OPERATIONS
Role of operations management
Strategic role of operations
Operations management is an essential key business function that overlaps with the other business functions such as marketing, finance and human resources management.
Strategic means ‘affecting all key business areas’; that is, the strategic role of operations management involves operations managers contributing to the strategic plan of the business.
Some of the different costs in the operations function include; input costs, labour costs, processing costs, inventory costs and quality management costs.
Cost leadership involves aiming to have the lowest costs or to be the most price-competitive in the market. A key aspect to cost leadership is that although trading with the lowest cost, the overall business should still be profitable. One aspect of cost leadership arises from a business creating economies of scale. Economies of scale refers to cost advantages that can be created as a result of an increase in scale of business operations. Typically the cost savings come from being able to purchase lower cost per unit and from efficiencies created through improved use of technology and machinery.
Goods/services differentiation is a key strategy applied by operations managers. Product differentiation means distinguishing products in some way from its competitors. Ways a product could be differentiated include: varying the actual product features, varying product quality, varying any improved features, varying the amount of time spent on a service, varying level of expertise brought to a service, varying qualifications and experience of the service provider and varying the quality of materials/ technology used in service delivery.
For both goods and services, differentiation can be created from cross branding or strategic alliances.
Goods and/or services in different industries
Operations decisions will vary for goods depending on whether they are standardised goods or customised goods. Standardised goods are those that are mass produced, usually on an assembly line. Standardised goods are uniform in quality and meet a predetermined level of quality. These are generally produced with a production focus. Customised goods are those that are varied according to the needs of customers. These goods are produced with a market focus rather than a production focus.
Interdependence with other key business functions
Interdependence refers to the mutual dependence that the key functions have on one another. The key business functions work best when they overlap and employees work towards common goals. Each function area depends on the support of the others if it is to perform at capacity.
The key functions in a business are; operations, marketing, finance and human resources. Operations refers to the business processes that involve transformation or, more generally, ‘production’. Marketing is about meeting the needs and wants of consumers through provision of products at prices that the market is prepared to pay. Finance is the function that is concerned with recording and summarising financial transactions into a series of reports that can be easily interpreted. Human resources is the function which is reliable to deal with the people the business employs and the issues arising from their employment.
Influences on operations management
Main influences on operations management
Globalisation refers to the removal of barriers of trade between nations. Globalisation is characterised by an increasing integration between national economies and a high degree of transfer of capital, labour, intellectual capital and ideas, financial resources and technology. It has significantly affected the operations function of large and global businesses. Globalisation affects consumers who seek global brands and this, in turn, shapes the operations function. Globalisation affects organisational design and the supply chain. For large global businesses, the integration of