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RAMANUJAN

Education

Why
Operations Management
is Important for a Company
A White Paper

Operations Management is a fundamental part of any
organization. It plays a vital role in the success of
organization. It is the area of management which is
concerned with creation of goods or services of a company.
The field is important as well as challenging and vital for all
types of organizations ranging from manufacturing to
retailing to services.

Galloway (1998) defines operations as all the activities concerned with the transformation of materials. they all function is also crucial for the success of a transform the inputs through different means and company and is particularly related to the they all have output & use resources. flows. Operations & Marketing. IT support services / Data storage. depending upon the type of organization. logistics and value to firms inputs to convert to profitable evaluations of processes in a typical manufacturing outputs. The field of operations management has gained increased recognition due to public awareness of . managing purchases. managing operations common characteristics: they all have input. stores / distribution. information or customers. Forbes magazine reported in 2011 Operations is transformation also defined process in wherein terms inputs of are converted to outputs.” include product creation. organization has Operations function whether or not Operations management is a fundamental part of it is named so. every economic enterprise. any organization. production These lines.e. as per many definitions by researchers." It is one of the transactions. Wherein in a service organization these can be customer care.RAMANUJAN Education Operations & Operations Management Every individual. Thus every Operations management focuses on In short Operations Management is the science and art of management of: People. Process & Systems for delivery of a useful product or service successfully to customers. They got on the job training and thus took time to learn the concepts of Operations Management. production carefully managing the processes to produce and and distribution. Finance. presenting. or working. But they all have certain functions of an organization. performs work ‘Operations’. through conversion to distribution. cooking. storage. Operations Management. security. Operations is type of activities that go on in a is “the set of activities that creates value in the form organization regardless of whether end product is a of goods and services by transforming inputs into good or service. as per industry experts. development. 3 basic functions of an organization i. serving. quality control. backend services. every educational institution and every includes "all those activities required to create and organization deliver a product or service. from procurement operations may have different names: processes. overall activities often outputs. curricula. Like the other necessary accounting. that about three quarters of all CEOs came from an operations background. inventory distribute products and services such that it adds control. Major. only some of them did. writing. generation of product or services. every Operations. facility maintenance etc. During the transformation operations add value to inputs to Importance of Operations Management produce goods or services. Not all these CEOs studied operations in school. government. setup.

variable cost and organization operations overhead costs. The easier for the marketing people to target the desired secret to success lies in creating such a robust market segment is the task of operations’ people. Right from the founder of the company. make projected statements or forecasts about the The concepts of efficiency and effectiveness of any productions in terms of fixed cost. As a result. This is what Toyota Motor Corporation reducing the operations cost rather than increasing is known for! The history of Toyota is lined by sales or reducing finance cost.RAMANUJAN Education quality control systems. It is the operations organizational resources to get the product in the department which has to integrate all these right place in the right way keeping in view the cost functions. Kiichiro. finance and operations) of an . Also firms have realized of an organization. the success of Japanese manufacturers. labor and No single innovation promises an ever lasting machinery to produce a product which can make it competitive advantage for an organization. in the provided budget by revolve around the utilizing the best of capacity of land. Below are few salient features indicating the the process for using resources. there has been a great emphasis on operations management and • Operations is one of the three major functions (marketing. Managing operations is all about the task to hire people who have the appropriate making the processes work right! Running the knowledge. Also a comparison is submitted and above all the process for creating value. proposed specifications. Human resource department has got management. The finance department is support the mission of the firm and its overall concerned with the cost considerations and can corporate strategy. skills and abilities to meet the processes involves great degree of integration of organizational objectives. competitive advantage which has its roots in the processes. continuous improvement in quality. reducing the finance all can be achieved only if the operations are cost & reducing the production / operations cost. many businesses have come to realize that the Operations management supplements all the other operations function is just as important to their firm activities as finance and marketing. managed in a way which makes a difference and Comparison ends with a note that companies profit creates the concept of differentiation right at the increases maximum when company focus on shop floor. Making the product according to the and time considerations. These between increasing the sales. the processes for use of new technology. Research and development activity is focused on the developing a that in order to effectively compete in a global product that is the need of the customers and has market they must have an operations strategy to enough market potential. organization. the process for importance of Operations Management for an utilizing the current resources to generate new ones organization.

small Input 80000 120000 80000 64000 operations can also have significant advantages. in practice.edu.com/ • Mary Ann Anderson. However. and Technology: • http://www. tools and techniques of Operations efficiently and effectively. Gary Pisano. Strategy. Wiley 6000 Cost 14000 24000 17000 30000 3500 6000 4250 7500 Hayes. 20000 30000 20000 36000 References: Cost Gross Margin Finance • 6000 6000 3000 Net Pursuing the Competitive Edge”. However. Large Marketi Finance Operatio ng Option ns Option companies may have the resources to dedicate Manage individuals ment companies often cannot. Small companies may have exactly the same operations management issues as large ones but 20% Sales to they can be more difficult to separate from the mass 100000 of other issues in the organization. so people may have to do Option Current Increase Reduce Reduce Sales Finance Operatio 50% cost 50% ns Cost 100000 150000 100000 specialized tasks but smaller different jobs as the need arises.ukessays. produce and deliver their products and services • The concepts.edu. Finance cost as 6%. organization has its own set of problems. Operations Management in the Smaller • Operations is a costly part of an organization • Nearly half of the employed people over the world Organizations Operations management is just as important in have jobs in operations. profitability. Management are widely used in managing other managing operations in a small or medium size functions.ramanujan. Haryana) Web: www. Decision making can become confused as individuals’ roles overlap. The Operations function is responsible for a major Irrespective of their size.in . Offers a major opportunity for an organization to improve its productivity and * Input cost considered as 80% of sales.in Email: info@ramanujan. “Operations. • small organizations as it is in large / OEM ones. all companies need to portion of the assets of most organizations.RAMANUJAN Education • Operations affects the companies’ ability to Margin 10500 18000 12750 22500 after Tax compete. “Operations Management for Dummies” Margin Taxes @ 25% Ramanujan College of Management – Palwal (NCR Delhi.