Operations management is the activity of managing the resources which produce and deliver products and services. The operations function is the part of the organization that is responsible for this activity. Every organization has an operations function because every organization produces some type of products and/or services. However, not all types of organization will necessarily call the operations function by this name. (Note that we also use the shorter terms ‘the operation’ and ‘operations’ interchangeably with the ‘operations function’). Operations managers are the people who have particular responsibility for managing some, or all, of the resources which compose the operations function. Again, in some organizations the operations manager could be called by some other name. For example, he or she might be called the ‘fleet manager’ in a distribution company, the ‘administrative manager’ in a hospital, or the ‘store manager’ in a supermarket.
Operations in the organization
The operations function is central to the organization because it produces the goods and services which are its reason for existing, but it is not the only function. It is, however, one of the three core functions of any organization. These are:
The operations function is central to the organization because it produces the goods and services which are its reason for existing, but it is not the only function. It is, however, one of the three core functions of any organization. These are:
● the marketing (including sales) function – which is responsible for communicating the organization’s products and services to its markets in order to generate customer requests for service
● the product/service development function – which is responsible for creating new and modified products and services in order to generate future customer requests for service;
● the operations function – which is responsible for fulfilling customer requests for service through the production and delivery of products and services.
In addition, there are the support functions which enable the core functions to operate effectively. These include, for example:
● the accounting and finance function – which provides the information to help economic
decision-making and manages the financial resources of the organization;
● the human resources function – which recruits and develops the organization’s staff as
well as looking after their welfare.
● the accounting and finance function – which provides the information to help economic
decision-making and manages the financial resources of the organization;
● the human resources function – which recruits and develops the organization’s staff as
well as looking after their welfare.
Remember that different organizations will call their various functions by different names and will have a different set of support functions. Almost all organizations, however, will have the three core functions, because all organizations have a fundamental need to sell their services, satisfy their customers and create the means to satisfy customers in the future. Table 1.1 shows the activities of the three core functions for a sample of organizations. In practice, there is not always a clear division between the three core functions or between core and support functions. This leads to some confusion over where the boundaries of the operations function should be drawn. In this book we use a relatively broad definition of operations. We treat much of the product/service development, technical and information systems activities and some of the human resource, marketing, and accounting and finance activities as coming within the sphere of operations management. We view the operations function as comprising all the activities necessary for the day-to-day fulfilment of customer requests. This includes sourcing products and services from suppliers and transporting products and services to customers.
Working effectively with the other parts of the organization is one of the most important responsibilities of operations management. It is a fundamental of modern management that functional boundaries should not hinder efficient internal processes. Figure 1.1 illustrates some of the relationships between operations and some other functions in terms of the flow of information between them. Although it is not comprehensive, it gives an idea of the nature of each relationship. However, note that the support functions have a different relationship with operations than operations has with the other core functions. Operations management’s responsibility to support functions is primarily to make sure that they understand operations’ needs and help them to satisfy these needs. The relationship with the other two core functions is more equal – less of ‘this is what we want’ and more ‘this is what we can do currently – how do we reconcile this with broader business needs?’
