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Operations Management (OM) - Introduction

All businesses produce something, be this tangible or intangible. Traditionally, when we think of production we tend to think of firms manufacturing physical goods in factories and on production lines. However, the experience of most modern, developed economies is that the manufacturing element is actually a smaller part of the economy than the provision of services. There are exceptions; Germany, for example, is still a significant manufacturing and exporting economy.

Production is concerned with converting inputs such as raw materials into finished products which will meet the needs and wants of the market and the customers within them. The process of production will add-value allowing firms to charge a higher price for the finished product than it paid in terms of costs

Production describes a relatively static process, but the term operations management refers to the management of the production process and describes a far wider range of activities; it is far also better suited to firms that produce services rather than physical goods.

What is Operations Management?

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Operations Management is concerned with the design of products and services and the management of processes and supply chains. It describes the acquisition, development, and utilisation of the resources that firms require to produce and deliver the goods and services that their customers want.

Operations management covers both strategic and tactical activities. For example, senior management will need to make strategic decisions about the size and location of factories and the levels of research and development as well as planning appropriate supply chains. Middle management and supervisory staff will be more concerned with tactical issues including factory design, layout and structure, project management and equipment selection and replacement. At an operational level, decisions will focus on activities like production scheduling, stock processes and material handling, quality control and maintenance policies.

Operations management is concerned with activities within all three sectors of the economy:

  • primary sector, e.g. extracting raw materials and the harvesting of crops
  • secondary sector, e.g. manufacturing, construction and processing
  • tertiary sector, e.g. service provision.