Operations

Business, Legal & Accounting Glossary

Definition: Operations



Full Definition of Operations


Operations, in a company, is the process of converting inputs, such as raw materials, into products and services. Operations focus on the delivery of the end product. Operations include buying materials, buying machinery, managing technology, and more.

The conversion process is central to any production process. It is the job of the operations manager to oversee the conversion process.

In a company structure, operations fall under the marketing strategy, which is below the corporate strategy. This is to say that the operations are contingent upon marketing (operations produces products in line with marketing needs). Of course, marketing is subject to the overarching corporate direction.

Operations management is important because every firm has an operations need. Every company must make some type of transformation of some kind of input (material, labour, capital) to some kind of output (a good or a service). Operations cannot be ignored as the bulk of all assets are within operations (machinery, people, raw material, inventory, stock, intellectual property).

Neglecting operations in a firm can result in declining competitiveness of the company.

The 5 Ps Of Operations

The five Ps of operations.

It is often said that marketing has four Ps. Operations have five. They are:

  • 1. Products
  • 2. Plant
  • 3. Process
  • 4. People
  • 5. Production planning and control

Notice that the first four all feed into the fifth.

The chart on the right represents the five Ps of operations and the role of production planning and control.

It is noteworthy to recognize that operations are under marketing, which is under the overall corporate strategy. Finally, the corporate strategy is largely a condition of the overall marketplace and competition.

Expectations From Operations

Transformations

Types of transformation include:

  • Physical (manufacturing)
  • Locational (transport/storage)
  • Exchange (retail)
  • Physiological (health care)
  • Psychological (entertainment)
  • Informational (communications)

Fulfillments

The inputs that are being created and produced as outputs should fulfil some or all of the following:

  • Effective and then efficient (For example, having a sales office in the right location, and then making sure it is productive)
  • Flexible and robust to changes
  • Socially and environmentally responsible

The outputs should be any or all of the following:

  • Low-cost
  • High-quality
  • Low lead time
  • Customizable
  • After-sales support

Two Phases Of Integration

Cross-functional Value Chain

A cross-functional value chain is an inter-functional value chain approach. The traditional model was for processes to move from department to department, in a linear fashion.

A re-engineered process leads to a cross-functional value chain. In mid-August, 2008, Motorola announced they would streamline their value chain to compete better in their product offering.

Supply Chain Integration

Such cross-functional integration has been adopted readily in the past twenty years. Now, supply chain integration, a more advanced step, is emerging. This philosophy regards the supplier and the buyer as a common process, jointly working to improve the design, reduce cost, and improve the process.

Examples

Manufacturing

In a manufacturing company, typical operations divisions include:

  • Manufacturing
  • Production control
  • Quality control
  • Purchasing

Airline

  • Flight operations
  • Ground support
  • Facility maintenance
  • Catering

Bank

  • Teller scheduling
  • Check clearing
  • Transaction processing
  • Security

History

1750s

The era of mechanical inventions

  • Hargreaves (spinning Jenny)
  • James Watt (steam engine)
  • Maudslay (lathe)

1776

Division of labour (Adam Smith)

1798

Interchangeable Parts (Eli Whitney)

1800s

Larger and more complex factors emerged, with scientific methods for analyzing factory problems (Charles Babbage, F.W. Taylor).

Post-civil war

Expanded workforce, increased production capacity and capital, new Western US markets, effective national transportation system.

Late 1800s

Principles of scientific management

1900s

Assembly line (Henry Ford and Sorensen)

Industrial engineering: Gilbreths – principles of motion economy; Henry Gantt – scheduling

1920s

Waiting line theory

1930s

Human factors

  • Hawthorne studies
  • Motivation theories
  • Team-based functioning
  • Theory X, Y, Z

Quality control, using statistics (Dodge, Romig, Shewhart) Statistics gave them the means to control variability for consistent outputs. Thus, statistical quality control (SQC) was developed.

1940s

Management science

1947

Linear programming (George Dantzig), who developed the Simplex algorithm as a student. In fact, Dantzig believed it to be a homework problem and inadvertently solved it over a weekend, when really it was a problem his professor was presenting that had not been solved for 150 years. Dantzig arrived late to class and didn’t realize it wasn’t a homework assignment.

1950s

Totally quality management (TQM) 1951: Digital computer

1940s

PERT/CPM

1960s

Simulation

1990s

Internet Intranet Extranet

2000s

E-commerce, which facilitated The Long Tail and Technomics

Various types of IT systems that accelerated and streamlined modern operations include:

  • Materials requirements planning (MRP)
  • Manufacturing resource planning (MRP II)
  • Enterprise resource planning (ERP)
  • E-commerce and supply chain management
  • Technomics in general

Operations today

Today, conditions that define operations may include any number of the following:

  • Being global, low-cost, high-quality and having a fast response to the market and customers
  • Being able to embrace globalization in general
  • Being able to offer mass customization
  • Being flexible and nimble; able to cope and adapt in volatile times, both economically and politically
  • Being up-to-date in the latest technology; using technomics
  • Having new workforce requirements, in line with modern HR standards
  • Being aware and respecting environmental and ethical issues
  • Having an integrated supply chain

Cite Term


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Operations. PayrollHeaven.com. Retrieved May 25, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/operations/

Definition Sources


Definitions for Operations are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 29th March, 2020 | 2 Views.