In some types of organization it is relatively easy to visualize the operations function and what it does, even if we have never seen it. For example, most people have seen images of automobile assembly. But what about an advertising agency? We know vaguely what they do – they produce the advertisements that we see in magazines and on television – but what is their operations function? The clue lies in the word ‘produce’. Any business that produces something, whether tangible or not, must use resources to do so, and so must have an operations activity. Also the automobile plant and the advertising agency do have one important element in common: both have a higher objective – to make a profit from producing their products or services. Yet not-for-profit organizations also use their resources to produce services, not to make a profit, but to serve society in some way. Look at the following examples of what operations management does in five very different organizations and
some common themes emerge.
some common themes emerge.
1. Automobile assembly factory – Operations management uses machines to efficiently assemble products that satisfy current customer demands
2. Physician (general practitioner) – Operations management uses knowledge to effectively diagnose conditions in order to treat real and perceived patient concerns
3. Management consultant – Operations management uses people to effectively create the services that will address current and potential client needs
4. Disaster relief charity – Operations management uses our and our partners’ resources to speedily provide the supplies and services that relieve community suffering
5. Advertising agency – Operations management uses our staff ’s knowledge and experience to creatively present ideas that delight clients and address their real needs
Start with the statement from the ‘easy to visualize’ automobile plant. Its summary of what operations management did was that . . . ‘Operations management uses machines to efficiently assemble products that satisfy current customer demands.’ The statements from the other organizations were similar, but used slightly different language. Operations management used, not just machines but also . . . ‘knowledge, people, “our and our partners’ resources” ’ and ‘our staff ’s experience and knowledge’, to efficiently (or effectively, or creatively) assemble (or produce, change, sell, move, cure, shape, etc.) products (or services or ideas) that satisfy (or match or exceed or delight) customers’ (or clients’ or citizens’ or society’s) demands (or needs or concerns or even dreams). So whatever terminology is used there is a common theme and a common purpose to how we can visualize the operations activity in any type of organization: small or large, manufacturing or service, public or private, profit or not-for-profit. Operations management uses resources to appropriately create outputs that fulfil defined market requirements. See Figure 1.2. However, although the essential nature and purpose of operations management is the same in every type of organization, there are some special issues to consider, particularly in smaller organizations and those whose purpose is to maximize something other than profit.
Operations management in the smaller organization
Operations management is just as important in small organizations as it is in large ones. Irrespective of their size, all companies need to produce and deliver their products and services efficiently and effectively. However, in practice, managing operations in a small or medium-size organization has its own set of problems. Large companies may have the resources to dedicate individuals to specialized tasks but smaller companies often cannot, so people may have to do different jobs as the need arises. Such an informal structure can allow the company to respond quickly as opportunities or problems present themselves. But decision making can also become confused as individuals’ roles overlap. Small companies may have exactly the same operations management issues as large ones but they can be more difficult to separate from the mass of other issues in the organization. However, small operations can also have significant advantages; the short case on Acme Whistles illustrates this.
Operations management in not-for-profit organizations
Terms such as competitive advantage, markets and business, which are used in this book, are usually associated with companies in the for-profit sector. Yet operations management is also relevant to organizations whose purpose is not primarily to earn profits. Managing the operations in an animal welfare charity, hospital, research organization or government department is essentially the same as in commercial organizations. Operations have to take the same decisions – how to produce products and services, invest in technology, contract out some of their activities, devise performance measures, and improve their operations performance and so on. However, the strategic objectives of not-for-profit organizations may be more complex and involve a mixture of political, economic, social and environmental objectives. Because of this there may be a greater chance of operations decisions being made under conditions of conflicting objectives. So, for example, it is the operations staff in a children’s welfare department who have to face the conflict between the cost of providing extra social workers and the risk of a child not receiving adequate protection. Nevertheless the vast majority of the topics covered in this book have relevance to all types of organization, including non-profit, even if the context is different and some terms may have to be adapted.
The new operations agenda
The business environment has a significant impact on what is expected from operations management. In recent years there have been new pressures for which the operations function has needed to develop responses. Table 1.2 lists some of these business pressures and the operations responses to them. These operations responses form a major part of a new agenda for operations. Parts of this agenda are trends which have always existed but have accelerated, such as globalization and increased cost pressures. Part of the agenda involves seeking ways to exploit new technologies, most notably the Internet. Of course, the list in Table 1.2 is not comprehensive, nor is it universal. But very few businesses will be unaffected by at least some of these concerns. When businesses have to cope with a more challenging environment, they look to their operations function to help them respond.