Operations management focuses on the tools and techniques a manufacturing firm uses to ensure a smooth, effective production process. If the company provides services, operations administration indicates to top leadership the factors that can prop up customer loyalty and sales. The discipline offers various benefits, including better profitability tracking, manufacturing expertise and regulatory compliance.
Sound operations management causes corporate leadership to challenge conventional wisdom or employees’ sense of what's operationally correct. Simply put, senior executives rely on this activity to question existing processes and ask personnel to come up with new ideas to do business and increase sales. In fact, companies with experienced, competent operations managers are generally adept at monitoring their revenues and expenses. They do so by delving into corporate statements of income, profitability trends and budget reports, to name a few.
Businesses adequately manage their operations to get a handle on key internal and external factors. Internal factors include operating policies, intellectual capital and the average attrition rate. This reflects the number of employees leaving as a result of resignations, retirements and deaths. Forced workforce reductions, such as terminations, do not count as attrition-rate components. Intellectual capital represents various abilities, expertise and knowledge that a firm has gathered over time. External factors that operations managers heed include the state of the economy and rivals’ strategies. By helping a firm understand its internal and external conditions, operations management improves the company’s competitive standing. This is because the business gets a better understanding of its operating environment and can adapt its tactics more effectively to changing conditions. Marketing specialists use the SWOT concept -- strengths, weaknesses, opportunities, threats -- to describe this analytical process.
Operations management allows a manufacturing firm to change or improve the way it produces goods, as well as how it stores items such as raw materials, work-in process merchandise and completely finished products. This important benefit helps the manufacturer prevent a deterioration in debt affordability, which may happen if the firm incurs losses and cannot repay its existing liabilities. Manufacturing tools used in operations management include computer-aided production software, defect-tracking programs, warehouse management software and process re-engineering applications.
By studiously analyzing operating activities, corporate management waves goodbye to the days of hefty government fines and adverse regulatory decisions. Department heads and segment chiefs set adequate internal controls to make sure rank-and-file personnel perform tasks in accordance with the law. For example, adequate operations management helps improve workplace safety, a key criterion that the U.S. Occupational Safety and Health Administration watches closely.
Marquis Codjia is a New York-based freelance writer, investor and banker. He has authored articles since 2000, covering topics such as politics, technology and business. A certified public accountant and certified financial manager, Codjia received a Master of Business Administration from Rutgers University, majoring in investment analysis and financial management.