Operations Management : Definition, Principles and Strategies (2024)

Operations management refers to the administration of best business practices to achieve the maximum levels of effectiveness and efficiency in terms of the use of company resources. This includes the proper management of materials, machinery, technologies, and labor to produce high-quality goods and services that will benefit the company.

All those operation components must be managed properly, from the strategic planning stage, the implementation stage, production supervision, and the final evaluation of outcomes for future innovations, so that the company remains profitable and competitive in its industry. Operational managers have a great responsibility in handling strategies, and projections, also overseeing day-to-day processes.

Management Meaning, and The Principles of Operations Management

There are ten principles of operations management that managers need to apply. Before we jump into the principles of operation management, let’s define the meaning of management. So, what is management meaning? Management refers to coordination and administration to achieve goals.

The management principles were presented by Randall Schaeffer, an experienced production and operations manager, an industry philosopher, and a regular speaker at conference meetings organized by APICS, the leading association of supply chain and operations management in the United States.

Reality

Operations managers must focus on problems, not techniques because there are no tools that provide universal solutions.

Organization

Processes in manufacturing are interconnected. All elements must be predictable and consistent, to achieve the same outcome in profits.

Fundamentals

Operations managers must know how to comply with all fundamentals because this is the key to production success. It is important to ensure the accuracy of inventory data, BOMs, and other general tasks to achieve the desired results.

Accountability

Managers are expected to set rules and metrics, determine the responsibilities of their subordinates, and regularly check if objectives are achieved.

Variance

The variance of processes needs to encourage because if managed properly, differences can be a source of creativity.

Causality

Sometimes, problems will still arise even when the best efforts have done. Managers need to find the root cause of the problem so that it won’t get worse.

Managed Passion

Employee morale can be a major driver of company growth. Managers must be able to inspire their subordinates to be passionate at work.

Humility

No one wants to work with an aggressive know-it-all. Thus, operations managers need to position themselves as ordinary people who don’t know everything and can also make mistakes.

Success

Managers have clearly defined what they consider successful so that everyone in the company will have the parameters to work within the process of achieving targets.

Change

Everyone in the company must learn to adapt to market changes. This includes understanding customers, target clients, and what they want.

The Importance of Operations Management

It is no exaggeration to state that all aspects of a business depend on operations management. However, it can plan, direct and encourage the manufacturing of goods and services. To be able to compete in an ever-changing market. Then, the operations managers need to work efficiently and productively to maximize profits which are the main determinants of business survival.

Operations management can influence customer service, product and service quality, proper functional methodologies, competitiveness in the market, technological advances, and profitability. Failure to manage the company’s operations will cause significant losses for the business.

Strategies of Operations Management

Operations management functions as the company’s engine room. Since operations managers are involved in many roles and functions, they have developed several important strategies and tactics to ensure the smooth implementation of their obligations and responsibilities. Here are some of the main strategic and tactical methods they rely on:

Leveraging Data

Savvy operations managers depend on quality, accurate, and reliable data for planning, strategic marketing, and decision-making. Two types of data analysis commonly used are efficiency and effectiveness metrics.

Controlling Data Challenges

Sometimes, data can be very large and the results vary, making it difficult to compare. Fortunately, with the help of advanced systems and software, managers can see, manage and analyze data more easily and organized.

Analyzing Inventory

The inventory will easily to analyzed if the company uses inventory management software. This tool will also make it easier for managers to categorize their products (known as the ABC analysis).

Designing Processes

Operations managers work hard in making the best research, accurate estimates, and the right development of good processes. All these efforts will eventually lead to long-lasting results.

Forecasting and Setting Goals

Setting goals provides direction and motivation to the company and its employees. Forecasting gives hope as well as provides an opportunity for the company to prepare for bad results.

Forecasting requires complete and accurate historical data. Usually, this takes a long time, but thanks to ERP software, this can be done more easily and very quickly.

Collaboration Between Departments

Collaboration between departments is needed so that the finance, sales, marketing, and human resources teams can work together in harmony to make improvements for the company. An ERP system enables inter-departmental collaboration by providing centralized information for all departments, making communication easier and more transparent.

Social Responsibility

Being responsible for the environment as well as the communities that are directly affected by the business are the main concerns that must the company care about. This is especially true for manufacturers that often deal with waste problems.

HR Management

Using HRIS software for managing employees is very important for your business’s success since employees are the backbone of your company. Without these people, daily business activities will cease, and your company won’t be able to produce quality goods or services.

Tips for Successful Operations Management

The success of operations management won’t organization achieved without the role of a reliable operational manager. Operations managers must not only be adept at managing but must be able to become good leaders. They have to be able to inspire and set a good example for employees.

Since operations managers are responsible for planning, projecting, and analyzing various aspects related to production, they are very dependent on the accuracy of the data. With an ERP system, operations managers can generate accurate real-time data related to inventory, production, and sales. This system also allows inter-departmental integration so employees from different divisions (and even locations) can collaborate through the same system.