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Pearson BTEC Level 7

 Extended Diploma in Strategic Management and Leadership 

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Human Resources Management Institute, Colombo

Sri Lanka 

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Explain the importance of effective operations management in achieving organisational objectives

1 Understanding the role of Operations Management in an Organisation

1.1 The importance of Effective Operations Management in achieving organisational objectives

1.1.1 Definition of Operations Management

According to Plenert (2002), Operations Management (OM) can be defined as the management of activities that enable an organisation to transfer a range of basic inputs (raw materials, energy, customer requirements, information, skills, finance, etc.) into outputs that deliver the organisation’s primary products and services to the end customer.

Stevenson (2011) and Brown et al. (2013) enlarge that definition by adding factors such as inventory management, supply and logistics, design decisions related to capacity planning and scheduling, quality assurance and the management of processes and human resources in order to ensure that the right skill base is developed and utilised.

Extended Diploma in Strategic Management and Leadership 

1.1.2 The role of operations management

Extended Diploma In Strategic Management And LeadershipThe nature of how the management of the strategic objectives is organised depends largely on the type of organisation, such as a government authority, a manufacturing or wholesale business, a retail company or an agency (Pycraft et al. 2007). According to Brown et al. (2013) and Mahadevan (2010), the importance of effective operations management in achieving organisational objectives can be divided into three broad categories: strategic decisions, tactical decisions and operational decisions.

Strategic Decisions:

OM assists senior level management in making strategic level decisions. Such decisions consider the existing constraints as well as the current conditions to formulate efficient systems and companywide processes to achieve a competitive advantage.

Examples of these long-term, strategic decisions include mergers and acquisitions or major technological changes that directly affect the organisation’s core businesses.

Tactical Decisions:

OM enables management to efficiently schedule the available resources and manage the staff under the legal regulations and the constraints defined by the organisation’s strategic plan (Radford 1998). Examples of these intermediate tactical decisions include operational shift planning and the scheduling of the delivery of raw materials.

Operational Decisions:

Following Mahedevan (2010) and Johnson et. al. (2005) OM assists management in planning, controlling and monitoring operational decisions under the constraints defined by the tactical decisions. These decisions are narrowly focussed on individual departmental targets. Examples of these short-term operational decisions include typical day-to-day business decisions made by team leaders, such as planning individual daily tasks and goals.

The following figure will highlight several operation strategies and their links to manufacturing paradigms. The transition from mass customisation up to strategic manufacturing is shown an the role of OM is described within every step in this transition.

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Figure 1: Operations strategies and the links to manufacturing paradigms (Brown et. al. 2009)

1.2 Evaluating the Success of an Existing Operations Management Process in Meeting GIGAPRODUCTION’s Overall Strategic Management Objectives

The business areas of GIGAPRODUCTION (GPRO) include the manufacturing and worldwide distribution of furniture and POS marketing tools, such as window and in-store decoration tools, according to the needs of customers in the premium and luxury retail areas.

GPRO’s existing operations are closely linked to the organisation’s management targets. The success of meeting these objectives is evaluated within the following business areas: production design, manufacturing and logistics and job design.

1.2.1 Product design

According to Chary (2004) OM processes relating to design include the achievement of consistent and similar quality across all customer campaigns by developing a sophisticated supplier and distribution network. This area also deals with the innovativeness in product design and materials to address the preferences and needs of the customers in order to attract consumers to the company’s products.

It also includes the reengineering of window decorations according to the aesthetics of local markets and cultures; for example, the use of positive testimonials in local markets or the abandonment of specific raw materials.

1.2.2 Manufacturing and logistics

Following Wöhe (2008) OM ensures the coordination between project management and production to achieve economy of scale effects through mass production. The value of these effects is a reduction in the costs of production and logistics as well as an increase in revenue.

Schulte (2013) and Hammer (2004) added it also includes evaluating an organisation’s performance by setting benchmarks, which are used to discover ways to make improvements by identifying the best way to conduct business. These benchmarks can either be used externally to target the company’s biggest competitor or within the organisation to target the company’s best teams; for example, the performance of the best teams within the logistic department can be measured and the processes they use can be adapted to other logistic teams.

1.2.3 Job design

Although an organisation’s human resource department copes with employees and their working conditions, OM processes are typically related to the employees’ operational areas as well as to their development (Scholz 2000).

OM ensures guidelines to calculate the effectiveness of time-bound campaigns as well as tasks to help ensure that the production and logistics of all campaigns run smoothly. OM also identifies best methods for the logistics of hiring hourly paid staff. This includes shift planning in accordance with the timetables of local schools and universities.