What is Operation Management? Functions, Challenges

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What is Operation Management?

Operations Management is best understood using systematic approach. It involves understanding the nature of issues and problems to be studied, establishing measures of performance, collecting relevant data, using scientific tools, techniques, and solution methodologies for analysis, and developing effective as well as efficient solutions to the problem at hand.

Operations Management Functions

Operations management (OM) is an intergal part of all types of organizations. To understand various functions of OM, following classification scheme can be used.

Design Functions

Design functions prepare configuration of the operations system and provide an overall framework under which the operations system will function. Various design functions can be product design and development, process design, quality management, location and layout of facilities and capacity planning.

Operational Control Functions

Functions of forecasting, production planning and control, supply chain management, maintenance management are some of the control functions of oerations management.

Most of the design issues are discussed in control functions also. However context may differ in two. Design issues are often strategic in nature while operational issues are tactical in nature.

Take an example of capacity planning. As a design issue, we are interested to know the capacity requirement for meeting targeted business plans but as a control issue, the objective is to match the requirement to the available capacity.

Long Term Functions

Certain operations management functions are rare. Decisions with respect to them is made once every five to ten years. Where to locate a new plant is one such decision. Most of the design-related decisions are made on long term horizon.

Short Term Functions

Short term decisions can be made in fixed cycles of one year. Aggregate production planning, master production scheduling etc. are done once or twice in a year while operations scheduling are done for a very short period, may be one or two weeks.

Challenges in Operations Management

Challenges in Operations management arise as a result of need of efficient and effective systems. Efficient systems are required for making cost effective and sustainable processes. Effective systems are required to support customer requirements.

Challenges Due to Marketplace Development

The marketplace is now demanding customized products in place of mass-marketed products. This has created a challenge for operations management to develop systems which are capable to produce wide variety of products at low cost.

Secondly, especially in the service industry, the customer is becoming partner – often unwillingly. For example in a self-serving restaurant customer has to pick his order on a beep. This trend is coming to manufacturing also giving pressure to operations management.

Challenges Due to Economic Reforms

This is particularly applicable in Indian Scenario after 1991’s economic reforms. Before the economic reforms, Indian Industry enjoyed undue advantage due to high import tariffs. In some cases tariff rates were as high as 350 percent. Among the many changes effected, tariff reductions demanded a basic shift in the approach of business.

“Cost plus some margin is the price” was approach before economic reforms. After reforms prices are guided by market forces. Subtract some margin from this price to get that cost under which a business has to deliver the products. To match the offerings of overseas players, Indian companies were also expected to improve their performance with respect to cost, delivery, quality and service.

Challenges Due to Factors of Production

Factors of production such as managing an increasingly diverse workforce, shortage of skilled workers, availability of raw materials from sustainable sources are challenges to modern systems of operations management.

Challenges Due to Technological Environment

Information technology is one of the most important enablers for developing and easy implementation of tools such as ERP, computer-aided manufacturing, Flexible manufacturing system etc. Now the challenge is investing in the right technology and mastering it. It is difficult for any small and medium company to implement regularly changing technology.

Challenges Due to Regulatory Environment

Global pressure of intellectual property rights protection has created a pressure on developing nation to keep their systems in the alignment of the requirement of these legal provisions. Similarly new financial reporting systems, environmental protection laws are giving challenge to operation managers which are new to this field.

Challenges Due to Innovative Business Models

With the advent of new technology, particularly IT and related e-commerce, new business models are emerging. These new business models such as e – choupal of ITC, Flipkart have posed new challenges to operation managers with respect to supply chain management.

Key Terms

  • Operations Management: It is a Systematic Approach for Converting inputs into useful, revenue-oriented outputs.

  • Strategic Decisions: Decisions about products, process and facilities. These decisions have long term Significance.

  • Operating Decisions: Decisions about planning production to meet demand.

  • Control Decisions: Decisions related to day-to-day activities for planning and controlling operations.

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This Post Has One Comment

  1. Muchunguzi

    I like the notes about operations management

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