Operations management is the branch of management which deals with designing and controlling the process of the production of goods and services. Operations management main function is
to ensuring the business operations as efficient as possible by using as few resources as needed and meeting the production and product quality as per customer requirements. Operations management primarily function is to planning, organizing and supervising of the production, manufacturing or to deliver services. It deals with managing an entire production system. 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 management manages of both the strategic and day-to-day production of goods and services.
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 deliver the service.
The history of production and operation systems began around 5000 B.C. when Sumerian priests developed the ancient system of recording inventories, loans, taxes, and business transactions. The next major historical application of operation systems occurred in 4000 B.C. It was during this time that the Egyptians started using planning, organization, and control in large projects such as the construction of the pyramids. By 1100 B.C.,
In 1883, Frederick Winslow Taylor introduced the stopwatch method for accurately measuring the time to perform each single task of a complicated job. He developed the scientific study of productivity and identifying how to coordinate different tasks to eliminate wasting of time and increase the quality of work. The next generation of scientific study occurred with the development of work sampling and predetermined motion time systems (PMTS).
Service Industries: At the turn of the twentieth century, the services industries were already developed, but largely fragmented. In 1900 the U.S. service industry consisted of banks, professional services, schools, general stores, railroads and telegraph. Services were largely local in nature and owned by entrepreneurs and families.
In 1911 Taylor published "The Principles of Scientific Management", in which he characterized scientific management as:
1-The development of a true science;
2-The scientific selection of the worker;
3-The scientific education and development of the worker;
4-Intimate friendly cooperation between the management and the workers.
In 1983 J.N Edwards published his "MRP and Kanban-American style" in which he described JIT goals in terms of seven zeros:] zero defects, zero (excess) lot size, zero setups, zero breakdowns, zero handling, zero lead time and zero surging. This period also marks the spread of Total Quality Management (TQM) in Japan, ideas initially developed by American authors such as Deming, Juran and Armand V. Feigenbaum. TQM is a strategy for implementing and managing quality improvement on an organizational basis, this includes: participation, work culture, customer focus, supplier quality improvement and integration of the quality system with business goals. Schnonberger identified seven fundamentals principles essential to the Japanese approach:
1-Process control: SPC and worker responsibility over quality
2-Easy able -to-see quality: boards, gauges, meters, etc. and poka-yoke
3-Insistence on compliance: "quality first"
4-Line stop: stop the line to correct quality problems
5-Correcting one's own errors: worker fixed a defective part if he produced it
6-The 100% check: automated inspection techniques and foolproof machines
7-Continual improvement: ideally zero defects
In 1987 the International Organization for Standardization (ISO), recognizing the growing importance of quality, issued the ISO 9000, a family of standards related to quality management systems. There standards apply to both manufacturing and service organizations. There has been some controversy regarding the proper procedures to follow and the amount of paperwork involved, but much of that has improved in current ISO 9000 revisions.
Operations strategy concerns policies and plans of use of the firm productive resources with the aim of supporting long term competitive strategy. Metrics in operations management can be broadly classified into efficiency metrics and effectiveness metrics. Effectiveness metrics involve:
1- Price (actually fixed by marketing, but lower bounded by production cost): purchase price, use costs, maintenance costs, upgrade costs, disposal costs
2- Quality: specification and compliance
Time: productive lead time, information lead 3- time, punctuality
4- Flexibility: mix, volume, gamma
5- Stock availability
6- Ecological Soundness: biological and environmental impacts of the system under study.
Operations management usually cover demand forecasting, even though Demand forecasting is also a critical part of push systems, since order releases have to be planned ahead of actual clients orders. Also any serious discussion of capacity planning involves adjusting company outputs with market demands.