One may generally consider that there are three distinct areas inherent in any business: marketing, finance, and operations; all other business disciplines fit somewhere under one or more of these areas. For example, finance could include investing, real estate, insurance or banking. While management is considered an academic discipline unto itself it is actually a part of all three areas: financial management, marketing management, and operations management. Operations management is the area concerned with the efficiency and effectiveness of the operation in support and development of the firm's strategic goals. Other areas of concern to operations management include the design and operations of systems to provide goods and services. To put it succinctly, operations management is the planning, scheduling, and control of the activities that transform inputs (raw materials and labor) into outputs (finished goods and services). A set of recognized and well-developed concepts, tools, and techniques belong within the framework considered operations management. While the term operations management conjures up views of manufacturing environments, many of these concepts have been applied in service settings, with some of them actually developed specifically for service organizations.
Operations management is also an academic field of study that focuses on the effective planning, scheduling, use, and control of a manufacturing or service firm and their operations. The field is a synthesis of concepts derived from design engineering, industrial engineering, management information systems, quality management, production management, inventory management, accounting, and other functions.
The field of operations management has been gaining increased recognition over the last two decades. One major reason for this is public awareness of the success of Japanese manufacturers and the perception that the quality of many Japanese products is superior to that of American manufacturers. As a result, many businesses have come to realize that the operations function is just as important to their firm as finance and marketing. In concert with this, firms now realize that in order to effectively compete in a global market they must have an operations strategy to support the mission of the firm and its overall corporate strategy.
Another reason for greater awareness of operations management is the increased application of operations management concepts and techniques to service operations. Finally, operations management concepts are being applied to other functional areas such as marketing and human resources. The term marketing/operations interface is often used.
Until the end of the 18th century, agriculture was the predominant industry in every country. The advent of the steam engine and Eli Whitney's concept of standardized parts paved the way for the Industrial Revolution with its large manufacturing facilities powered by steam or water. A number of countries (the United States included) evolved from an agricultural economy to an industrial economy. But for a time, manufacturing was more of an art than a science. This changed with the introduction of Frederick W. Taylor's systematic approach to scientific management at the beginning of the twentieth century. The introduction of Taylor's method of scientific management and Henry Ford's moving assembly line brought the world into an age where management was predominantly centered around the production of goods.
In the late 1950s and early 1960s scholars moved from writing about industrial engineering and operations research into writing about production management. Production management had itself become a professional field as well as an academic discipline. As the U.S. economy evolved into a service economy and operations techniques began to be incorporated into services the term production/operations management came into use. Today, services are such a pervasive part of our life that the term operations management is used almost exclusively.
At the strategic level (long term), operations managers are responsible for or associated with making decisions about product development (what shall we make?), process and layout decisions (how shall we make it?), site location (where will we make it?), and capacity (how much do we need?).
At the tactical level (intermediate term), operations management addresses the issues relevant to efficiently scheduling material and labor within the constraints of the firm's strategy and making aggregate planning decisions. Operations managers have a hand in deciding employee levels (how many workers do we need and when do we need them?), inventory levels (when should we have materials delivered and should we use a chase strategy or a level strategy?), and capacity (how many shifts do we need? Do we need to work overtime or subcontract some work?).
At the operational level, operations management is concerned with lower-level (daily/weekly/monthly) planning and control. Operations managers and their subordinates must make decisions regarding scheduling (what should we process and when should we process it?), sequencing (in what order should we process the orders?), loading (what order to we put on what machine?), and work assignments (to whom do we assign individual machines or processes?).
Today's operations manager must have knowledge of advanced operations technology and technical knowledge relevant to his/her industry, as well as interpersonal skills and knowledge of other functional areas within the firm. Operations managers must also have the ability to communicate effectively, to motivate other people, manage projects, and work on multidisciplinary teams. Sunil Chopra, William Lovejoy, and Candace Yano describe the scope of operations management as encompassing these multi-disciplinary areas:
Mark Davis, Nicolas Aquilano and Richard Chase (1999) have suggested that the major issues for operations management today are:
As one can see, all these are critical issues to any firm. No longer is operations management considered subservient to marketing and finance; rather, it is a legitimate functional area within most organizations. Also, operations management can no longer focus on isolated tasks and processes but must be one of the architects of the firm's overall business model.
R. Anthony Inman
Anupindi, Ravi, Sunil Chopra, Sudhakar D. Deshmukh, Jan A. Van Mieghem, and Eitan Zemel. Managing Business Process Flows: Principles of Operations Management. Upper Saddle River, NJ: Pearson Prentice Hall, 2006.
Davis, Mark M., Nicholas J. Aquilano, and Richard B. Chase. Fundamentals of Operations Management. 3rd ed. Boston: Irwin McGraw-Hill, 1999.
Finch, Byron. Operations Now. 2nd ed., Boston: McGraw-Hill Irwin, 2006.
Rainbird, Mark. "A Framework for Operations Management: The Value Chain." International Journal of Operations and Production Management 34, no. 3/4 (2004): 337–345.
Raturi, Amitabh, and James R. Evans. Principles of Operations Management. Mason, OH: Thomson Southwestern, 2005.