Operations Management Planning

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  • 0:04 Business Operations
  • 1:08 Strategic Planning
  • 3:22 Tactical Planning
  • 3:55 Operational Planning
  • 4:21 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

Businesses are complex systems engaged in complex activities that require constant planning and supervision. In this lesson, you'll learn about planning in operations management as well as various types of planning.

Complexity in Business Operations

Imagine that you're the president of a large multinational tech corporation based in Silicon Valley. You have satellite offices in Seattle, Chicago, Atlanta and New York. Your company designs and manufactures smart phones. While research and development takes place in the U.S., you sometimes outsource your production to a Chinese company based in Hong Kong. Your products are distributed across the globe on six different continents.

In order for your business to succeed, you and your management team must carefully plan your business operations. Business operations involve business activities that your company engages in to earn a profit and accomplish other business-related goals.

Operations management planning is the development of plans and strategies that will allow your business to effectively seize opportunities and meet challenges head on. It's linking strategic business goals to tactical objectives, which are intermediate steps taken to achieve your goals. Operations management planning also involves taking the necessary steps on the ground for achievement of business goals. Let's take a closer look at the process.

Strategic Planning

Strategic planning involves the big picture and consists of several different components. First, strategic planning addresses product design. At this stage of planning, you are determining what new products your tech company is going to produce and the primary features of the product. Let's say that you've decided to develop a new generation of computer tablets to complement your smart phones.

The next step in strategic planning is determining the production processes you are going to use. There are two steps here: a technical component and a business component. The technical component of planning requires your operation managers to figure out what type of equipment is needed and what type of raw materials, parts and components will be needed to build the tablets. And let's not forget that we need to figure out the best way to put the tablets together when production starts.

The business component revolves around anticipated consumer demand. Important questions need to be answered to make good decisions. Does your marketing research indicate that the tablet will be popular enough to support mass production right off the bat? Will demand be so high that you need to have a facility dedicated to manufacturing just these tablets? Are you going to design different versions of the tablet given a variety of consumer preferences, or do most consumers want the same features?

After your team has figured out the production processes, it needs to determine the facility design and location. Facility design involves building a facility with the right equipment, layout and capacity. Capacity is the ability of a facility to produce the products demanded by your customers in the time required. Forecasting the demand for your product will be an important part of planning the correct level of capacity.

Keep in mind that building a facility is a huge investment of capital and time - which is why it's a strategic decision. You also need to consider the location of the facility. Factors you will consider when picking a location include local labor supply, local government regulations, transportation costs and the initial capital investment required.

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