Business, Legal & Accounting Glossary
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.
It is often said that marketing has four Ps. Operations have five. They are:
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.
Types of transformation include:
The inputs that are being created and produced as outputs should fulfil some or all of the following:
The outputs should be any or all of the following:
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.
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.
In a manufacturing company, typical operations divisions include:
The era of mechanical inventions
Division of labour (Adam Smith)
Interchangeable Parts (Eli Whitney)
Larger and more complex factors emerged, with scientific methods for analyzing factory problems (Charles Babbage, F.W. Taylor).
Expanded workforce, increased production capacity and capital, new Western US markets, effective national transportation system.
Principles of scientific management
Assembly line (Henry Ford and Sorensen)
Industrial engineering: Gilbreths – principles of motion economy; Henry Gantt – scheduling
Waiting line theory
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.
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.
Totally quality management (TQM) 1951: Digital computer
Internet Intranet Extranet
E-commerce, which facilitated The Long Tail and Technomics
Various types of IT systems that accelerated and streamlined modern operations include:
Today, conditions that define operations may include any number of the following:
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Operations are sourced/syndicated and enhanced from:
This glossary post was last updated: 29th March, 2020 | 2 Views.