Operations Management
Operations management is the administration of business practices to create the highest level of efficiency possible within an organization in converting materials and labor into goods and services as efficiently as possible to maximize the profit of an organization. Operations management as a management process is concerned with decisions in planning, organizing, coordination and control of operations activities, resources, and capabilities to improve efficiency and generate higher profits .
Operations involves the transformation of an organizations inputs into finished goods and services using processes that coordinate and orchestrate resources that comprise the operations system. It brings together raw materials with the production process and resources to make products that customers need, it involves decisions in one or more of the following decision areas:
The Operations System for an organization is the joint configuration of resources and processes such that its resulting competencies are aligned with the organization's desired competitive position. The process view focuses on how work is done, while the resource view focuses on who or what performs the work. Both are necessary to understand operations well. The specific choices, of resources and processes affect what the operations system can and cannot do well. Besides resources and processes, values are the third factor that affects what an operation - and thus the organization - can and cannot do. Values are the standards by which employees set priorities.
Some priorities are embodied or programmed into a process, but many are not. Examples include judging whether an order or customer is attractive or not, whether a suggestion to improve a product or process is attractive or marginal, and whether an investment is worth making or not. Simulation of the Operations System processes for the different types of transformation i.e., manufacturing, transport, supply and service helps managers and key operations staff gain insight into the "real world" situations and factors influencing performance objectives that can be categorized as: functional performance, customer accommodation performance, logistics and distribution performance.
Operations management is the administration of business practices to create the highest level of efficiency possible within an organization in converting materials and labor into goods and services as efficiently as possible to maximize the profit of an organization. Operations management as a management process is concerned with decisions in planning, organizing, coordination and control of operations activities, resources, and capabilities to improve efficiency and generate higher profits .
Operations involves the transformation of an organizations inputs into finished goods and services using processes that coordinate and orchestrate resources that comprise the operations system. It brings together raw materials with the production process and resources to make products that customers need, it involves decisions in one or more of the following decision areas:
- Design of Products and Services
- Quality Management
- Process and Capacity Design
- Location Strategy
- Layout Design and Strategy
- Human Resources and Job Design
- Supply Chain Management
- Inventory Management
- Scheduling
- Maintenance
The Operations System for an organization is the joint configuration of resources and processes such that its resulting competencies are aligned with the organization's desired competitive position. The process view focuses on how work is done, while the resource view focuses on who or what performs the work. Both are necessary to understand operations well. The specific choices, of resources and processes affect what the operations system can and cannot do well. Besides resources and processes, values are the third factor that affects what an operation - and thus the organization - can and cannot do. Values are the standards by which employees set priorities.
Some priorities are embodied or programmed into a process, but many are not. Examples include judging whether an order or customer is attractive or not, whether a suggestion to improve a product or process is attractive or marginal, and whether an investment is worth making or not. Simulation of the Operations System processes for the different types of transformation i.e., manufacturing, transport, supply and service helps managers and key operations staff gain insight into the "real world" situations and factors influencing performance objectives that can be categorized as: functional performance, customer accommodation performance, logistics and distribution performance.
Manufacturing - Production of Goods
Manufacturing systems are production systems that transform material (including parts and products) into finished goods/products delivered to customers. The capacity of these systems is defined in terms of the output of products/parts per some specified interval. Production work centers are augmented with work-in-process (WIP) inventory stores that act as buffers to bottleneck resources and work centers that constrain the flow of products through the system. These production systems can be analyzed systematically as part of organization workflow analysis through production systems simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore the impact of maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Businesses typically have a mix of production of goods and services that collectively define the value proposition offered to customers. Product-mix decisions are usually supported by analytical methods such as Linear Programming (LP). These decisions are usually made so that the market demand is met and the firm profit is maximized. However, the complexity, and the dynamic stochastic nature of real-world production and service delivery systems often lead to goods and service production and delivery effective capacity levels that are different from those determined by analytical methods. Analytical methods also have problems coping with the dynamic changes in the product-mix which usually requires enhancing system parameters and/or configuration of the operations systems.
Simulation informs decisions on the optimum configuration of Production Systems
Manufacturing systems are production systems that transform material (including parts and products) into finished goods/products delivered to customers. The capacity of these systems is defined in terms of the output of products/parts per some specified interval. Production work centers are augmented with work-in-process (WIP) inventory stores that act as buffers to bottleneck resources and work centers that constrain the flow of products through the system. These production systems can be analyzed systematically as part of organization workflow analysis through production systems simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore the impact of maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Businesses typically have a mix of production of goods and services that collectively define the value proposition offered to customers. Product-mix decisions are usually supported by analytical methods such as Linear Programming (LP). These decisions are usually made so that the market demand is met and the firm profit is maximized. However, the complexity, and the dynamic stochastic nature of real-world production and service delivery systems often lead to goods and service production and delivery effective capacity levels that are different from those determined by analytical methods. Analytical methods also have problems coping with the dynamic changes in the product-mix which usually requires enhancing system parameters and/or configuration of the operations systems.
Simulation informs decisions on the optimum configuration of Production Systems
- Supply or Sourcing Decisions - These decisions specify which activities are performed internally, and which activities are outsourced, and how to manage suppliers. Decisions involve defining the process boundaries and interfaces. It includes strategic sourcing decisions, vertical integration, and supply network configuration.
- Technology Decisions - These decisions characterize how to process inputs into outputs. It includes the methods and systems employed, as well as the know-how and intellectual property. The technology decisions can be grouped into the following key categories: a) coordination and information technology decisions such as assignment of responsibility, incentives, measurement, and control; b) product technology decisions in product philosophy, product architecture, and product capabilities; c) process technology decisions on how to structure the conversion processes and methods used in execution; and d) transportation technology decisions on how goods are exchanged among different activities in the network.
- Demand Forecast Decisions - These decisions specify how to match demand to available supply. These decisions characterize the interfaces and relationships with customers and include demand planning and forecasting, as well as tactical capacity allocation and order management. Demand management is an important driver in inflexible supply processes that cannot quickly adapt to changes in demand such as the core processes in airlines, hotels, hospital wards, and car rental companies, It also relates to service and customer relationship management.
- Improvements and Innovation Decisions - These are decisions on characterizing the processes and incentives to improve and innovate products and processes.
Creating Manufacturing Systems Simulation Models
Creating a simulation experiment to investigate production systems effective capacity, and capacity decisions related to creation and delivery of value to customers involves:
Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc. These production systems processes can be analyzed systematically as part of whole organization workflow through simulation methods, to identify potential bottlenecks and inefficiencies for improvements.
Manufacturing Production Process
Manufacturing production processes are structured, recurrent activities that transform inputs into outputs (products). A process is a network of activities with specific precedence relationships among activities - the relationships that specify which activities must be finished before another activity can begin. Manufacturing processes create and deliver products and/or parts that are delivered to customers. The capacity of these processes is defined in terms of the output of products/parts per some specified interval. The manufacturing and/or service delivery system processes define a network of manufacturing and/or service centers connected and coordinated by the processes. Manufacturing work centers are augmented with WIP inventory stores that act as buffers to bottleneck resources and work centers that constrain the flow of products through the system. These manufacturing and service delivery systems can be analyzed systematically as part of organization workflow analysis through production systems simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Simulation Output Analysis & Visualization
The Production and/or service systems simulation enable managers and key operations staff to gain insight into the "real world" capacity problems facing the company, and improves their understanding of the factors that affect production and service delivery performance. The simulation and visualization informs decisions on:
Creating a simulation experiment to investigate production systems effective capacity, and capacity decisions related to creation and delivery of value to customers involves:
- Creating product demand forecast model for products and services - This includes information about the average rates at which customers request for products and/or services including the breakdown of customer order request types (e.g., for a coffee shop regular coffee vs. espresso, for a barbershop haircut vs. shaves, etc.) – at different times of the day, and the orders' sizes
- Creating simulation models for the activity network of processes and roles (logical resources that perform the activities) that comprise aspects of the Operations System involved in the production goods (transformation of input material and parts to products), storage and movement of material/parts between work centers as well as inventory stores.
- Creating simulation models of the service delivery and fulfillment processes and the roles of human and equipment resources.
- Creating simulation model for the Operations System outputs - the products and services mix offered by the organization to customers
- Creating simulation model for the workforce (people) needed by the Operations System, and their roles and positions in the organization, as well as their weekly schedules
- Creating simulation model for the required equipment as defined by the capacity plan including operations and maintenance schedules
- Creating schedules for the organization's operating calendar - shifts, workdays, times and holidays.
- Generate/Run simulation models for the organizations Operations System and aspects of it.
Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc. These production systems processes can be analyzed systematically as part of whole organization workflow through simulation methods, to identify potential bottlenecks and inefficiencies for improvements.
Manufacturing Production Process
Manufacturing production processes are structured, recurrent activities that transform inputs into outputs (products). A process is a network of activities with specific precedence relationships among activities - the relationships that specify which activities must be finished before another activity can begin. Manufacturing processes create and deliver products and/or parts that are delivered to customers. The capacity of these processes is defined in terms of the output of products/parts per some specified interval. The manufacturing and/or service delivery system processes define a network of manufacturing and/or service centers connected and coordinated by the processes. Manufacturing work centers are augmented with WIP inventory stores that act as buffers to bottleneck resources and work centers that constrain the flow of products through the system. These manufacturing and service delivery systems can be analyzed systematically as part of organization workflow analysis through production systems simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Simulation Output Analysis & Visualization
The Production and/or service systems simulation enable managers and key operations staff to gain insight into the "real world" capacity problems facing the company, and improves their understanding of the factors that affect production and service delivery performance. The simulation and visualization informs decisions on:
- Demand Management - Specifying how to match demand to available resources; and tactical allocation of capacity.
- Process Network Structure - Decision of the layout of the activity network in terms of locations of activities, buffers and interconnections. For example, processes can be organized by activity, or by product line; job shops such as consulting companies, and tool-die-shops often have a functional or process layout, while flow shops such as assembly plants, and chemical processing plants usually have a product layout.
- Coordination and Information technology decisions on how to coordinate, communicate, and plan execution throughout the network. Coordination is typically a managerial activity and includes assignment of responsibility, incentives, measurements and control.
- Product architecture decisions on structure and parts to facilitate production.
- Transportation technology decisions on how goods are exchanged among different activities in the network. This is a key driver in logistics and supply chain management, as well as how insurance policies are moved between the different processing steps.
Retail or Supply Systems
Retail/Supply Service systems are a form of production systems that involve transformation of goods involving transfer of ownership from the supplier (service provider) to the customer.
Retail/Supply Service systems are a form of production systems that involve transformation of goods involving transfer of ownership from the supplier (service provider) to the customer.
Creating Retail/Supply System Simulation Models
Creating a simulation experiment to investigate service delivery effective capacity, and capacity decisions related to services to deliver of value to customers involves:
These production and service delivery systems processes can be analyzed systematically as part of whole organization workflow through simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Simulation Output Analysis & Visualization
The Production and/or service systems simulation enable managers and key operations staff to gain insight into the "real world" capacity problems facing the company, and improves their understanding of the factors that affect production and service delivery performance. The simulation and visualization informs decisions on:
Simulation informs decisions on the optimum configuration of processes such as:
Creating a simulation experiment to investigate service delivery effective capacity, and capacity decisions related to services to deliver of value to customers involves:
- Creating service demand forecast model - This includes information about the average rates at which customers request for services including the breakdown of customer order request types (e.g., for a coffee shop regular coffee vs. espresso, for a barbershop haircut vs. shaves, etc.) – at different times of the day, and the orders' sizes
- Creating configuration model for the service delivery operation including the configuration model of the groups of people and equipment resources.
- Creating configuration model for the services mix offered by the organization
- Creating configuration model for the workforce (people) and their roles as well as their schedules
- Creating configuration model for the equipment including operations and maintenance schedules
- Creating schedules for the organization's operating calendar - workdays, times and holidays.
- Generate/Run operations process simulation models
These production and service delivery systems processes can be analyzed systematically as part of whole organization workflow through simulation methods, to identify potential bottlenecks and inefficiencies for improvements. Simulation enables users to explore maximizing organization output subject to minimizing delays through reducing/eliminating waiting times, improving labor and equipment utilization, etc.
Simulation Output Analysis & Visualization
The Production and/or service systems simulation enable managers and key operations staff to gain insight into the "real world" capacity problems facing the company, and improves their understanding of the factors that affect production and service delivery performance. The simulation and visualization informs decisions on:
- Demand Management - Specifying how to match demand to available resources; and tactical allocation of capacity.
- Process Network Structure - Decision of the layout of the activity network in terms of locations of activities, buffers and interconnections. For example, processes can be organized by activity, or by product line; job shops such as consulting companies, and tool-die-shops often have a functional or process layout, while flow shops such as assembly plants, and chemical processing plants usually have a product layout.
- Coordination and Information technology decisions on how to coordinate, communicate, and plan execution throughout the network. Coordination is typically a managerial activity and includes assignment of responsibility, incentives, measurements and control.
- Product architecture decisions on structure and parts to facilitate production.
- Transportation technology decisions on how goods are exchanged among different activities in the network. This is a key driver in logistics and supply chain management, as well as how insurance policies are moved between the different processing steps.
Simulation informs decisions on the optimum configuration of processes such as:
- Supply or Sourcing Decisions - These decisions specify which activities are performed internally, and which activities are outsourced, and how to manage suppliers. Decisions involve defining the process boundaries and interfaces. It includes strategic sourcing decisions, vertical integration, and supply network configuration.
- Technology Decisions - These decisions characterize how to process inputs into outputs. It includes the methods and systems employed, as well as the know-how and intellectual property. The technology decisions can be grouped into the following key categories: a) coordination and information technology decisions such as assignment of responsibility, incentives, measurement, and control; b) product technology decisions in product philosophy, product architecture, and product capabilities; c) process technology decisions on how to structure the conversion processes and methods used in execution; and d) transportation technology decisions on how goods are exchanged among different activities in the network.
- Demand Forecast Decisions - These decisions specify how to match demand to available supply. These decisions characterize the interfaces and relationships with customers and include demand planning and forecasting, as well as tactical capacity allocation and order management. Demand management is an important driver in inflexible supply processes that cannot quickly adapt to changes in demand such as the core processes in airlines, hotels, hospital wards, and car rental companies, It also relates to service and customer relationship management.
- Improvements and Innovation Decisions - These are decisions on characterizing the processes and incentives to improve and innovate products and processes.
Services - Offer of Satisfaction or Provisioning of Benefits
A Service is a set of activities, benefits, or satisfaction offered for sale, or provided in connection with the sale of goods. The service system capacity is defined holistically in terms of the throughput of the flow of customers (e.g., in retail, patients in health care, clients in barbershops/salons, guests in hotels, etc.) per specified time interval, Servicing centers are augmented with waiting areas; waiting areas may be introduced to act as buffers to bottleneck service centers that constrain the flow of customers in the service network. Anything that eases throughput by releasing the bottleneck potentially adds value to the system.
Distinctive Features of Service Delivery Systems
Although many of the principles of good management in a manufacturing/production environment also apply in organizations that provide services, service businesses such as banking, professional firms of accountants, etc., do have a number of distinctive features which have implications on how they are managed.
The primary workflow is typically accomplished by an information flow to coordinate activities, and a cash flow to support and reward them.
The competency view characterizes the abilities of the enssemble of the organization's resources, processes, and values
A Service is a set of activities, benefits, or satisfaction offered for sale, or provided in connection with the sale of goods. The service system capacity is defined holistically in terms of the throughput of the flow of customers (e.g., in retail, patients in health care, clients in barbershops/salons, guests in hotels, etc.) per specified time interval, Servicing centers are augmented with waiting areas; waiting areas may be introduced to act as buffers to bottleneck service centers that constrain the flow of customers in the service network. Anything that eases throughput by releasing the bottleneck potentially adds value to the system.
Distinctive Features of Service Delivery Systems
Although many of the principles of good management in a manufacturing/production environment also apply in organizations that provide services, service businesses such as banking, professional firms of accountants, etc., do have a number of distinctive features which have implications on how they are managed.
- Services are less easily standardized than products and so service quality tends to be more variable. This makes human resource management and motivation more critical.
- Services are often intangible and multi-dimensional; this can make attracting customers more difficult as it often depends on promoting an intangible item.
- Unlike manufactured products, services cannot be stored, but must be consumed as they are produced or they are wasted. This creates additional problems matching productive capacity with customer demand. This is reflected in for example, the marginal cost to fill empty seats - a plane flying empty to New York is a service provided but wasted.
- Ascertaining the cost of individual services is often also problematic, as the cost structure of many services business is such that costs are often shared among different services. This makes pricing and analysis of profitability of different services more difficult.
The primary workflow is typically accomplished by an information flow to coordinate activities, and a cash flow to support and reward them.
The competency view characterizes the abilities of the enssemble of the organization's resources, processes, and values
Service Delivery Simulation Models
Selling - Sales Process System
Selling is a process involving the interaction of potential "buyer" (Consumer/Business) and a "seller" (person) that represents the company to sell its "products"/"services" to the potential buyer. Sales operations is about supporting and enabling front line sales teams to sell more efficiently and effectively by providing strategic direction and reducing friction in the sales process. To do this, sales operations fulfills both strategic and tactical functions. Sales operations teams accomplish their goals through a variety of roles and function including: strategy, data analysis, hiring and training, forecasting, territory design, and sales process optimization.
Selling Process
The Selling process for business-to-consumer or business-to-business involves the following steps:
Selling is a process involving the interaction of potential "buyer" (Consumer/Business) and a "seller" (person) that represents the company to sell its "products"/"services" to the potential buyer. Sales operations is about supporting and enabling front line sales teams to sell more efficiently and effectively by providing strategic direction and reducing friction in the sales process. To do this, sales operations fulfills both strategic and tactical functions. Sales operations teams accomplish their goals through a variety of roles and function including: strategy, data analysis, hiring and training, forecasting, territory design, and sales process optimization.
Selling Process
The Selling process for business-to-consumer or business-to-business involves the following steps:
- Prospecting - Prospecting is the foundation for the rest of the sales process. It involves research to identify the people or companies that might be interested in the offering (products/services); and the qualifying the potential buyer (prospect). Qualifying involves determining if the potential buyer has the desire and ability to buy the product/service. A prospect is a lead that is qualified; a lead is a potential buyer..
- Preparation - This is the step where the salesperson does their home work in preparation for the next step - Interaction. This requires the salesperson research and collect information that is relevant and pertinent to the buyer's need and ability and help in presentation of the sales pitch.
- Interaction - This is the approach to interaction/engaging the prospect. The step involves the salesperson building trust with the prospect before making the sales pitch in the next step - Presentation..
- Presentation - This is where the sales pitch is made through a presentation that demonstrates understanding of the customer's needs> The presentation should be tailored to the customer, explaining how the product/service meets that person or company's needs.
- Handling objections - These are the concerns that a customer may have after the presentation; a good salesperson will take this as an opportunity to further understand and respond to customer's needs.
- Closing the Sale - You enter this step eventually, if your customer is convinced the product/service will meet their needs. You close by agreeing on the terms of the sale and finishing up the transaction. The important - and sometimes challenging - part of closing is that the seller has to actually ask if the potential customer is willing to make the purchase. When the close is successful, this step clearly aligns with the purchase step in the buying process.
- Follow-up - This is an important step in assuring customer satisfaction, retaining customers, and prospecting for new customers. This might involve sending a thank-you note, contacting the customer to make sure a product was received, or checking in to make sure a service is meeting customer's expectations. From the buyer's perspective, the follow-up is the implementation step in the buying process.