definition:

Operations management is an area of management concerned with

designing and controlling the process of production and redesigning
business operations in the production of goods or services.[1] It involves
the responsibility of ensuring that business operations are efficient in terms
of using as few resources as needed and effective in terms of meeting
customer requirements. It is concerned with managing an entire production
system which is the process that converts inputs (in the forms of raw
materials, labor, and energy) into outputs (in the form of goods and/or
services), as an asset or delivers a product or services.[2] Operations
produce products, manage quality and creates service. Operation
management covers sectors like banking systems, hospitals, companies,
working with suppliers, customers, and using technology. Operations is one
of the major functions in an organization along with supply chains,
marketing, finance and human resources. The operations function requires
management of both the strategic and day-to-day production of goods and
services.

Ford Motor car assembly line: the classical example of a manufacturing

production system.

In managing manufacturing or service operations several types of decisions

are made including operations strategy, product design, process design,
quality management, capacity, facilities planning, production planning and
inventory control. Each of these requires an ability to analyze the current
situation and find better solutions to improve the effectiveness and
efficiency of manufacturing or service operations.[4]
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COMPETITIVE ADVANTAGE THROUGH OPERATION MANAGEMENT PDF

Selecting Processes and Technology to Gain Competitive
Advantages:
The Generic Type of Process Choices

Business Implications of Process Choices

Useful Technologies for Manufacturing and Services

Selection of Technologies To Support Operations Strategy

Evaluation of Technology Investment

Competitive Advantage:

Competitiveness:
Companies must be competitive to sell their goods and services in the marketplace.
Competitiveness is an important factor in determining whether a company prospers,
barely gets by, or fails. Business organizations compete with one another in a variety of
ways.

These include price, quality, product or service differentiation, flexibility, time to

perform certain activities, service, and managers and workers.

1. Price is the amount a customer must pay for the product or service. If all other factors
are equal, customers will choose the product or service that has the lowest price.
Organizations that compete on price may settle for lower profit margins, but most focus
on lowering costs of goods or services.

2. Quality refers to materials and workmanship as well as design. Usually, it relates to a

buyer's perceptions of how well the product or service will serve its intended purpose.

3. Product or service differentiation refers to any special features (e.g., design, cost,
quality,ease of use, convenient location, warranty) that cause a product or service to be
perceived by the buyer as more suitable than a competitor's product or service.
4. Flexibility is the ability to respond to changes. The better a company or department is
at responding to changes, the greater its competitive advantage over another company
that is not as responsive. The changes might relate to increases or decreases in volume
demanded, or to changes in the design of goods or services.

5. Time refers to a number of different aspects of an organization's operations. One is

how quickly a product or service is delivered to a customer. This can be facilitated by
faster movement of information backward through the supply chain. Another is
howquickly new products or services are developed and brought to the market. Still
another

is the rate at which improvements in products or processes are made.

6. Service might involve after-sale activities that are perceived by customers as

valueadded, such as delivery, setup, warranty work, technical support, or extra attention
while work is in progress, such as courtesy, keeping the customer informed, and
attention to little details.

7. Managers and workers are the people at the heart and soul of an organization, and if
they are competent and motivated, they can provide a distinct competitive edge by their
skills and the ideas they create. One skill that is often overlooked is answering the
telephone. How complaint calls or requests for information are handled can be a
positive or a negative. For example, if automated answering is used, that can turn off
some callers. If the person answering the call is rude, not helpful, or cuts off the call, that
can produce a negative image. Conversely, if calls are handled promptly and cheerfully,
that can produce a positive image and, potentially, a competitive advantage.

Some of these dimensions overlap. For example, several of the items on the list may
come under the heading of quality Organizations fail, or perform poorly, for a variety of
reasons. Being aware of those reasons can help managers avoid making similar mistakes.
Among the chief reasons are the following:

1. Putting too much emphasis on short-term financial performance at the expense of

research and development.

2. Failing to take advantage of strengths and opportunities, and/or failing to recognize

competitive threats.

3. Neglecting operations strategy.

4. Placing too much emphasis on product and service design and not enough on process
design and improvement.
5. Neglecting investments in capital and human resources.

6. Failing to establish good internal communications and cooperation among different

functional areas.

7. Failing to consider customer wants and needs.

The key to successfully competing is to determine what customers want and then
directing efforts toward meeting (or even exceeding) customer expectations. There are
two basic issues that must be addressed. First: What do the customers want? Which
items on the preceding list of the ways business organizations compete are important to
customers?

Second: What is the best way to satisfy those wants?

Operations must work with marketing to obtain information on the relative importance
of the various items to each major customer or target market.

Understanding competitive issues can help managers develop successful strategies.

Businesses adequately manage their operations to get a handle on key internal and external
factors. Internal factors include operating policies, intellectual capital and the average attrition
rate. This reflects the number of employees leaving as a result of resignations, retirements and
deaths. Forced workforce reductions, such as terminations, do not count as attrition-rate
components. Intellectual capital represents various abilities, expertise and knowledge that a firm
has gathered over time. External factors that operations managers heed include the state of the
economy and rivals’ strategies. By helping a firm understand its internal and external conditions,
operations management improves the company’s competitive standing. This is because the
business gets a better understanding of its operating environment and can adapt its tactics more
effectively to changing conditions. Marketing specialists use the SWOT concept -- strengths,
weaknesses, opportunities, threats -- to describe this analytical process.

The purpose of an operations strategy is to guide an operations organization in

assembling and aligning the resources that will enable it to implement its company’s competitive
strategy effectively. The problem that most managers face when attempting to develop an
effective operations strategy is not that the task is too complex or difficult. Paradoxically, they
often appear to believe that it is too easy – that they can easily seek out and emulate the best
practices of other companies, particularly those deemed world class. The seductive appeal of
ideal approaches has occasioned a fierce, and sometimes fairly emotional, debate about the
relative merits of three quite different philosophies of operations.

Until the early 1980s, most American managers thought about operations in terms of a paradigm
whose roots went back well over a hundred years. The American System of manufacturing, with
its emphasis on mass markets, standard designs, and mass production using interchangeable
parts, revolutionized manufacturing in the middle of the nineteenth century. This new
philosophy modified and elaborated by the concept of scientific management promulgated by
Frederick Taylor and his disciples was exploited by such great industrialists as Andrew Carnegie,
Henry Ford, and Isaac Singer to transform the United States into an industrial powerhouse by the
1920s.

The ideas that the key to low cost was standardization and high volume , that work was done
most efficiently when divided up and assigned to specialists that managers and staff experts
should do the thinking for workers (so they could concentrate on doing) that every process was
characterized by an innate amount of variation (and hence an irreducible rate of defects) and
that communication within an organization should be tightly controlled – so as to avoid possible
confusion and should proceed through a hierarchical chain of command — were accepted as
dogma. The best manufacturing process was assumed to be based on long runs; it utilized
equipment that was specialized for each stage of the process and whose capacities were
matched as closely as possible, and it used inventories to buffer different stages both from each
other and from the erratic behaviour of suppliers and customers. Work should be organized and
conducted systematically in a specified sequence and under tight supervision. In the minds of
many top managers, such practices which collectively formed a cohesive operations strategy
defined the one best way ( to borrow Taylor’s phrase) to design any manufacturing or service
delivery system it was the ideal toward which all should strive.

In many continuous process industries, such as petrochemicals food processing, and paper
making, this paradigm remained dominant. During the 1980s, however, its shortcomings became
increasingly apparent in many assembly and high tech industries, and other approaches to
operations were found to provide convincing advantages. Rather than a single new approach
that could be studied and mastered, however, operations managers now faced a confusing
cacophony of expert advice – each advocating different routes to improved competitiveness. The
mass production paradigm, although inadequate in many environments at least offered
simplicity and clarity it allowed limited options as regards technology, organization, work
scheduling inventory and quality control, and performance measurement. People might make
different choices, but there was widespread agreement about the underlying premises.
The clearest evidence of this consensus is provided by an analysis of the books written about
operations management in the twenty years prior to 1980.

In Japan, however, companies rebuilding from the shambles of World War II were beginning to
create an entirely different approach to production. Short on capital blessed with few natural
resources and faced with small, fragmented markets, they were forced to design new practices
that reflected both their lack of resources and the chaotic conditions of their economic
environment. Over time, the best ones developed an approach to manufacturing that was
claimed by some to be uniformly superior to the American system.

This lean production system was characterized by an emphasis on reliability, speed and flexibility
rather than volume and cost. People ought to be broadly trained, rather than specialized and
should work in teams to identify and solve operating problems. Staff was overhead and
overhead was bad. No amount of rejects was acceptable, so one should work tirelessly to
eliminate them. Communication should take place informally and horizontally among line
workers rather via prescribed hierarchical paths through the organization. Equipment should be
for general purposes and organized in cells that produced a group of similar parts or products,
rather than specialized by process stage. Production throughput time was more important than
labour or equipment utilization. Inventory like defects was waste. Supplier relationships should
be long term and cooperative. Product development activities should be carried out
concurrently, not sequentially and by cross functional teams.