Operations Management: Focusing on Production Efficiency & Customer Satisfaction

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  • 0:07 The Pieces of a Company
  • 1:29 Parts of Operations Management
  • 5:12 A Narrow Part of the Company
  • 5:35 Old and the New
  • 6:56 Lesson Summary
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Lesson Transcript
Instructor: Rob Wengrzyn

Rob has an MBA in management, a BS in marketing, and is a doctoral candidate in organizational theory and design.

Operations is the lifeblood of any organization - how a business works and processes materials and services helps produce its output. In this lesson we will focus on operations and explain the elements present in it.

The Pieces of a Company

I like the ocean and I always have. There's something soothing about being at the beach, seeing and hearing the waves roll in, and feeling the sand between my toes. One of the other cool things about being at the ocean is the sea life. Now, I'm not talking about running into a great white shark or anything like that, but the sea life you see as you walk along the beach or climb out over the breakers.

Some of the sea animals that I always come across are starfish in all different shapes and sizes. One of the cool things about starfish is that if they lose an arm, it will grow back (pretty cool trick, if I say so myself). And while that might be cool for a starfish, this same situation does not exist in business. You see, if business was a starfish, it would have multiple arms that could represent:

  • Operations
  • Finance
  • Marketing
  • Sales
  • Human Resources

If any of these arms falls off, they cannot grow back and will most certainly damage the organization. And while they are all very important to the organization, for this lesson, we are going to focus on the operations arm of the company. This arm is responsible for ensuring the company produces a product efficiently and ultimately helps with the profitability of the company while also making sure customers are happy with their final product.

Parts of Operations Management

If you ever want to get a real-world look at operations management, just take a look at how your Thanksgiving dinner comes together. You see, operations management can be described as the overseeing and controlling of the manufacturing process to include materials planning, process planning, capital requirements, and human capital. Wow - now that was one heck of a definition. Let us break each portion of this definition down a little more to help you understand its parts.

  • Materials planning is the coordination of purchasing and delivery of raw materials to make the final product.
  • Process planning deals with designing the processes required to ensure the product can be made in the shortest amount of time, with as little waste and as efficiently as possible.
  • Capital requirements is the portion of operations management that deals with buildings and machinery.
  • Human capital is the management of the employees that help run the facility.

Now that we have talked about those areas, let's put them into the Thanksgiving dinner scenario so you can have a better understanding of how they work in operations management. Anyone who has ever seen their mother or grandmother cook a Thanksgiving dinner knows there is some serious operations management going on there.

First, we have to look at materials planning. Someone, usually mom or grandma, has to make a list of all the items (materials) they will need - the turkey, of course, as well as all the other items (cranberry sauce, potatoes, green beans - man, this is making me hungry). So all the materials are identified and then purchased.

Now we move on to process planning. For our dinner, we're looking at how the different items will be put together (the process) so it all hits the table at the same time. The bird has to go in first, and the other items follow suit. But the turkey also has to be prepped, stuffing needs to be made to go inside the turkey, and so on. Thus, we're looking at the individual steps we have to take to get this dinner going, and they have to be in order so it all makes sense. Without process planning (or knowing the turkey has to go in first), we would have a table of green beans and biscuits while we're waiting on the turkey for another few hours.

All of these materials would not be available to eat at the dinner if we did not have the house and oven to cook them in. Imagine if the dinner we are thinking about had too many pieces to be made in one kitchen. We would need additional capital (more ovens or stoves) to make the dinner happen - these are our capital requirements. You can see that this can be discussed when we are looking at the materials planning. So, for example, if we have one oven and need three turkeys, we obviously have a capital problem (not enough ovens). So as a company looks at the materials planning, they have to make sure the process they have can accept or use all the materials coming in and that there is enough capital (machinery, etc.) to process all the materials coming in.

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