Operations Management

A chemist studies a sample of textile dye.

It’s one thing to be in charge of getting Thanksgiving dinner on the table, but it’s another to manage a complex manufacturing process. Before we explore what’s involved in such an undertaking, let’s begin our study of processes and operations by defining some key terms you will use throughout this module.

Operations management is the area of management concerned with designing and controlling the processes of producing goods and services. It involves ensuring that business operations are efficient in terms of using as few resources as needed and effective in terms of meeting customer requirements. Put differently, operations management is concerned with managing the process that converts inputs (in the forms of raw materials, labor, and energy) into outputs (in the form of goods and/or services). That process can be as simple as milling trees into lumber or as complex as building an international space station.

An operations manager is in charge of making sure that production processes run smoothly. That includes fine-tuning production processes to ensure quality, holding down the costs of materials and labor, and cutting costs that don’t add value to the finished product. As you might expect, the role of an operations manager is broad, encompassing many operational areas. While other managers may focus on a specific area, such as finance, accounting, or human resources, an operations manager interacts with every functional area within the organization. This is because operations management includes so many different kinds of tasks—logistics, budgeting, supplier relations, purchasing, staffing, and many more. As globalization has increased competition, the operations manager’s job responsibilities have increased in both scope and importance.

Operations Management in Service Industries

In businesses that produce services, the need for operations management may seem less obvious, since they don’t produce tangible goods. Operations management is all about transformation, though—taking inputs and transforming them into outputs—and it involves things like suppliers, supply chains, and logistics. All of these things are present in service industries. Consider how “operations” play out in a service business—let’s say in a theme park like Wally World. Although the company doesn’t manufacture products, it is still producing an experience. The following breakdown gives you an idea of how and why operations management is so important to this kind of business:

  • How do you control the crowds? How many guests should be let into the park before the line to ride the Tea Cups is intolerably long?
  • How many cars should be attached to the Cyclone of Doom rollercoaster to maximize the number of riders but still ensure their safety and security?
  • For July 4th weekend, how many tons of ice cream need to be ordered to supply all the ice-cream carts and keep all the hot, tired, and hungry patrons happy?
  • Where do you purchase the park’s supplies? That’s everything from souvenir cups with Wally’s picture on them to paper plates and napkins for the restaurants.
  • How do you staff entrances and exits? How much security is enough to let guests feel comfortable letting their children roam around?

How do you manage the operations of this type of business that produces fun as its primary product? Answer: You hire an operations manager!

Check Your Understanding

Answer the question(s) below to see how well you understand the topics covered above. This short quiz does not count toward your grade in the class, and you can retake it an unlimited number of times.

Use this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.