Operations Management - Principles and Theories (2022)

Imagine a world in which your business maximises all its resources and minimises its costs to produce the optimal output. That sounds like a dream, but it also sounds like what you can achieve with operations management.

Operations Management - Principles and Theories (1)

All businesses face constraints and challenges when working towards meeting their customer’s needs. However, there are methods by which you can still produce desired results and reach your business goals.

Let’s take a look at what operations management means, the skills you need, some useful management theories and how automation tools can support your endeavours.

Table of Contents

1. What is Operations Management

2. Understanding Operations Management: What it Involves

3. Skills Needed for Successful Operations Management

(Video) 10 principles of OPERATIONS MANAGEMENT by Randall Schaeffer

4. 10 Principles of Operations Management

5. Why is Operations Management Necessary?

6. Useful Operations Management Theories

7. Operations Management Strategies and Requirements

8. How Software Can Help

9. Operations Management is Key for Business Success

What is Operations Management?

Once called production management, the practice of operations management originated in manufacturing. It is a management area that deals with implementing the most optimal business practices to achieve the highest levels of efficiency. It is all about how to convert raw materials and labour into goods and services to maximise profits.

Operations management professionals balance costs and revenue with a focus on maximising net operating profit. To do so, operations management is a multidisciplinary discipline that works across departments and relies on the involvement of marketing and finance teams, too.

(Video) BME01 / THEORIES ON OPERATIONS MANAGEMENT

Those who work in operations management should not only understand the inner workings of a business’ processes, but they should also be constantly aware of the shifting demands in the economy and marketplace.

Understanding Operations Management: What it Involves

Operations management involves all the steps and departments it takes to move materials into a product or service that is then delivered to a customer. This means that operations management considers materials, technology behaviours and equipment. In essence, operation managers deal with logistics and supply chain management.

Since the field requires knowledge about so many aspects of the business, market and analytics, it necessitates special skills.

Operations Management - Principles and Theories (2)

Skills Needed for Successful Operations Management

  • Understand the processes:Firstly, an operations manager must be attuned to how business processes operate within an organisation. This is how they can find gaps or inefficiencies and provideprocess improvementtactics to reduce waste.
  • Understand local and global trends and resources:An operations manager has to understand what is going on in the economy to make informed decisions about vendors and supply chain management. He or she is also acutely in tune with the changing needs of customers and what resources are currently available to deliver output.
  • Prompt delivery of goods:Heading up logistics, an operations manager seeks to minimise the number of steps from product to delivery of goods. This helps to ensure customer satisfaction and keeps costs lower.
  • Develop new processes:Based on the efficiency of current processes, an operations manager can leverage analytics to see where improvements may be made. They are pivotal players in developing new processes to be more efficient. Data automation tools can connect all legacy and data systems to drive real-time analytics and trends to help with this. It can also map out processes to find weaknesses to reduce critical man dependency and improve compliance.
  • An MBA:Often, those in the field of operations management have graduated with their MBA. This grants them with the skills and knowledge to understand industry trends and stay up-to-date on policies and regulations.
  • Organisational abilities:Undoubtedly, operations management requires utmost organisational skills. Since there are so many moving parts and people involved in the business’ operations, it’s up to the operations manager to ensure that things move fluidly.
  • Analytical abilities:With the help ofdata analytics and tools, operations managers can keep track of KPIs, costs and time of daily operations. In this way, they can analyse inefficiencies and address them.
  • People skills:Operations management works alongside all departments within an organisation. The management professionals can help to create long-term bonds with vendors and work within a business to keep people motivated and aligned with business goals. This requires excellent communication and people skills to understand challenges and help resolve them as they arise.
  • Creativity:In operations management, and business overall, there are usually many ways to approach a situation. The creativity that operations management teams can bring to the table could reshape an industry entirely and be a significant part of its success.
  • Tech-savvy:These days, you’ll be hard-pressed to find any business that doesn’t rely on technology in one way or another. When it comes to operations management, technology is at the top of the list for tools needed. Fromdata automationto logistics technology, operations management requires tech-savvy leaders.

10 Principles of Operations Management

According to operations professionalRandall Schaeffer,these are the ten main principles of operations management:

Reality:Operation Managers need to stay focused on the issue at hand because tools, trends and techniques work in a broad sense, but there’s never a universal solution since Operations Management is so business-specific.

Organisation:Processes are interconnected in business in the same way as human biological systems work together to keep a person alive. This means that they require an organisation to keep movement flowing.

Fundamentals: The Pareto Rule of Efficiency (80/20 rule) works in operations management as 80% relies on maintaining processes as-is, and 20% is granted to new techniques, tools and processes.

(Video) Henri Fayol's Principles of Management

Accountability:A primary way to ensure that things run smoothly is for operations managers to communicate processes, assign responsibility and measure metrics so that people do the work they are supposed to do.

Variance:Support slight changes in processes if and when they occur because this type of creative thinking may lend itself to better results.

Causality:Find the source and root of issues rather than ignoring them and solving the effects. Everything is caused by something, and until the root of the problem is addressed, it will continue to occur.

Managed Passion:Company growth and success lies in the joy of its employees. Managers play a pivotal role in boosting company morale and support employees’ attitudes.

Humility:Errors are costly, and as such, an operations manager needs to know when to ask for help.

Success:Markers of success are ever-changing, but one constant measurement of success is customer satisfaction. Maintain this as a business priority, and it will help other goals fall in line.

Change:Change is inevitable, and thanks to innovative technology, it tends to be for the better. Be open to change and communicate the reasons it’s necessary to earn buy-in from critical stakeholders.

Why Is Operations Management Necessary?

For small businesses and big businesses, operations management is essential. Operations management helps allow for:

(Video) MOS 3330 Operations Management

  • Increased profit
  • Increased output
  • Competitive advantage
  • Enhanced customer service
  • Technological advances
  • Better quality products or services

Operations Management - Principles and Theories (3)

Useful Operations Management Theories

There are various process management theories and operations management philosophies that can help to better manage a business’ doings. Let’s take a look at what these include:

  • Business Process Management (BPM):This is the action of continually reviewing, analysing, optimising, automating and improving processes. It involves following the steps of designing a process,modelling a processon paper so everyone can understand and visualise the steps, analysing its productivity, monitoring for successes or errors and providing ideas for improvement or implementing automation to maximise efficiency.
  • Business Process Reengineering (BPR):BPR is a fundamental shift in how a business currently operates. It leverages technology to redesign functions and create organisational change entirely.
  • Lean & Agile Manufacturing:This is a modern approach to manufacturing and production that has led to decreased costs and the ability to meet consumer’s shifting demands promptly. It relies on efficient purchasing to reduce costs and the use of technology to manage delivery systems adequately. The agility also comes from the use of technology and data analytics to stay up-to-date on current functioning so that marketing, sales, design and production teams can all access thesame data systemsto do their job in the best way.
  • Six Sigma:Six Sigma is a methodology and tool to reduce the error rate in the manufacturing process. It involves the tasks to define, measure, analyse, improve and control a process.
  • Reconfigurable Manufacturing System:Due to a sudden market or system change, a reconfigurable manufacturing system is one that is designed to adapt to a shift in supply or demand quickly.. Both hardware and software are implemented in the initial design to handle swift adjustments when necessary.
  • Employee Involvement:Designing a company culture that allows employees to feel heard and have a say in decisions means that their involvement matters. It can create a more collaborative, passionate and productive workforce.
  • Sustainable Operations Management:This type of operations management is concerned with the sustainability of supply chains. With increased globalisation and climate change, there’s an enhanced need for sustainable business practices. Many businesses make this a primary element of their value proposition which helps to increase their bottom line (and triple bottom line).
  • Behavioural Operations Management:Behavioral operations management brings sociology, psychology, economics and social sciences together to see how managers make their decisions. It looks at how human systems operate alongside operational systems and identifies where deviations in rational behaviour can create inefficiencies.
  • Supply Chain Management:Supply chain management concerns overseeing the flow of goods and services, from the supply of raw materials to storage, inventory and outputs. It’s involved in business processes that move from the point of origin to the end of consumption. The goal is to minimise costs and waste and maximise outputs and profits.

Operation Management Strategies and Requirements

Here are some of the best strategies for operations management teams to succeed:

  • Leveraging data:The importance of data cannot be understated. For quality planning and measurement, operations management teams use data to make better-informed decisions.
  • Inventory management:Inventory management requires that resources are being used as needed, and waste is avoided. This results in decreased costs and increased efficiency.
  • Process design:Operations managers research and development processes to be effective. They also monitor operations to ensure that goals are being met and if not, they conduct analysis on how to make a process work better.
  • Collaboration:Finance, marketing, sales, HR teams all work together for success. With centralised data systems, this is easily manageable and doable.
  • Forecasting:Setting goals helps keep people motivated and processes moving in the right direction. To be able to see if things are headed in the right direction, businesses can leverage forecasting tools that use past data to predict the future.

How Software Can Help

Software becomes an integral element for operations management. Choosing the right tools to help manage your operations can contribute to:

  • Standardised processes
  • Storage of historical processes
  • The ability to map processes and share them across your organisation
  • An easy way to track metrics
  • Improved employee engagement and ownership

Data automation tools can provide your team with automation solutions that help to maximise outputs and timeliness of processes. For example, say you have one person in charge of approving invoices for vendors. If that person is out sick or on vacation, this critical person dependency may postpone payment. In turn, your supply chain has been affected, and customers may start to experience delays. Instead, automation tools can run the repetitive process for you and do so with minimised error. Reducing bottlenecks is just one way that an automation tool can help to increase abusiness’ operational effectiveness.

Operations Management - Principles and Theories (4)

Operations Management is Key for Business Success

Operations management is a multidisciplinary aspect of business that overlaps with all department’s functioning and the management of business processes. This means that it can help to contribute to increased bottom lines, better production practices, optimised logistics and more.

(Video) Lecture 1 Introduction to Operations Management

With data automation and software tools, operations management teams can work with marketing, finance, HR, etc. to access essential and real-time data to better guide decision-making to maximise profits.

Operations Management - Principles and Theories (5)

FAQs

What are the theories of operations management? ›

Modern operations management is comprised of four theories: business process redesign (BPR), six sigma, lean manufacturing, and reconfigurable manufacturing systems.

What are the five basic principles of operation management? ›

Principle No.

At the most fundamental level, management is a discipline that consists of a set of five general functions: planning, organizing, staffing, leading and controlling. These five functions are part of a body of practices and theories on how to be a successful manager.

What are the 4 types of operations management? ›

Every business operates along four basic focus dimensions: finance, customers, internal processes, and learning and innovation. These theoretical divisions of operations management come from the research of Robert S. Kaplan and David P.

What are principles of operations? ›

Operating Principles, or as they are often referred to, a company's operating system, are essentially the way that organizations put their values into practice and get things done. Many companies rely on operating principles to get things done faster. They also influence culture and values.

Who made operations management theory? ›

In 1911, at the height of the Second Industrial Revolution, Frederick Taylor published his principles of scientific operations management. This theory included four elements: Developing a science of management.

Why is IT important to follow principles in operations management? ›

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.

What are the 7 principles of management? ›

The seven principles of quality management are:
  • Engagement of people.
  • Customer focus.
  • Leadership.
  • Process approach.
  • Improvement.
  • Evidence-based decision making.
  • Relationship management.

What are the 7 main function of operational management? ›

We can distinguish seven main functions of operation management in the industrial enterprise: planning, scheduling, purchasing, controlling, quality control and inventory control. In each of those fields operations managers should conduct many decision affecting of-organization effectiveness.

What are the 3 roles of operation management? ›

The term operations management encompasses planning, implementing, and supervising the production of goods or services.

What are the six types of focus operations? ›

Six Areas of Focus for Executing Strategy and Ensuring Strong Performance
  • Resource allocation. ...
  • Creating the appropriate structure. ...
  • Assigning ownership and accountability. ...
  • Aligning the culture with strategy. ...
  • Control and performance measurement. ...
  • Feedback and reward systems.
5 Nov 2012

What are objectives of operations management? ›

Customer Service: The primary objective of operations management, is to utilize the resources of the organization, to create such products or services that satisfy the needs of the consumers, by providing “right thing at the right price, place and time”.

What are examples of operating principles? ›

Examples of Operating Principles
  • Focus on the user and all else will follow.
  • It's best to do one thing really, really well.
  • Fast is better than slow.
  • Democracy on the web works.
  • You don't need to be at your desk to need an answer.
  • You can make money without doing evil.
  • There's always more information out there.
16 Feb 2017

What is operation management Meaning? ›

Operations management is a delivery-focused area in business which ensures that an organisation successfully turns inputs to outputs in an efficient manner. The inputs themselves could represent anything from materials, equipment and technology to human resources such as staff or workers.

Who is the father of operation management? ›

Fayol has been regarded by many as the father of the modern operational management theory, and his ideas have become a fundamental part of modern management concepts.

Who is father of management? ›

Peter Drucker: father of management thinking | The British Library.

What is operation management Framework? ›

The DPSA created a web-enabled platform where all institutions will be able to share knowledge with regard to all matters on operations management. The web-enabled system was developed in order to ensure efficient and effective roll-out of the OMF.

What are the key elements of operation management? ›

This is shown in Figure 1, which represents the three components of operations: inputs, transformation processes and outputs. Operations management involves the systematic direction and control of the processes that transform resources (inputs) into finished goods or services for customers or clients (outputs).

What skills are needed for operations management? ›

The following examples of operational management skills are necessary to perform effectively in operations and production management:
  • Technical proficiency. ...
  • Data processing skills. ...
  • Product development. ...
  • Risk analysis. ...
  • Strategic planning. ...
  • Budget management. ...
  • Staff management. ...
  • Decision-making skills.
15 Mar 2021

What are the 4 operation management activities for operation planning? ›

Primary activities of operations management include job design, scheduling, materials management, capacity management, facilities management, and quality management.

Are there 7 or 8 quality management principles? ›

A primer for quality

The eight principles are: Principle 1 – Customer focus: Organizations can establish this focus by trying to understand and meet their customers' current and future requirements and expectations.

What is TQM in management? ›

Total Quality Management (TQM) is a management framework based on the belief that an organization can build long-term success by having all its members, from low-level workers to its highest ranking executives, focus on improving quality and, thus, delivering customer satisfaction.

What are the 8 universal quality management? ›

The Eight Principles of Total Quality Management (TQM) are Customer Focus, Leadership, Involvement of People, Processes Approach, System Approach to Management, Continual Improvement, Factual Approach to Decision-Making, and Mutual Beneficial Supplier Relationship.

What are operation management tools? ›

Operations management tools are the software and hardware used to manage the day-to-day operations of a business. This can include anything from enterprise resource planning (ERP) systems to customer relationship management (CRM) software.

What are the six direct responsibilities of operations managers? ›

Their direct responsibilities include managing both the operations process, embracing design, planning, control, performance improvement, and operations strategy.

How important is 4 M's in business operation? ›

Planned Maintenance: The 4M framework is instrumental in reducing breakdowns by restoring the equipment, correcting basic weaknesses, and preventing issues from coming back. Working together, 4Ms helps the pillars to understand where the weaknesses are and address them through restoration and prevention.

What is Operation Manager duties? ›

Operations Manager Responsibilities:

Develop, implement, and review operational policies and procedures. Assist HR with recruiting when necessary. Help promote a company culture that encourages top performance and high morale. Oversee budgeting, reporting, planning, and auditing.

What are 6 strategic areas? ›

Read ahead to learn more about the six vital elements of strategic planning: vision, mission, objectives, strategy, approach, and tactics.

What are key strategic areas? ›

The basic strategic variables for consideration as you make a plan for the future are products, services, customers, markets, finances, people, technology, and production capability.

What are the four characteristics of a strategic operation? ›

Furthermore, there are four basic characteristics of a successful strategy: goals that are simple, consistent and long term; profound understanding of the competitive environment; objective appraisal of the resources; and, effective implementation.

What is the most important function in operations management? ›

Operational planning is the foundational function of operations management. Your duties within this function may include: Monitoring daily production of goods. Managing and controlling your inventory.

What are the roles and responsibilities of operations? ›

The specific duties of an Operations Manager include formulating strategy, improving performance, procuring material and resources and securing compliance. You should be ready to mentor your team members, find ways to increase quality of customer service and implement best practices across all levels.

What is scope of operation? ›

The term 'Scope of Operations' is used to describe the activities of your food business and also includes: • the sector(s) a food business operates under the Food Act 2014, • what products a food business makes and/or sells, • how products are sourced and/or supplied, • how products are processed, if applicable, and • ...

What are strategic principles? ›

Strategy principles are the fundamental rules and guidelines that serve as a foundation for reasoning and decision making about the longer-term direction for an enterprise. When used properly, strategy principles help organizations grow and achieve competitive advantage in the marketplace.

What is the difference between a principle and a strategy? ›

If strategy is essentially about making choices, then these choices can be articulated through a set of principles, where a principle is defined as a 'conscious choice between two equally valid alternatives'.

What are your principles? ›

Your principles will:

Be your compass to which you refer to when you're in doubt, evaluating opportunities or conflicting priorities, or need to take a stand. Help you to define your goals and values, and to choose between them when confronted with conflicting issues or opportunities.

What is the systems management theory? ›

2. Systems Management Theory. Systems management offers an alternative approach to the planning and management of organizations. The systems management theory proposes that businesses, like the human body, consists of multiple components that work harmoniously so that the larger system can function optimally.

What is Six Sigma in production and operations management? ›

Six Sigma is a quality management methodology used to help businesses improve current processes, products or services by discovering and eliminating defects. The goal is to streamline quality control in manufacturing or business processes so there is little to no variance throughout.

What are the types of models in production and operations management? ›

2.2 Models of Production system:

Three types of models are there such as physical, schematic and mathematical.

What are the 3 management theories? ›

The three main classifications of management theory are Classical Management Theory (1900s), Behavioral Management Theory (1910s), and Modern Management Theory (1940s).

Which management theory is the best? ›

Take scientific management — best known as Taylorism — arguably the most enduring management theory of them all. It suggests that a manager's job is to increase efficiency in a production system.

What is fayol theory of management? ›

Henri Fayol identified 5 functions of management, which he labelled: planning, organizing, commanding, coordinating and controlling. Henri Fayol theorized that these functions were universal, and that every manager performed these functions in their daily work.

What are the 7 main function of operational management? ›

We can distinguish seven main functions of operation management in the industrial enterprise: planning, scheduling, purchasing, controlling, quality control and inventory control. In each of those fields operations managers should conduct many decision affecting of-organization effectiveness.

What are the 3 roles of operation management? ›

The term operations management encompasses planning, implementing, and supervising the production of goods or services.

What is the goal of operation management? ›

The goal of operations management is to help maximize efficiency within an organization, increase the organization's productivity, increase profits while reducing costs, and ensure the production and delivery of high-quality products or services that suit consumers' needs.

Why it is called 6 Sigma? ›

"Six Sigma" comes from the bell curve used in statistics, where one Sigma symbolizes a single standard deviation from the mean. If the process has six Sigmas, three above and three below the mean, the defect rate is classified as "extremely low."

What is 5S quality? ›

Quality Glossary Definition: Five S's (5S) 5S is defined as a methodology that results in a workplace that is clean, uncluttered, safe, and well organized to help reduce waste and optimize productivity. It's designed to help build a quality work environment, both physically and mentally.

Who is the father of 6 Sigma? ›

Six Sigma (6σ) is a set of techniques and tools for process improvement. It was introduced by American engineer Bill Smith while working at Motorola in 1986.

What are the 4 types of models? ›

Formal versus Informal Models. Physical Models versus Abstract Models. Descriptive Models. Analytical Models.

What is difference between production and operation management? ›

Operation management is the field of study that deals with supervision, design and planning of business operations.
...
What is Operation Management?
Production ManagementOperation Management
Area of Decision making
Related to aspects of production onlyRelated to the regular business activities in an organization
Found In
5 more rows

What are the 3 types of models? ›

Many types of models can be grouped into three categories; visual models, mathematical models, and computer models. Visual models make things easier to understand by showing visual representations of phenomena used for education and communication.

Videos

1. Classical Management Theory
(Organizational Communication Channel)
2. What is Operation Management? | Duties and Responsibilities in Operation Management
(Educationleaves)
3. Lecture 01 Operations Management: Basics
(Operations Management - IITR)
4. What Is Operations Management?
(Samantha Magers)
5. Operations Management 101: Introduction to Decision Analysis
(Brandon Foltz)
6. Ten Principles of Operation Management.
(Management learning)

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