales or activity reports, or other performance data to
measure productivity or goal achievement or to identify areas needing cost reduction
or program improvement

• Directing or coordinating financial or budget activities to fund operations, maximize

investments, or increase efficiency

• Setting prices or credit terms for goods or services, based on forecasts of customer
demand
3. Supply Chain Management: Supply chain management may feel similar to
operations management in that both involve overseeing processes within the
organization. But as we’ve discussed, operations management exists at a higher level
– viewing the company holistically and looking for efficiencies – while supply chain
management is focused on the processes that turn your raw materials into a final
product. Take, for example, a company that cultivates fruit that is shipped directly
from the farm to the grocery store. Supply chain management would involve
processes such picking the crops, cleaning them, packaging them, and putting them
on trucks.
Operations managers are intimately involved in supply chain management decisions,
and some of their responsibilities include:
• Directing and coordinating activities of businesses or departments concerned with the
production, pricing, sales, or distribution of products

• Managing the movement of goods into and out of production facilities to ensure
efficiency, effectiveness, or sustainability of operations

• Monitor suppliers to ensure they efficiently and effectively provide needed goods or
services within budgetary limits
4. Quality Control: Because so much of operations management involves
searching for efficiencies and the fastest, safest, and most cost-effective ways to
serve your customers, quality control is key. Not only are you working to determine if
your business processes are efficient, but you’re also constantly examining your own
product. Does it meet your brand standards? Does it meet customer expectations? Is
it of the highest quality?

What Skills Do You Need in Operations Management?

Operations management is a leadership-level role that involves overseeing

multiple departments, and a successful operations manager will need to bring a
combination of relevant hard and soft skills. According to O*NET Online, a typical
operations manager will need the following skills:
• Complex problem-solving: Like putting together the pieces of a puzzle, it will be your
job to determine how all the departments of your company will work together to
ensure the business is running efficiently.
• Management of personnel resources: Can one person do the job of two? As an
operations manager, you’ll need to determine how to maximize productivity using the
human capital at your disposal.
• Management of material resources: Do you have the necessary equipment, tools, or
facilities to run your business effectively? An operations manager will strategize to
determine how to best use the resources at hand, or determine how to get the proper
tools for the right price.
• Persuasion: An essential soft skill for leaders, the art of persuasion is necessary to
bring others onboard with your vision for the company.
• Time management: This goes back to speed as a key performance objective.
Operations managers know how to manage their time while creating organization-
wide processes that move things along at the right pace.
• Systems analysis and evaluation: What’s working? What’s not? Analysis and evaluation
are day-to-day responsibilities for operations managers, who must constantly tweak
the system in order to achieve better results.

https://www.uagc.edu/blog/what-operations-management

What Operations Managers Do

Operations managers are involved in coordinating and developing new
processes while reevaluating current structures. Organization
and productivity are two key drivers of being an operations manager, and the
work often requires versatility and innovation. As part of their daily
responsibilities, operations managers must possess a variety of skill sets,
including:2

• Technical expertise in areas such as production automation, data

entry, budget tracking, and design.
• Organizational ability and attention to detail to include keeping track
of project files, employee reports, budgets, schedules, and other details
related to company processes.

• Motivational prowess in the form of strong leadership skills that

provide the expertise to motivate others, inspire ideas, and foster a
supportive and diverse team.
• Analytical aptitude, including skill in risk analysis and mitigation when
initiating new projects. Operations managers also must analyze
processes to identify challenges and offer solutions in the event that
negative situations develop.
• Decision-making proficiency, especially under stress when there is
very little time to assess all factors.
• Ability to maintain quality standards, including as they relate to raw
materials, machinery, manufacturing procedures, packaging, delivery
processes, and the finished product.

What are some systems of operations management?

Modern operations management revolves around four theories:

• Business process redesign (BPR), which is focused on analyzing

and designing workflow and business processes within a company. The
goal of BPR is to help companies dramatically restructure the
organization by designing the business process from the ground up.
• Reconfigurable manufacturing systems, designed to incorporate
accelerated change in structure, hardware, and software components.
This allows systems to adjust rapidly to the capacity to which they can
continue production and how efficiently they function in response to
market or intrinsic system changes.
• Six Sigma, an approach that focuses on quality. The word “six”
references the control limits, which are placed at six standard
deviations from the normal distribution mean. Tools used within the Six
Sigma process include trending charts, potential defect calculations,
and other ratios.
 • Lean manufacturing, which is the systematic elimination of waste
within the manufacturing process. This theory sees resource use for
any reason other than value creation for customers as wasteful and
seeks to eliminate wasteful resource expenditures as much as possible.

https://www.investopedia.com/terms/o/operations-management.asp

What is an example of operations management?

Operations management is prevalent in the healthcare sector. The current
healthcare system overuses expensive, technological, and emergency-based
treatment. High costs from care often remain uncompensated due to
uninsured patients. A prevalence of services in expensive settings creates a
burden on taxpayers, health insurance holders, and healthcare institutions.

https://www.investopedia.com/terms/o/operations-management.asp

https://www.uagc.edu/blog/what-operations-management

https://www.coursera.org/articles/operations-management