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ROLE OF OPERATIONS MANAGEMENT (Strategic Role of Operations Management…
ROLE OF OPERATIONS MANAGEMENT
Strategic Role of Operations Management
Operations
: Refers to the business processes that involve the conversion of inputs, both transformed and transforming, into final goods and services known as outputs through the transformation process.
Strategic
: Means 'affecting all key business operations' whereby operations managers contribute to the strategic (long-term) direction and plans of the business.
During the operations process, businesses undergo transformation which not only
converts the inputs into outputs
, but also involves the creation of value
This
value adding
process refers to the creation of extra or added value as the inputs are transformed into outputs.
To become a cost and product leader in the competitive marketplace, operations managers focus on achieving two main strategic role:
Cost Leadership
Product Differentiation
To reduce costs businesses can:
Exploit economies of scale
Produce standardised goods
Engage in supplier rationalisation
Outsource materials and labour
Product Differentiation
involves businesses distinguishing their products from its competitors.
For tangible goods this can be done through augmenting the product's features, varying product uality or including additional benefits.
For services product differentiation can be achieved through the level of expertise brought to a service, the amount of time performing the service or the qualifications of the service provider.
Cost Leadership
: involves businesses aiming to have the lowest possible costs, or be the most price- competitive in the market
To become a cost leader, businesses must aim to streamline costs across the whole of the operations process, including input and processing costs, as well as costs involved with inventory and quality management.
By reducing costs, business will not only be able to remain profitable and meet their financial obligations, but also sustain a competitive advantage.
Goods and/or Services in different industries
Goods in different industries
Standardised Goods
: Are mass produced, usually on an assembly line where they are uniform in quality and met a predetermined level of quality. There is a high focus on production.
Customised Goods
: are goods that are tailored to the needs and wants of the customer. There is high focus on producing Consumer-Centric goods.
When goods are perishable, there needs to be a high level of operational processes integrated, specifically with the evolution of fast-moving consumer groups (FMCG).
This includes high standards of quality and safety, short lead times and appropriate packaging and storage processes.
Conversely, when goods are non-perishable, they become more durable than perishable goods due to their long-lasting nature. Operations managers still need to effectively manage quality management processes such as quality control and inventory management systems such as just-in-time
Services in different industries
Just like goods, services can be customised and standardised. Service providers can achieve cost leadership by standardising how the service is performed.
For example, returning a product at a store is generally the same process for all customers. One the other hand, services can be customised to fulfil the needs of customers.
This is commonly seen in the form of pre and after sales service when shopping at luxury and high-end stores such as Louis Vuitton
Interdependence with other key business functions
Interdependence
: Also known as cross-coordination, is the mutual dependence the key business functions have on one another, meaning each function relies on another to perform to their full productive capacity.
FINANCE & OPERATIONS
The Operations function relies on the finance function to ensure there are adequate funds to carry out transformation processes, and to summarise financial transactions to reflect the true value of the business
As the operations function is the aspect that produces, finance relies on it to produce the products that generates sales and provide funds for the other functions.
If the costs incurred in production are minimised, the cost of each goods sold is reduced, which increases sales and maximises profitability.
By focusing on quality, operations managers are able to provide high quality and durable products, thus resulting in products that can be sold at high prices via price skimming to increase revenue.
MARKETING & OPERATIONS
Operations managers are reliant on marketing managers to identify and meet the needs and wants of customer through market research.
Marketers adopt the marketing concept, allowing them to successfully fulfil customers inherent dires while simultaneously achieving the business' social, environmental, and economic goals. This allows the business to effectively direct and manifest all of its policies, plans and operations integrally into the business in a bid to achieve customer satisfaction.
Through the transformation process, the operations function produces the business' production offering, which has been designed by marketing, and without this, the business would simply not exist.
HUMAN RESOURCES & OPERATIONS
For Operations to produce goods and services, it is imperative for human resources to effectively deal with employees and their employment issues to generate business success.
Human Resources management deals with employment resourcing, engaging in activities of acquisition, development, maintenance, and separation.
Effective human resources is vital to the success of the business as employees are the most valuable asset to the business. However, the constantly changing business environment poses a challenge for human resources management due to the complexity of communications and increase reliance on technology.
Thus, the operations function decision to outsource and acquire leading-edge technology directly influences the nature of the workplace and the skills required to effectively carry out the human resources function.