Production is the process by which an organization turns its resources into value added outputs. These outputs could be either goods or services and their sales bring revenue and thus profit for the organization. Hence, the main objective of any organization is to produce the goods/ services in the required quantity and quality at the required time with minimum cost. In order for this to happen, the organization should streamline their operation or production process. This is what operations management or operations manager does.
Thus, we can define operations management as - The design, operation and improvement of the production systems that create a firm's primary products and services.The efficiency of a firm's conversion process that turns resources into desirable outputs is called the productivity of the firm.
Productivity (P) = Output (O)/ Inputs (I)
From this equation, we can understand that an organization can increase its productivity in two ways -
- Reducing inputs (and there by the cost associated with it) while maintaining the output.
- Increasing the output (production efficiency through performance tuning) while maintaining the input levels.
Thus, we can say that operations management has 2 broad objectives in a firm -
Performance Objective
- Efficiency improvement
- Improve process Effectiveness
- Quality Assurance
- Reduction in lead time
- Capacity utilization
- Flexibility
Cost Objectives
- Reduce the explicit (visible) cost
- Reduce the implicit (hidden) costs
- Opportunity cost
- Inventory handling cost
- Downtime cost
- Inspection cost etc.
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These notes are intended to give you a quick summary and recap of Production Operations Management and help you answer questions such as -
- Define Production Operations Management (POM)
- Explain the objectives of Operations Management. Discuss the role of operations managers
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