Operations management
Encyclopedia
Operations management is an area of management
concerned with overseeing, designing, and redesigning business operations
in the production of goods and/or services. It involves the responsibility of ensuring that business operations are efficient
in terms of using as little resources as needed, and effective in terms of meeting customer requirements. It is concerned with managing the process that converts inputs (in the forms of materials, labor, and energy) into outputs (in the form of goods and/or services). The relationship of operations management to senior management
in commercial contexts can be compared to the relationship of line officer
s the highest-level senior officers in military science
. The highest-level officers shape the strategy
and revise it over time, while the line officers make tactical
decisions in support of carrying out the strategy. In business as in military affairs, the boundaries between levels are not always distinct; tactical information dynamically informs strategy, and individual people often move between roles over time.
According to the U.S. Department of Education, operations management is the field concerned with managing and directing the physical and/or technical functions of a firm or organization, particularly those relating to development, production, and manufacturing. Operations management programs typically include instruction in principles of general management, manufacturing and production systems, plant management, equipment maintenance management, production control, industrial labor relations and skilled trades supervision, strategic manufacturing policy, systems analysis, productivity analysis and cost control, and materials planning. Management, including operations management, is like engineering
in that it blends art with applied science
. People skills, creativity, rational analysis, and knowledge of technology are all required for success.
, the development of interchangeable manufacture
, the Waltham-Lowell system
, the American system of manufacturing
, Fayolism
, scientific management
, the development of assembly line
practice and mass production
, industrial engineering
, systems engineering
, manufacturing engineering
, operations research
, the Toyota Production System
, lean manufacturing
, and Six Sigma
. Combined, these ideas allow for the standardization
of best practice
s balanced with room for further innovation
through continuous improvement
of production processes. Key features of these production systems are the departure from craft production
to a more thorough division of labor and the transfer of knowledge
from within the minds of skilled, experienced workers into the systems of equipment, documentation, and semiskilled workers, often with an average of less tenure and less experience
. The disciplines of organizational studies
, industrial and organizational psychology
, program management
, project management
, and management information system
s all ideally inform optimal operations management, although most smart people who work in the corporate world can empirically observe that the reality often falls far short of the ideal
in ways that the market
nevertheless rewards, based mostly on the fact that in markets, "good-enough-to-scrape-by" methods tend to defeat "proper" ones on cost. There is a strong tradition of recruiting operations managers simply by promoting the most effective workers, which does work, although its main systemic flaw is the Peter Principle
. One of the reasons why competition
doesn't kill businesses that operate this way is that few operate in any more ideal way. Typically the Peter Principle is so pervasive throughout an industry that similarly afflicted businesses face a field of competitors who are more or less equally hobbled by it (the "same circus, different clowns" problem).
There are scores of people who can be viewed as thought leader
s whose life's work laid the foundations for operations management (only some of which have name recognition among the general population). A very cursory list would include (in approximate chronological order) Adam Smith
, Jean-Baptiste Vaquette de Gribeauval, Louis de Tousard
, Honoré Blanc
, Eli Whitney
, John H. Hall, Simeon North
, Henri Fayol
, Frederick Winslow Taylor
, Henry Gantt
, Henry Ford
, Sakichi Toyoda
, Alfred P. Sloan
and Bill Knudsen
of GM, Frank and Lillian Gilbreth
, Tex Thornton
and his Whiz Kids
team, and W. Edwards Deming
and the developers of the Toyota Production System
(Taiichi Ohno
, Shigeo Shingo
, Eiji Toyoda
, Kiichiro Toyoda
, and others).
Whereas some influences place primary importance on the equipment and too often viewed people as recalcitrant impediments to systems (e.g., Taylor and Ford), over time the need to view production operations as sociotechnical systems, duly considering both humans and machines, was increasingly appreciated and addressed.
Historically, the body of knowledge stemming from industrial engineering formed the basis of the first MBA programs, and is central to operations management as used across diverse business sectors, industry, consulting and non-profit organizations.
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
concerned with overseeing, designing, and redesigning business operations
Business operations
Business operations are those ongoing recurring activities involved in the running of a business for the purpose of producing value for the stakeholders...
in the production of goods and/or services. It involves the responsibility of ensuring that business operations are efficient
Efficiency
Efficiency in general describes the extent to which time or effort is well used for the intended task or purpose. It is often used with the specific purpose of relaying the capability of a specific application of effort to produce a specific outcome effectively with a minimum amount or quantity of...
in terms of using as little resources as needed, and effective in terms of meeting customer requirements. It is concerned with managing the process that converts inputs (in the forms of materials, labor, and energy) into outputs (in the form of goods and/or services). The relationship of operations management to senior management
Senior management
Senior management, executive management, or management team is generally a team of individuals at the highest level of organizational management who have the day-to-day responsibilities of managing a company or corporation, they hold specific executive powers conferred onto them with and by...
in commercial contexts can be compared to the relationship of line officer
Line officer
In the United States armed forces, the term line officer or officer of the line refers to an officer who is trained for command — that is, to be the commanding officer of a warship, ground combat unit, combat aviation unit, or combat support unit....
s the highest-level senior officers in military science
Military science
Military science is the process of translating national defence policy to produce military capability by employing military scientists, including theorists, researchers, experimental scientists, applied scientists, designers, engineers, test technicians, and military personnel responsible for...
. The highest-level officers shape the strategy
Strategy
Strategy, a word of military origin, refers to a plan of action designed to achieve a particular goal. In military usage strategy is distinct from tactics, which are concerned with the conduct of an engagement, while strategy is concerned with how different engagements are linked...
and revise it over time, while the line officers make tactical
Military tactics
Military tactics, the science and art of organizing an army or an air force, are the techniques for using weapons or military units in combination for engaging and defeating an enemy in battle. Changes in philosophy and technology over time have been reflected in changes to military tactics. In...
decisions in support of carrying out the strategy. In business as in military affairs, the boundaries between levels are not always distinct; tactical information dynamically informs strategy, and individual people often move between roles over time.
According to the U.S. Department of Education, operations management is the field concerned with managing and directing the physical and/or technical functions of a firm or organization, particularly those relating to development, production, and manufacturing. Operations management programs typically include instruction in principles of general management, manufacturing and production systems, plant management, equipment maintenance management, production control, industrial labor relations and skilled trades supervision, strategic manufacturing policy, systems analysis, productivity analysis and cost control, and materials planning. Management, including operations management, is like engineering
Engineering
Engineering is the discipline, art, skill and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes that safely realize improvements to the lives of...
in that it blends art with applied science
Applied science
Applied science is the application of scientific knowledge transferred into a physical environment. Examples include testing a theoretical model through the use of formal science or solving a practical problem through the use of natural science....
. People skills, creativity, rational analysis, and knowledge of technology are all required for success.
Origins
The origins of operations management can be traced back through cultural changes of the 18th, 19th, and 20th centuries, including the Industrial RevolutionIndustrial Revolution
The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the social, economic and cultural conditions of the times...
, the development of interchangeable manufacture
Interchangeable parts
Interchangeable parts are parts that are, for practical purposes, identical. They are made to specifications that ensure that they are so nearly identical that they will fit into any device of the same type. One such part can freely replace another, without any custom fitting...
, the Waltham-Lowell system
Waltham-Lowell system
Waltham-Lowell System was a labor and production model employed in the United States, particularly in New England, during the early years of the American textile industry in the early 19th Century....
, the American system of manufacturing
American system of manufacturing
The American system of manufacturing was a set of manufacturing methods that evolved in the 19th century. It involved semi-skilled labor using machine tools and jigs to make standardized, identical, interchangeable parts, manufactured to a tolerance, which could be assembled with a minimum of time...
, Fayolism
Fayolism
Fayolism was a theory of management that analyzed and synthesized the role of management in organizations, developed around 1900 by the French management theorist Henri Fayol...
, scientific management
Scientific management
Scientific management, also called Taylorism, was a theory of management that analyzed and synthesized workflows. Its main objective was improving economic efficiency, especially labor productivity. It was one of the earliest attempts to apply science to the engineering of processes and to management...
, the development of assembly line
Assembly line
An assembly line is a manufacturing process in which parts are added to a product in a sequential manner using optimally planned logistics to create a finished product much faster than with handcrafting-type methods...
practice and mass production
Mass production
Mass production is the production of large amounts of standardized products, including and especially on assembly lines...
, industrial engineering
Industrial engineering
Industrial engineering is a branch of engineering dealing with the optimization of complex processes or systems. It is concerned with the development, improvement, implementation and evaluation of integrated systems of people, money, knowledge, information, equipment, energy, materials, analysis...
, systems engineering
Systems engineering
Systems engineering is an interdisciplinary field of engineering that focuses on how complex engineering projects should be designed and managed over the life cycle of the project. Issues such as logistics, the coordination of different teams, and automatic control of machinery become more...
, manufacturing engineering
Manufacturing engineering
Manufacturing engineering is a field dealing with different manufacturing practices and the research and development of processes, machines and equipment.-Overview:...
, operations research
Operations research
Operations research is an interdisciplinary mathematical science that focuses on the effective use of technology by organizations...
, the Toyota Production System
Toyota Production System
The Toyota Production System is an integrated socio-technical system, developed by Toyota, that comprises its management philosophy and practices. The TPS organizes manufacturing and logistics for the automobile manufacturer, including interaction with suppliers and customers...
, lean manufacturing
Lean manufacturing
Lean manufacturing, lean enterprise, or lean production, often simply, "Lean," is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination...
, and Six Sigma
Six Sigma
Six Sigma is a business management strategy originally developed by Motorola, USA in 1986. , it is widely used in many sectors of industry.Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects and minimizing variability in manufacturing and...
. Combined, these ideas allow for the standardization
Standardization
Standardization is the process of developing and implementing technical standards.The goals of standardization can be to help with independence of single suppliers , compatibility, interoperability, safety, repeatability, or quality....
of best practice
Best practice
A best practice is a method or technique that has consistently shown results superior to those achieved with other means, and that is used as a benchmark...
s balanced with room for further innovation
Innovation
Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...
through continuous improvement
Continuous Improvement Process
A continuous improvement process is an ongoing effort to improve products, services, or processes. These efforts can seek "incremental" improvement over time or "breakthrough" improvement all at once...
of production processes. Key features of these production systems are the departure from craft production
Craft production
Craft production is the process of manufacturing by hand with or without the aid of tools. The term Craft production refers to a manufacturing technique applied in the hobbies of Handicraft but was also the common method of manufacture in the pre-industrialized world...
to a more thorough division of labor and the transfer of knowledge
Knowledge transfer
Knowledge transfer in the fields of organizational development and organizational learning is the practical problem of transferring knowledge from one part of the organization to another part of the organization. Like Knowledge Management, Knowledge transfer seeks to organize, create, capture or...
from within the minds of skilled, experienced workers into the systems of equipment, documentation, and semiskilled workers, often with an average of less tenure and less experience
Turnover (employment)
In a human resources context, turnover or staff turnover or labour turnover is the rate at which an employer gains and loses employees. Simple ways to describe it are "how long employees tend to stay" or "the rate of traffic through the revolving door." Turnover is measured for individual companies...
. The disciplines of organizational studies
Organizational studies
Organizational studies, sometimes known as organizational science, encompass the systematic study and careful application of knowledge about how people act within organizations...
, industrial and organizational psychology
Industrial and organizational psychology
Industrial and organizational psychology is the scientific study of employees, workplaces, and organizations. Industrial and organizational psychologists contribute to an organization's success by improving the performance and well-being of its people...
, program management
Program management
Program management or programme management is the process of managing several related projects, often with the intention of improving an organization's performance...
, project management
Project management
Project management is the discipline of planning, organizing, securing, and managing resources to achieve specific goals. A project is a temporary endeavor with a defined beginning and end , undertaken to meet unique goals and objectives, typically to bring about beneficial change or added value...
, and management information system
Management information system
A management information system provides information needed to manage organizations efficiently and effectively. Management information systems involve three primary resources: people, technology, and information. Management information systems are distinct from other information systems in that...
s all ideally inform optimal operations management, although most smart people who work in the corporate world can empirically observe that the reality often falls far short of the ideal
Pointy-Haired Boss
The pointy-haired boss is Dilbert's boss in the Dilbert comic strip. He is notable for his micromanagement, gross incompetence and unawareness of his surroundings, yet somehow retains power in the workplace...
in ways that the market
Invisible hand
In economics, invisible hand or invisible hand of the market is the term economists use to describe the self-regulating nature of the marketplace. This is a metaphor first coined by the economist Adam Smith...
nevertheless rewards, based mostly on the fact that in markets, "good-enough-to-scrape-by" methods tend to defeat "proper" ones on cost. There is a strong tradition of recruiting operations managers simply by promoting the most effective workers, which does work, although its main systemic flaw is the Peter Principle
Peter Principle
The Peter Principle states that "in a hierarchy every employee tends to rise to his level of incompetence", meaning that employees tend to be promoted until they reach a position at which they cannot work competently. It was formulated by Dr. Laurence J...
. One of the reasons why competition
Competition (economics)
Competition in economics is a term that encompasses the notion of individuals and firms striving for a greater share of a market to sell or buy goods and services...
doesn't kill businesses that operate this way is that few operate in any more ideal way. Typically the Peter Principle is so pervasive throughout an industry that similarly afflicted businesses face a field of competitors who are more or less equally hobbled by it (the "same circus, different clowns" problem).
There are scores of people who can be viewed as thought leader
Thought leader
Thought leader is business jargon for an entity that is recognized for having innovative ideas.The term was coined in 1994 by Joel Kurtzman, editor-in-chief of the Booz Allen Hamilton magazine, Strategy & Business. "Thought leader" was used to designate interview subjects for that magazine who had...
s whose life's work laid the foundations for operations management (only some of which have name recognition among the general population). A very cursory list would include (in approximate chronological order) Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
, Jean-Baptiste Vaquette de Gribeauval, Louis de Tousard
Louis de Tousard
Louis de Tousard was a French artillerist who served in the American Continental Army under La Fayette, and later was given a US commission...
, Honoré Blanc
Honoré Blanc
Honoré Blanc was a French gunsmith and a pioneer of the use of interchangeable parts.He was born in Avignon in 1736 and apprenticed to the gun-making trade at the age of twelve...
, Eli Whitney
Eli Whitney
Eli Whitney was an American inventor best known for inventing the cotton gin. This was one of the key inventions of the Industrial Revolution and shaped the economy of the Antebellum South...
, John H. Hall, Simeon North
Simeon North
Simeon North was a Middletown, Connecticut, gun manufacturer, who developed one of America's first milling machines in 1818 and played an important role in the development of interchangeable parts manufacturing.North was born in Berlin, Connecticut, into a prosperous family able to provide all...
, Henri Fayol
Henri Fayol
Henri Fayol was a French mining engineer and director of mines who developed a general theory of business administration. He and his colleagues developed this theory independently of scientific management but roughly contemporaneously...
, Frederick Winslow Taylor
Frederick Winslow Taylor
Frederick Winslow Taylor was an American mechanical engineer who sought to improve industrial efficiency. He is regarded as the father of scientific management and was one of the first management consultants...
, Henry Gantt
Henry Gantt
Henry Laurence Gantt, A.B., M.E. was an American mechanical engineer and management consultant who is most famous for developing the Gantt chart in the 1910s....
, Henry Ford
Henry Ford
Henry Ford was an American industrialist, the founder of the Ford Motor Company, and sponsor of the development of the assembly line technique of mass production. His introduction of the Model T automobile revolutionized transportation and American industry...
, Sakichi Toyoda
Sakichi Toyoda
was a Japanese inventor and industrialist. He was born in Kosai, Shizuoka. The son of a poor carpenter, Toyoda is referred to as the "King of Japanese Inventors".- Career :...
, Alfred P. Sloan
Alfred P. Sloan
Alfred Pritchard Sloan, Jr. was an American business executive in the automotive industry. He was a long-time president, chairman, and CEO of General Motors Corporation...
and Bill Knudsen
William S. Knudsen
William Signius Knudsen was a leading automotive industry executive. His experience and success as a key senior manager in the operations sides of Ford Motor Company and later General Motors led the Franklin Roosevelt Administration to commission him as a Lieutenant General in the United States...
of GM, Frank and Lillian Gilbreth
Lillian Moller Gilbreth
Lillian Moller Gilbreth was an American psychologist and industrial engineer. One of the first working female engineers holding a Ph.D., she is arguably the first true industrial/organizational psychologist. She and her husband Frank Bunker Gilbreth, Sr...
, Tex Thornton
Tex Thornton
Charles Bates "Tex" Thornton was an American business executive who was the founder of Litton Industries.-Biography:...
and his Whiz Kids
Whiz Kids (Department of Defense)
Whiz Kids was a name given to a group of experts from RAND Corporation with which Robert McNamara surrounded himself in order to turn around the management of the United States Department of Defense in the 1960s...
team, and W. Edwards Deming
W. Edwards Deming
William Edwards Deming was an American statistician, professor, author, lecturer and consultant. He is perhaps best known for his work in Japan...
and the developers of the Toyota Production System
Toyota Production System
The Toyota Production System is an integrated socio-technical system, developed by Toyota, that comprises its management philosophy and practices. The TPS organizes manufacturing and logistics for the automobile manufacturer, including interaction with suppliers and customers...
(Taiichi Ohno
Taiichi Ohno
was a prominent Japanese businessman. He is considered to be the father of the Toyota Production System, which became Lean Manufacturing in the U.S. He devised the seven wastes as part of this system. He wrote several books about the system, including Toyota Production System: Beyond Large-Scale...
, Shigeo Shingo
Shigeo Shingo
, born in Saga City, Japan, was a Japanese industrial engineer who distinguished himself as one of the world’s leading experts on manufacturing practices and the Toyota Production System. Shingo is known far more in the West than in Japan, as a result of his meeting Norman Bodek, an American...
, Eiji Toyoda
Eiji Toyoda
is a prominent Japanese industrialist, who was largely responsible for bringing Toyota Motor Corporation to profitability and worldwide prominence during his tenure as president and later chairman.-Career:...
, Kiichiro Toyoda
Kiichiro Toyoda
was a Japanese entrepreneur and the son of Toyoda Loom Works founder Sakichi Toyoda. His decision to take Toyoda Loom Works into automobile manufacturing would create what would eventually become Toyota Motor Corporation, the world's largest automobile manufacturer....
, and others).
Whereas some influences place primary importance on the equipment and too often viewed people as recalcitrant impediments to systems (e.g., Taylor and Ford), over time the need to view production operations as sociotechnical systems, duly considering both humans and machines, was increasingly appreciated and addressed.
Historically, the body of knowledge stemming from industrial engineering formed the basis of the first MBA programs, and is central to operations management as used across diverse business sectors, industry, consulting and non-profit organizations.
Organizations
The following organizations support and promote operations management:- Association for Operations Management (APICS) which supports the Production and Inventory Management Journal
- European Operations Management AssociationEuropean Operations Management AssociationThe European Operations Management Association is an international network of academics and practitioners from around the world who have a common interest in the continuing development of Operations Management. EurOMA is a European-based network with rapidly growing international links, whereby...
(EurOMA) which supports the International Journal of Operations & Production ManagementInternational Journal of Operations & Production ManagementThe International Journal of Operations and Production Management is a peer-reviewed academic journal published by Emerald Group Publishing... - Production and Operations Management Society (POMS) which supports the journal: Production and Operations ManagementProduction and Operations ManagementProduction and Operations Management is a peer-reviewed academic journal covering research on all topics in product and process design, operations, and supply chain management....
- Institute for Operations Research and the Management SciencesInstitute for Operations Research and the Management SciencesThe Institute for Operations Research and the Management Sciences is an international society for practitioners in the fields of operations research and management science...
(INFORMS) - The Manufacturing and Service Operations Management Society (MSOM) which supports the journal: Manufacturing & Service Operations ManagementManufacturing & Service Operations ManagementManufacturing & Service Operations Management is a scholarly, refereed journal that is published quarterly by INFORMS. M&SOM contains research about innovative mathematical methods of implementation in the manufacturing industry and service operations. The research draws heavily from the tools of...
- Institute of Operations ManagementInstitute of operations managementThe Institute of Operations Management or IOM is a non-profit, professional body aiming to promote excellence in operations management.- History of the Institute :...
(UK) - Association of Technology, Management, and Applied Engineering (ATMAE)
Publications
The following academic journals are concerned with Operations Management issues:- Management Science
- Journal of Operations Management
- International Journal of Operations & Production ManagementInternational Journal of Operations & Production ManagementThe International Journal of Operations and Production Management is a peer-reviewed academic journal published by Emerald Group Publishing...
- Manufacturing & Service Operations ManagementManufacturing & Service Operations ManagementManufacturing & Service Operations Management is a scholarly, refereed journal that is published quarterly by INFORMS. M&SOM contains research about innovative mathematical methods of implementation in the manufacturing industry and service operations. The research draws heavily from the tools of...
- Production and Operations ManagementProduction and Operations ManagementProduction and Operations Management is a peer-reviewed academic journal covering research on all topics in product and process design, operations, and supply chain management....
- Production and Inventory Management Journal
- Journal of Modelling in Operations Management
See also
- APICS The Association for Operations Management
- Business process mappingBusiness Process MappingBusiness process mapping refers to activities involved in defining exactly what a business entity does, who is responsible, to what standard a process should be completed and how the success of a business process can be determined. Once this is done, there can be no uncertainty as to the...
- Industrial engineeringIndustrial engineeringIndustrial engineering is a branch of engineering dealing with the optimization of complex processes or systems. It is concerned with the development, improvement, implementation and evaluation of integrated systems of people, money, knowledge, information, equipment, energy, materials, analysis...
- InventoryInventoryInventory means a list compiled for some formal purpose, such as the details of an estate going to probate, or the contents of a house let furnished. This remains the prime meaning in British English...
- Inventory management softwareInventory management softwareInventory management software is a computer-based system for tracking product levels, orders, sales and deliveries. It can also be used in the manufacturing industry to create a work order, bill of materials and other production-related documents. Companies use inventory management software to...
- Lean manufacturingLean manufacturingLean manufacturing, lean enterprise, or lean production, often simply, "Lean," is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination...
- National Institute of Industrial Engineering
- Operations researchOperations researchOperations research is an interdisciplinary mathematical science that focuses on the effective use of technology by organizations...
- Six SigmaSix SigmaSix Sigma is a business management strategy originally developed by Motorola, USA in 1986. , it is widely used in many sectors of industry.Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects and minimizing variability in manufacturing and...
- Project managementProject managementProject management is the discipline of planning, organizing, securing, and managing resources to achieve specific goals. A project is a temporary endeavor with a defined beginning and end , undertaken to meet unique goals and objectives, typically to bring about beneficial change or added value...
- Silver-Meal heuristicSilver-Meal heuristicThe Silver-Meal heuristic method was composed in 1975 by E.A. Silver and H.C. Meal. It refers to production planning in manufacturing and its purpose is to determine production quantities to meet the requirement of operations at minimum cost.-Definition:...