Operations Management Aberdeen Business School

Topic 1: Introduction to Operations Management

Topic Preview

This topic provides an overview of operations and operations management. It provides:

• An introduction to the concept of operations management

• A discussion of the relationships between inputs, the transformation processes, and
outputs
• An evaluation of the differences between manufactured goods and service provision
• A typological framework for distinguishing operations
• An understanding of some of the key roles and responsibilities of the operations
manager.

Topic Content

Defining Operations Management

Operations management is concerned with the activities, decisions and responsibilities of

people who produce goods and/or deliver services.

If you think about this simple definition, and if we accept that the reason any organisation
exists is to produce goods and/or deliver services, it becomes clear that every organisation
needs to understand operations management and the role of the operations manager.

Every organisation has an operations manager – although the job title may be something
different. For example, in a hospital the ‘Administrative Manager’ may have responsibility for
operations, while in a hotel it may be the ‘General Manager’. In a manufacturing organisation,
it may be the ‘Production’ or ‘Plant Manager’. In a small organisation, the responsibility for
operations management may be undertaken by someone who performs another role, or it is
perhaps carried out directly by the owner.

Operations management is at the core of all organisations, but it is not the whole organisation.
Two other central functions exist in many organisations:

1. The marketing (and sales) function: This provides two-way communication with the
market. First, telling customers about the organisation’s products and services,
generating interest, and creating orders. Second, finding out what customers think
about the offerings and gaining greater understanding of what they require and
expect.
2. The product/service development function: This uses the information collected from
the marketplace and, through the process of developing existing/creating new
products and services, meets customers’ requirements and expectations.

Together with operations, these three core functions have, of course, a degree of overlap – in
the best performing organisations, the overlap will be significant, and success will be
dependent on maintaining excellent relationships.

© Robert Gordon University

Operations Management Aberdeen Business School

To support these three core functions, a range of support functions exist – finance, purchasing,
accounting, human resource management, maintenance engineering, etc.

The boundaries between all these functions are not clearly defined in many organisations.
Because of the need for operations to have close relations with all core and support functions,
the operations manager needs a well-developed understanding of relationship management,
underpinning all other technical aspects of the role.

The nature of the operation and the role of the operations manager will vary from organisation
to organisation. The manager needs to decide how the operation should be managed, and to
that end there must be a systematic process of analysis of, for example, customers and
markets, products and services, the organisational systems and processes, available resources,
and so on. By establishing a clear picture through this analysis, the manager is in a strong
position to build the most appropriate operational organisation.

The remainder of this topic will begin to analyse the organisation to identify how some
operations share similarities and how others demonstrate distinct differences. Understanding
the nature of this distinction is the key to establishing the best way to manage the operation.

Managing Processes

To meet customers’ needs, operations management focuses on the design, planning, control,
and improvement of those processes that produce goods or deliver services. At the same time,
as with any other functional manager’s responsibilities, efficient use must be made of
organisational resources.

Operations take a set of resources, transform those resources through a range of processes and
produce several outputs. This concept is the foundation for beginning to understand the
nature of the operation.

Note that it is possible to create a simple overview of an organisation with one comprehensive
model. However, to perform a deeper analysis, it is usual to identify the key transformation
processes and then construct an individual model for each.

Inputs

The basic inputs of the Transformation Model are usually defined as the ‘factors of
production’. For example, people, materials, machines/equipment, and information.

There are two categories of inputs in operations, and it is useful to differentiate between them.
Transformed resources are resources that are in some way changed during processing while
Transforming resources are resources that are necessary to effect those changes to the
transformed resources.

© Robert Gordon University

Operations Management Aberdeen Business School

Transformation Processes

With a manufacturing operation, it is quite straightforward to understand the nature of the

transformation processes – we can all visualise a range of activities that might take

place on a production floor, such as machining, baking, coating, assembling, and packing.
With other operations, visualisation may not be so simple.

As a generalisation, we can say that transformation processes fall into three generic groups:

• Materials processing
• Information processing
• Customer processing – be aware that customers can be transforming as well as
transformed resources.

Outputs: Products, Services – or Both?

Operations produce goods, and/or provide services. Increasingly, both are required as
outputs by customers. Products are relatively easy to understand generally, they are tangible
and have measurable attributes such as size, weight, and functional specification. In this
respect, the performance of operations might be measured by examining the performance of
the physical outputs. For example, does the product meet the customer’s specified quality
requirements?

With the provision of a service, however, many of the characteristics that define a product are
missing. It is usually intangible, and measurement of customer satisfaction may be, therefore,
largely subjective. Think of a group of MSc Procurement and Supply Chain Management
students having a set meal at Peter Foods – there may be as many different opinions as there
are diners!

Business Process Orientation

An important change that has influenced operations management involves the increasing
focus on business processes within an organisation. Traditionally, organisations have been
built and subsequently developed around a functionally structural model. In such a company,
clear lines of demarcation exist between, for example, engineering and manufacturing, or
manufacturing and distribution, or purchasing and inventory control. By breaking down
functional division, and the barriers often associated with it, and focusing purely on the
movement of goods and/or the flow of information through an organisation, a different
approach is taken. The rise in popularity of Business Process Re-engineering (BPR) (Hammer,
1993) as a management technique reflects an acceptance of the logic of looking at operations
in this new way.

Operational Typology

Operations do share certain similarities, but in the process of analysis, we need also to
understand how they differ from one another. By examining some important operational
criteria, we can begin to identify these differences and perhaps understand the implications

© Robert Gordon University

Operations Management Aberdeen Business School

in terms of, for example, operational design (equipment, layout, process type), planning
(resources, systems, personnel) and control (information systems, management structure,
staff training).

Four criteria might be:

• The volume of output – what are the daily/annual production targets?

A high-demand product with a competitive selling price (small profit margin) needs to be
produced at the lowest possible cost to the manufacturing organisation. This, in turn, requires
the selection of certain types of high-volume machinery, careful factory layout, specifically
trained staff, etc.

• The variety of output – what is the extent of the product range?

Designing and managing an operation with a single product will be very much simpler than
designing and managing an operation with a wide range of products.

• The variation in demand of output – is there a steady or fluctuating demand for the
product?

Consider how a manager runs a hotel, with pronounced peaks and troughs in demand from
season to season, and perhaps also from weekday to weekend.

• The visibility or degree of customer contact – is there much direct contact between
those responsible for manufacturing and the end users?

In a retail environment, the layout of the product will reflect the style of the
organisation. The way that staff interacts with customers, face to face, is an integral
part of the overall ‘product’. The selection and training of staff may be of prime
importance.

By examining each of these four key criteria, and by rating each from High to Low, a profile
can be constructed that is specific to the organisation under review.

The Operations Manager

So far, we have looked at the nature of operations management. It is important also to

understand some of the roles and responsibilities of the operations manager. Operations
managers have a broad range of direct and indirect responsibilities. Because the operations
manager needs to interact with practically every other part of the business, there is a very real
requirement for him to have a deep understanding of the whole organisation – perhaps more
so than most other functional managers.

The key responsibilities might be categorised as follows:

1. At a high level, the operations manager should be centrally involved in the

formulation of corporate strategies that are designed to drive the business

© Robert Gordon University

Operations Management Aberdeen Business School

forward. The top-level, long-range plans based on, for example, market
analysis, long-range forecasts, macro-environmental analysis, financial
modelling, industry competition analysis, and so on. Today’s operations
manager must be aware of the bigger picture – the effects of globalisation, for
example, environmental issues, climate change, changing social trends,
understanding the potential impact of new technology.
2. It is, then, a clear primary role for the operations manager to ensure that there
is a very close alignment of operations with the strategic plans for the
organisation. Primarily, this involves a responsibility for the design of the
operation – that is, the products, services, processes, and systems essential for
satisfying customers and end users. At this level, the operations manager will
consider medium-range planning, taking consideration of existing resources
and those additional resources that may be needed in the future to meet the
requirements of the corporate strategy.
3. Once strategies have been established and the operation designed to enable
those strategic goals to be achieved, the operations manager then has the
responsibility to plan and control activities. The operations manager is
responsible for developing and maintaining the procedures which will ensure
that inputs, transformation processes and outputs comply. Working within a
short to medium-term timeframe, the operations manager will focus on the
twin aims of meeting the direct requirements of the market and making the
best use of organisational resources.
4. Operations exist in a dynamic environment. Strategies must be continuously
reviewed and, if necessary, revised to protect the business. Nothing stands still.
Without losing sight of the corporate objectives, the operations manager must
continually seek ways and means of improving operational performance.

Further Reading

You should read widely around this topic and consult other relevant online resources to
enhance your awareness, providing a strong foundation for your knowledge. It will help if
you contribute to the online discussion forum through Topic 1 assignment activities.

References

HAMMER, M. 1993. ‘Re-engineering work: Don’t automate, obliterate’. Harvard Business

Review, Vol. 68, No. 4.

Topic Review

This topic has introduced and defined operations management. It has highlighted:

• How all organisations share some operational similarities but may also exhibit
significant differences due to the nature of the product/service and the market
• The need to analyse organisations and differentiate operations using models and
frameworks
• Some of the key roles and responsibilities of the operations manager at different levels
within the organisation.

© Robert Gordon University