What is Operations Management?
Operations Management is the management of business processes that are used to design, manufacture, distribute, and deliver a product or a service. In essence, operations connects the dots across the value chain. The concepts of operations management apply to any industry, including services (hospitals, airlines, insurance, salesforce management, digital content creation) and manufacturing (cars, high tech products, apparel, pharmaceuticals, consumer packaged goods).
Operations management is truly cross-functional and global. Managing operations involves managing product flows, financial flows, information flows, and human resources across the value chain. As such, operations management is the core engine of any company, focused on creating and delivering value, and interfaces with marketing, finance, technology, human resources, and procurement.
More than a function, Operations Management is a way of thinking. Operations is geared towards process improvement, in order to make customers happier with their service or product at lower cost, greater quality, and in less time. Operations thinking along the value chain helps get beyond functional silos, both within and between firms, and increases the size of the pie. Properly managing operations offers opportunities to invest in the most important parts of an organization, reducing waste and making businesses more sustainable in every sense of the word.
How does Operations Management relate to Technology?
Technology enables processes, and changing technology enables changes in processes. The development of large databases and personal computing enabled massive process reengineering since the 1990s, starting from back office operations (e.g., order-to-cash processes). The development of the internet, mobile computing, and social networks is fundamentally changing the way many business processes operate, especially in information-intensive services (e.g., healthcare, banking, education, consulting). Therefore, technology is an integral part of operations management.
How does Operations Management relate to Strategy?
Strategy tells you where and how to compete, by assessing a firm’s relative competitive position in an industry and its resources. However, a strategy will not succeed if it is not executed properly. Operations Management is about executing a firm’s strategic plan. Execution can be the source of a firm’s competitive advantage. Although Toyota, Southwest Airlines, or Zara’s business models have been well documented, no firm has (so far) been able to fully replicate them because of their competitive advantage in operations execution.