Operations management deals with the production of goods and services that people buy and use every day. It is the function that allows organizations to achieve their goals through the efficient acquisition and use of resources. Every organization, whether public or private, manufacturing or services, has an operations function.
The administration of this function is the focal point of this issue. The role of operations within the entire organization will be explored. This paper contains explanations of what operations managers do, as well as some concepts and tools they use to support their key business decisions by selecting appropriate techniques and strategies. Successful operations managers can give their companies a competitive advantage, which is why operations management is one of the most exciting and challenging topics the modern world of business has to offer.
INTRODUCTION
In any industrial society we find organizations, which range from sports teams, schools and churches to hospitals, legal institutions, military bases and companies large and small. These formal groups make it possible for people to produce a wide range of products and services that would be beyond the capacity of any single individual. Operations management is critical for every type of organization, because an organization can only achieve its goals through the proper management of people, capital, information, and materials.
At one time, the term "operations management" referred primarily to manufacturing production. However, the growing economic importance of a wide range of non-manufacturing business activities broadened the scope of operations management as a function. Today, the term operations management refers to the direction and control of the processes by which inputs are transformed into finished goods and services. This function is essential for systems that produce goods and services in for-profit and non-profit organizations.
As the following figure illustrates, operations management is part of a production system.
The operations management system
A production system consists of inputs, processes, products and information flows, which connect it with customers and the external environment.
Inputs include human resources (workers and managers), capital (equipment and facilities), purchased materials and services, land, and energy. The numbered circles represent the operations that products or services must go through, and in which processes are used.
A process is any activity or group of activities through which one or more inputs are transformed and acquire an added value, thus obtaining a product for a customer. The type of processes can vary. In a factory, for example, a primary process can consist of a physical or chemical change to transform raw materials into products. In an airline the process would be the transport of passengers and luggage from one place to another. In a school it would be the education of the students. And in a hospital the healing of sick or injured patients. The facilities vary according to the case: a machine center, two or more airport terminals, a classroom and a hospital room.
The broken lines in the figure represent two essential types of inputs: customer or consumer participation and information on returns obtained from internal and external sources. Their participation takes place not only when they receive the products, but also when they take an active part in the process, as in the case of students participating in a classroom discussion. Performance information includes internal reports about customer service or inventory management, and external information from market research, government reports, or vendor phone calls. The operations manager needs all kinds of information to run the production system.
Inputs and outputs vary between different industries, for example inputs for jewelry operations include merchandise, store building, records, jeweler, and customers; the product of the store is sales to the customer. The inputs of a factory that produces denim pants include that fabric, machines, the plant, workers, managers and the services provided by external consultants; the product of the factory is clothing. However, the fundamental role of processes is valid for all production systems.
The figure above not only applies to an entire company, but also to the work of its different departments. Each of these receives inputs and uses various processes to supply products - often services (which can be information) - to its “customers”. Both manufacturing and service organizations now understand that everyone in an organization has customers: external intermediate and end customers, and internal customers in the next office, shop, or department that depends on the inputs it produces.
The customer-centric approach is necessary in managing the operations of the entire organization, regardless of whether the end product consists of services or manufacturing. As managers of tomorrow, we must understand the fundamentals of operations, no matter what our specialty, current area of study or the future direction in which the professions are channeled, because:
- Although each of the parts of an organization has its own identity, they are all connected with operations, and each of the parts, and not only the operations, must deal with issues of process, quality, technology and personnel.
OPERATIONS MANAGEMENT AS A FUNCTION
In large organizations, the operations or production department is usually responsible for the actual transformation of inputs into finished products or services.
Its characteristics are indicated below in the diagram:
Operations management as a function
DIFFERENCES BETWEEN MANUFACTURES AND SERVICES
Feature set of manufacturing and service operations
STRATEGIC ADMINISTRATION OF OPERATIONS
"Manufacturing Approach to Strategy"
He argues that many of the important production decisions have been relegated to lower-level managers. Production needs to be managed top-down and not the other way around. According to Wickham Skinner, the overall strategy of the organization should directly reflect its capabilities and manufacturing limitations and should understand operations objectives and strategies. He points out, for example, that the organization's operations strategy must be unique and reflect the tradeoffs inherent in any production process.
Corporative strategy
The corporate strategy defines the business or businesses to which the company will dedicate itself, the new opportunities and threats that will arise in the environment and the growth objectives that must be achieved. Options may include making standard products, to order, or competing on the basis of cost advantages or responsive product delivery. The corporate strategy sets a general direction that serves as a reference for the performance of all the functions of the organization.
Connection between corporate strategy and key decisions of operations management.
Core capabilities
They are the unique strengths and resources of an organization that management takes into consideration when formulating strategy. They reflect the collective learning of the organization, in the way of coordinating diverse processes and integrating multiple technologies. They include:
- Workforce Facilities Financial and market knowledge Systems and technology
Competitive priorities
A company gains an advantage from its operating system if it can outperform its competitors in one or more of these capacities.
Cost …………………… 1. Low cost operations
Quality ………………… 2. High performance design
…………………………….3. Consistent quality
Time ………………… 4. Fast delivery
…………………………….5. Give on time
…………………………….6. Development speed
Flexibility …………..7. Personalization
…………………………….8. Volume flexibility
PRODUCTIVITY MANAGEMENT
Productivity is the value of products (goods and services), divided by the value of resources (wages, equipment cost, and the like) that have been used as inputs:
Labor productivity: index of production per person or hour of work.
Machine productivity.
Multifactor productivity: Index of production corresponding to several of the resources used in production (labor, materials, general expenses).
CAPACITY, LOCATION AND PHYSICAL DISTRIBUTION
Capacity
Maximum production rate of a facility. It can be a workstation or an entire organization.
- Supply the necessary capacity to meet current and future demand The organization would lose opportunities for growth and profit Overcapacity can be as fatal as insufficient capacity Economies of scale Diseconomies of scale
Capacity measurements
- Based on output of the product: online flow and a relatively small number of standardized products and services Based on inputs: flexible flows, machine hours and number of machines used.
- Utilization - Extent to which equipment, space, or labor is currently employed as a percentage:
Utilization = Average Production Rate x 100
Maximum capacity
- Peak capacity: maximum production under ideal conditions Effective capacity: maximum production under normal conditions Capacity strategies:
- Calculation of the size of capacity mattresses:
"Capacity cushion" = 100 - percentage of ut. (%)
- Timing and magnitude of expansion:
Expansion strategy: big and infrequent jumps
Wait and see strategy: small and frequent jumps
- Tools for capacity planning:
- Queue Models Decision Trees
Location
It is the process of choosing the geographical location to carry out the operations of a company. Weigh factors:
- Location-sensitive factor Strong impact on company capacity
- Dominant factors in manufacturing:
- Favorable work climate Proximity to markets Quality of life Proximity to suppliers and resources Proximity to facilities Acceptable costs of utilities, taxes and real estate
- Methods to determine the location:
- Distance loading method: Mathematical model to evaluate locations in terms of proximity, select the one that minimizes the total of the weighted loads entering and leaving the facility. Break-even point Transportation method Heuristics Simulation Optimization
Physical distribution
Planning includes decisions about the physical position of centers of economic activity within a facility.
Examples: one person, group of people, teller window, machine, work station, department, staircase, shelf, cafeteria, storage room.
- ¿ Which centers should be included in the distribution? How much space and capacity does each center need? How should the space of each center be configured? Where should each center be located?
- Considerations according to competitive priorities:
- Facilitate the flow of materials and information Increase efficiency in the use of labor and equipment Provide greater customer comfort and increase sales in retail stores Reduce hazards to workers, improve morale and communication
- Distribution types:
- Distribution by processes Distribution by products Hybrid distribution
OPERATING DECISIONS
Supply chain management
Its purpose is to synchronize the functions of a company with those of its suppliers, in order to couple the flow of materials, services and information, with the customer's demand.
Supply chain management
Components of the supply chain
Primary activities in the supply chain.
- Demand: horizontal, trend, seasonal, cyclical and random variation Demand can be affected by external factors that are beyond the control of management Indicators of changes in external factors are often useful to predict changes that occur in the demand for goods and services. Decisions about product design, pricing and advertising are examples of internal decisions that influence demand. Two general types of demand forecasts are used: qualitative (judgment methods) and quantitative causal methods and time series analysis.
Inventory management
Inventory is created when the volume of materials, parts or finished goods received is greater than the volume of the same that are distributed.
Inventory types:
- Cycle. Size varies according to order quantity for safety. Variations in forecast uncertainty. Production rate flexibility in transit. Delivery time
- ABC analysis (significant few representing the bulk of inventory investment) EOQ - indicates the lot size that can minimize inventory handling costs.
Aggregate planning
Structure of the aggregate production plan.
Programming
- Allocation of resources for a certain period of time, in order to carry out a specific series of tasks Two fundamental types of programming: workforce and operations programming Identification of bottlenecks Theory of constraints (TOC)
Method of: drum - damper - rope
Project management
- To achieve success in project management requires the coordination of tasks, people, organizations, and other resources, in order to achieve a goal.Three important elements are: project manager, project team, project management system.
Methods:
- Network planning Gantt charts Probabilistic time estimates (optimistic, probable, pessimistic)
PROCESS ADMINISTRATION
- Selection of inputs, operations, workflows and methods that transform inputs into outputs Selection of processes:
- From project Intermittent production By batch or batch Online and continuous
- Process charts:
Technology management
- It links to R&D, engineering and administration in order to plan, develop and implement new technological capabilities that allow to carry out corporate and operations strategies.Three primary areas of technology:
- Product Technology Process Technology Information Technology
Managing the workforce
- Employee participation essential to improve competitiveness Involved in: problem-solving teams, special-purpose teams, self-directed teams Empower collaborators Scientific management: job design and specialization Work standards Work measurement: Time study, job sampling work, elementary and default standard databases.
QUALITY
- Quality as a management philosophy TQM - insists on three principles: customer satisfaction, employee involvement, and continuous quality improvement Deployment of quality function: QFD competitive analysis ISO standards: ISO 9000, ISO 14000 IMPROVEMENT TOOLS: Lists of Verification Histograms and bar graphs Pareto charts Scatter charts Cause and effect charts
CONCLUSION
Operations management is based on constant decision making and strategic selections that tend to focus on the entire organization, in terms of departments, teams and tasks.
Decision making, whether strategic or tactical, is an essential aspect of all administrative activities, including operations management. What distinguishes operations managers are the types of decisions they make, either individually or with other people. These types of decisions can be divided into five categories, to each of which corresponds a distinctive part: Selections of strategies, processes, quality, capacity, location, physical distribution, and operational decisions in general already described above in particular.
Although the specific circumstances of each situation vary, decision-making generally involves the same basic steps: (1) clearly recognizing and defining the problem, (2) gathering the information necessary to analyze possible alternatives, and (3) choosing the most attractive alternative and put it into practice. Managers must carefully relate their strategic and tactical decisions to achieve maximum efficiency.
BIBLIOGRAPHICAL SOURCES:
KRAJEWSKI, LJ, RITZMAN, LP Operations management: strategy and analysis. Pearson Education. Mexico, 2000.
HEIZER, J., RENDER, B. Principles of operations management. Pearson Education. Mexico, 2005.
GAITHER, N., FRAZIER, G. Administration of production and operations. International Thomson. Mexico, 2000.
SUGGESTED CATEGORY:
Topic - ADMINISTRATION
Subtopic - Production and processes
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