Operations
Every company has a specific set of processes and systems that they use to transform their resources into goods or services. The management of these operations are crucial in delivering quality products that lead to high customer satisfaction. Just like a well-oiled machine, there are several parts that comprise an organization's effective operations. Besides quality management and customer relationships, a company’s operations will also include improvements in product design and supply chain management.
Operations management requires an excellent team and constant innovation in order to keep up with competitors. Your team will be tasked with consistently designing, strategizing, and directing your current systems in order to maximize their efficiency. This will allow your organization to gain and maintain a competitive advantage. In other words, the goal of effective operational management is to establish a set of processes and systems that deliver the best products in the shortest time while utilizing the most economical resources.
Operations management requires an excellent team and constant innovation in order to keep up with competitors. Your team will be tasked with consistently designing, strategizing, and directing your current systems in order to maximize their efficiency. This will allow your organization to gain and maintain a competitive advantage. In other words, the goal of effective operational management is to establish a set of processes and systems that deliver the best products in the shortest time while utilizing the most economical resources.
The Problem-Solving Framework
Great leaders can intuitively understand the value of applying a number of different approaches simultaneously to solve difficult problems. This mindset is critical now more than ever: today’s business leaders operate in an environment where forces such as technological change and the historic rebalancing of global economic activity from developed to emerging markets have made business problems increasingly complex. Things also happen faster now, markets are more volatile, and the stakes are generally higher. There now exists an overwhelming of variables and free-flowing information encourages competition. This leads to an even greater premium on developing innovative, unique solutions.
There are 5 issues that arise when trying to produce a product or service. As leaders of today’s businesses, we must understand this process in order to successfully apply these concepts.
In business, we often hear about the six M’s of capacity that help guide us through process analysis:
Flow Diagrams and Gantt Charts
We can use a Flow Diagram to easily diagnose problems in your process system. Using this diagram will allow you to determine bottlenecks, inefficiencies, and information-sharing problems. Training your team to handle certain tasks rather than forcing one person to handle several tasks will stand out in a flow diagram
Gantt Charts are used for scheduling tasks in a production line for any given system or service. This ensures the entire production of the product or service remains on schedule and adheres a systematic, timely business system. This helps your employees avoid inefficiency and wasted time on unnecessary tasks
Inventories
Every industry will carry a different approach to inventory management. Some industries require companies to carry large ones, while others carry smaller ones. Inventory is about having the right amount products on hand to satisfy your customer demand. Smaller inventories allow businesses to keep more cash on hand for other investments, rather than being tied up in a product that remains on the shelves. Analyzing inventories is one of the key aspects of supply chain management.
Inventories exist in forms such as as raw materials, work in process, or finished goods for most industries. Raw materials are tangible items you need to build a product, while work in process is assembles the tangible items to create product. A finished good is a product that has been fully developed and is ready for sale.
Material Requirements Planning
Material Requirements Planning (MRP) involves the management of inventory and capacity issues in operations. The knowledge of production scheduling and inventory control makes manufacturing possible in today’s world. MRP calculates the optimal amount of inventory needed for efficient production, for which many companies today use sophisticated information systems to help aid in their efficiency. Two great examples are Walmart’s inventory system and Amazon’s order fulfillment process. MRP allows minimal inventory levels based on economic order quantities for each store or region and considers seasonal events.
Operations Research
We have discussed quite a bit of valuable information related to operations. Now, let’s have a minor history lesson about the past 200 years of how everything came to be.
During World War II, the scientific approach to management officially became more widely accepted and adopted in operations. There were constant bottlenecks in production lines of materials needed on the battlefield, and with this problem a new field of study took off. This is what is known as operational research (OR) today. However, there were other experiments being done to shape efficiency and profitability for companies. Frederick Taylor sought to measure a worker’s behaviors to determine how to make a complex task easier by breaking it down into smaller chunks on an assembly line. This is called fractionalization. We learned the most efficient way of getting the job done. This led to the one right way of getting done. Another study was conducted by the Gilbreth family, and their results showed similar results as Taylor’s. However, they realized wasteful motion during the tasks increased efficiency. Finally, Mayo learned by properly motivating a worker and making them feel part of something bigger led to increased efficiency. Behavior in nature that showed understanding ones’ menial task does serve a greater purpose.
These studies eventually led to the creation of Theory X, Theory Y, and Theory Z in operational research teachings. Theory X posits that people needed to be pushed to produce with rewards and punishment. In contrast, Theory Y says people in a supportive work environment are more innovative and find solutions to improve productivity. Theory Z was developed based on the Japanese’s Kaizen Methodology. This relates to coming together as a team and accomplishing the tasks at hand. Here, everyone is part of the circle of production.
There is no right or wrong way to setup operations in your business. Most organizations use multiple theories to determine what works for their company. Building the right business model and system infrastructure is the key to scaling your business the right way.
Great leaders can intuitively understand the value of applying a number of different approaches simultaneously to solve difficult problems. This mindset is critical now more than ever: today’s business leaders operate in an environment where forces such as technological change and the historic rebalancing of global economic activity from developed to emerging markets have made business problems increasingly complex. Things also happen faster now, markets are more volatile, and the stakes are generally higher. There now exists an overwhelming of variables and free-flowing information encourages competition. This leads to an even greater premium on developing innovative, unique solutions.
- Olivier Leclerc, Mckinsey
There are 5 issues that arise when trying to produce a product or service. As leaders of today’s businesses, we must understand this process in order to successfully apply these concepts.
- Capacity – How much can I produce?
- Scheduling – How am I going to do it?
- Inventory – How much inventory is there and how can I reduce it?
- Standards – What do I consider to be efficient production and quality output?
- Control – Is the production process working?
In business, we often hear about the six M’s of capacity that help guide us through process analysis:
- Methods – Are the machines operating with the most efficient method in line of production?
- Materials – Do you have quality materials available?
- Manpower – Do you have well-trained, productive workers and managers to accomplish the company's goals?
- Machinery – Are the right tools for the job available? Capabilities, speed, reliability, technology?
- Money – Do you have the capital required to fund investments in equipment and real estate?
- Message – Do you have a communication system to allow sharing of accurate and timely information among all members of the organization?
Flow Diagrams and Gantt Charts
We can use a Flow Diagram to easily diagnose problems in your process system. Using this diagram will allow you to determine bottlenecks, inefficiencies, and information-sharing problems. Training your team to handle certain tasks rather than forcing one person to handle several tasks will stand out in a flow diagram
Gantt Charts are used for scheduling tasks in a production line for any given system or service. This ensures the entire production of the product or service remains on schedule and adheres a systematic, timely business system. This helps your employees avoid inefficiency and wasted time on unnecessary tasks
Inventories
Every industry will carry a different approach to inventory management. Some industries require companies to carry large ones, while others carry smaller ones. Inventory is about having the right amount products on hand to satisfy your customer demand. Smaller inventories allow businesses to keep more cash on hand for other investments, rather than being tied up in a product that remains on the shelves. Analyzing inventories is one of the key aspects of supply chain management.
Inventories exist in forms such as as raw materials, work in process, or finished goods for most industries. Raw materials are tangible items you need to build a product, while work in process is assembles the tangible items to create product. A finished good is a product that has been fully developed and is ready for sale.
Material Requirements Planning
Material Requirements Planning (MRP) involves the management of inventory and capacity issues in operations. The knowledge of production scheduling and inventory control makes manufacturing possible in today’s world. MRP calculates the optimal amount of inventory needed for efficient production, for which many companies today use sophisticated information systems to help aid in their efficiency. Two great examples are Walmart’s inventory system and Amazon’s order fulfillment process. MRP allows minimal inventory levels based on economic order quantities for each store or region and considers seasonal events.
Operations Research
We have discussed quite a bit of valuable information related to operations. Now, let’s have a minor history lesson about the past 200 years of how everything came to be.
During World War II, the scientific approach to management officially became more widely accepted and adopted in operations. There were constant bottlenecks in production lines of materials needed on the battlefield, and with this problem a new field of study took off. This is what is known as operational research (OR) today. However, there were other experiments being done to shape efficiency and profitability for companies. Frederick Taylor sought to measure a worker’s behaviors to determine how to make a complex task easier by breaking it down into smaller chunks on an assembly line. This is called fractionalization. We learned the most efficient way of getting the job done. This led to the one right way of getting done. Another study was conducted by the Gilbreth family, and their results showed similar results as Taylor’s. However, they realized wasteful motion during the tasks increased efficiency. Finally, Mayo learned by properly motivating a worker and making them feel part of something bigger led to increased efficiency. Behavior in nature that showed understanding ones’ menial task does serve a greater purpose.
These studies eventually led to the creation of Theory X, Theory Y, and Theory Z in operational research teachings. Theory X posits that people needed to be pushed to produce with rewards and punishment. In contrast, Theory Y says people in a supportive work environment are more innovative and find solutions to improve productivity. Theory Z was developed based on the Japanese’s Kaizen Methodology. This relates to coming together as a team and accomplishing the tasks at hand. Here, everyone is part of the circle of production.
There is no right or wrong way to setup operations in your business. Most organizations use multiple theories to determine what works for their company. Building the right business model and system infrastructure is the key to scaling your business the right way.
