Why Operations Management is Important for a Company

1 RAMANUJAN Why Operations Management is Important for a Company A White PaperEducationOperations Management is a fundamental part of anyorganization. It plays a vital role in the success oforganization. It is the area of Management which isconcerned with creation of goods or services of a field is Important as well as challenging and vital for alltypes of organizations ranging from manufacturing toretailing to EducationOperations & Operations ManagementOperations, as per many definitions by researchers,includes "all those activities required to create anddeliver a product or service, from procurementthrough conversion to distribution." It is one of the3 basic functions of an organization Finance, Operations & Marketing. Like the other necessaryfunctions of an organization, managing operationsfunction is also crucial for the success of acompany and is particularly related to thegeneration of product or is type of activities that go on in aorganization regardless of whether end product is agood or service.

2 Major, overall activities ofteninclude product creation, development, productionand distribution, managing purchases, inventorycontrol, quality control, storage, logistics andevaluations of processes in a typical manufacturingsetup. Wherein in a service organization these canbe customer care, backend services, IT supportservices / Data storage, stores / distribution,security, facility maintenance etc. Thus everyorganization has Operations function whether or notit is named so. Operations is also defined in terms oftransformation process wherein inputs areconverted to outputs. Galloway (1998) definesoperations as all the activities concerned with thetransformation of materials, information or customers,depending upon the type of organization.

3 During thetransformation Operations add value to inputs toproduce goods or services. Every individual, every economic enterprise, everygovernment, every educational institution and everyorganization performs Operations . Theseoperations may have different names: processes,transactions, work flows, production lines,curricula, cooking, serving, writing, presenting,accounting, or working. But they all have certaincommon characteristics: they all have input, they alltransform the inputs through different means andthey all have output & use Management , as per industry experts,is the set of activities that creates value in the formof goods and services by transforming inputs intooutputs. Operations Management focuses oncarefully managing the processes to produce anddistribute products and services such that it addsvalue to firms inputs to convert to profitableoutputs.

4 In short Operations Management is the science andart of Management of: People, Process & Systemsfor delivery of a useful product or servicesuccessfully to Management is a fundamental part ofany organization. Forbes magazine reported in 2011that about three quarters of all CEOs came from anoperations background. Not all these CEOs studiedoperations in school; only some of them did. Theygot on the job training and thus took time to learnthe concepts of Operations of Operations ManagementThe field of Operations Management has gainedincreased recognition due to public awareness ofRAMANUJANRAMANUJANRAMANUJANRAMANUJAN Educationthe success of Japanese manufacturers. As a result,many businesses have come to realize that theoperations function is just as Important to their firmas finance and marketing.

5 Also firms have realizedthat in order to effectively compete in a globalmarket they must have an Operations strategy tosupport the mission of the firm and its overallcorporate concepts of efficiency and effectiveness of anyorganization revolve around the operationsmanagement. Managing Operations is all aboutmaking the processes work right! Running theprocesses involves great degree of integration oforganizational resources to get the product in theright place in the right way keeping in view the costand time considerations. No single innovation promises an ever lastingcompetitive advantage for an organization. Thesecret to success lies in creating such a robustcompetitive advantage which has its roots in theprocesses; the processes for use of new technology,the process for using resources, the process forutilizing the current resources to generate new onesand above all the process for creating value.

6 Theseall can be achieved only if the Operations aremanaged in a way which makes a difference andcreates the concept of differentiation right at theshop floor. This is what Toyota Motor Corporationis known for! The history of Toyota is lined bycontinuous improvement in quality. Right from thefounder of the Company , Kiichiro, there has been agreat emphasis on Operations Management andquality control systems. Operations Management supplements all the otheractivities of an organization. Research anddevelopment activity is focused on the developing aproduct that is the need of the customers and hasenough market potential. The finance department isconcerned with the cost considerations and canmake projected statements or forecasts about theproductions in terms of fixed cost, variable cost andoverhead costs.

7 Human resource department has gotthe task to hire people who have the appropriateknowledge, skills and abilities to meet theorganizational objectives. It is the operationsdepartment which has to integrate all thesefunctions. Making the product according to theproposed specifications, in the provided budget byutilizing the best of capacity of land, labor andmachinery to produce a product which can make iteasier for the marketing people to target the desiredmarket segment is the task of Operations are few salient features indicating theimportance of Operations Management for anorganization. Also a comparison is submittedbetween increasing the sales, reducing the financecost & reducing the production / Operations ends with a note that companies profitincreases maximum when Company focus onreducing the Operations cost rather than increasingsales or reducing finance cost.

8 Operations is one of the three major functions(marketing, finance and Operations ) of Education Operations affects the companies ability tocompete. Offers a major opportunity for anorganization to improve its productivity andprofitability. Operations is a costly part of an organization Nearly half of the employed people over the worldhave jobs in Operations . The Operations function is responsible for a majorportion of the assets of most organizations. The concepts, tools and techniques of OperationsManagement are widely used in managing OptionFinance OptionOperations Management OptionCurrent Increase Sales 50%Reduce Finance cost 50%Reduce Operations Cost 20%Sales100000150000100000100000 Input Cost800001200008000064000 Gross Margin20000300002000036000 Finance Cost6000600030006000 Net Margin14000240001700030000 Taxes @25%3500600042507500 Margin after Tax10500180001275022500* Input cost considered as 80% of sales, Finance cost as 6%.

9 Operations Management in the SmallerOrganizationsOperations Management is just as Important insmall organizations as it is in large / OEM of their size, all companies need toproduce and deliver their products and servicesefficiently and effectively. However, in practice,managing Operations in a small or medium sizeorganization has its own set of problems. Largecompanies may have the resources to dedicateindividuals to specialized tasks but smallercompanies often cannot, so people may have to dodifferent jobs as the need arises. Decision makingcan become confused as individuals roles companies may have exactly the sameoperations Management issues as large ones butthey can be more difficult to separate from the massof other issues in the organization.

10 However, smalloperations can also have significant : Hayes, Gary Pisano. Operations , Strategy, and Technology:Pursuing the Competitive Edge . Wiley Mary Ann Anderson. Operations Management for Dummies Ramanujan College of Management Palwal (NCR Delhi, Haryana)Web.