The Scope of Operations Management

The scope of operations management includes:

➢ Making decisions that affect the production of goods and
services.
➢ Ensuring the relationship between the different functions in the
organisation
➢ Guaranteeing the entire organisation works together as a
system.

The decision-making process can be demonstrated as follows. The

owner of a spaza shop must make many decisions in the course of
business. Some decisions, such as those about the replenishment of
stock, will occur on a regular basis. The decision regarding prices
charged for the merchandise is another frequently made decision. A
decision regarding the problem of changing the supplier, however, is
not a decision that the owner will encounter on a regular basis. An
operations manager has no control over many of the objectives that
are set for him or her. An example of this kind of objective is an
increase in sales, which the board of directors might decide is
necessary. In certain cases an operations manager will set objectives
in conjunction with managers of other functional areas. An example
of such collaboration is setting the annual budgets

. Special attention has to be paid to:

What decisions entail?
What are the functions that will influence operations management
are?
What a system is and how it will function within an organisation?
 The methodology utilised to make a decision will depend entirely
on the scale of the decision to be made. Risk factors, too, must be
taken into account when decisions are made. Therefore, to guarantee
that a good decision is made, certain steps must be followed.

Steps in Operations Management Decision-Making:

Step 1: The reason for taking the decision The circumstances may
have changed from the previous time that a decision had to be made.
For example, when the owner of a spaza shop has decided to open
his or her enterprise, a new market has been identified. There are no
internet facilities available in the area the owner is servicing. The
owner will have to decide whether the return on investment will be
sufficient for the risk undertaken.

Step 2: Definition of existing circumstances and impending

circumstances Both circumstances must be analysed in detail.
Information on the cost, price, market segment, labour
requirements, and capital requirements must be researched. In the
example we have been discussing, the spaza owner will have
research the cost of technology and the price to charge clients. Who
will assist him or her and where the money will be found to buy the
equipment required. The owner will have to decide on the length of
time for which he or she would like to render the service

Step 3: Setting of the objectives The measure used to define the

success of the process must be plainly characterised. It may include
factors such as profit expectations, cost performance, the
percentage required as a return on investment, and so on.

Step 4: Identification of all the alternatives It is not a good idea to

have only one plan of action. The owner must identify other
alternatives as well in case the original plan is unsuccessful. If there
are no other alternatives available, the endeavour will fail and the
owner will lose the investment made and may end up bankrupt.
Step 5: Selection of the best plan available The plan selected will be
the plan identified as having the best possible chance of being
successful.

Step 6: Fine-tuning of the plan for the implementation Risks must be

identified. Any uncertainties must be eliminated from the selected
plan. It is necessary to ensure that all identified objectives will be
fulfilled.

Step 7: Examination of the outcome of the plan that has been

implemented It is important that the results are examined. This is
the only way the success of the new endeavour can be determined. If
the results show, for example, that the internet business is not
profitable, it should be stopped before it drains the profits from the
spaza shop.

The three major functional areas of an organisation are operations,

finance, and marketing. In a manufacturing industry, operations
produce the goods. In a service organisation this department
may be referred to as the operations department. In the general
set-up of an organisation, operations refer to that part of the
organisation that produces goods or service (Kruger et al., 2013).

The organisation as a whole can be seen as a system. The main

purpose of the system is to generate profit. To achieve the goal,
the main system can be divided into sub-systems. The most
important sub-systems are operations, finance and marketing. A
decision that is made in any of the three sub-systems will influence
what will happen not only in the other sub-systems but also the
entire system. A decision that seems to be logical in the operations
department may seem illogical to the other departments. For
example let us assume the Ford Motor Company’s marketing
department decides that there is a need for a small motorcar model
with an engine capacity of 850c. The market research may indicate
that the decision is logical. For the production department it will
mean that it has to find additional capacity to produce the car. To
this department the decision may seem illogical. A possible
consequence of the decision on the system may be that the financial
resources become stretched beyond capacity. Therefore, before the
decision can be made, the entire system must be consulted to
determine the impact on each of the sub-systems (Kruger et al.,
2013).

Operations Management and Decision Making

Significance of Decision Making in Operation Management

The scope of operations management ranges across the organization.

Operations management people are involved in product and service
design, process selection, selection and management of technology,
design of work systems, location planning, facilities planning, and
quality improvement of the organization’s products or services. The.
operations function includes many interrelated activities, such as
forecasting, capacity planning, scheduling, managing inventories,
assuring quality, motivating employees, deciding where to locate
facilities, and more. Under Operation Management, Decision making
is consider as the process of selection of best course of action
among alternatives (Selection of Best Product/ Service, Plant
Location , Selection of vendor/ supplier etc.) and supports
managerial functions (such as planning, organizing, directing an
controlling) through “right” decision making.
The Historical Evolution of Operations Management

The traditional view of manufacturing management began in 18th

century when Adam Smith recognized the economic benefits of
specialization of labor. He recommended breaking of jobs down into
subtasks and recognizes workers to specialized tasks in which they
would become highly skilled and efficient.

In the early 20th century, F.W Taylor implemented Smith’s theories

and developed scientific management. From then till 1930, many
techniques were developed prevailing the traditional view.

❖ Operations management (OM) was first recognized in the late

1700s or early 1800s. it can be defined as the set of activities
that creates goods and services throughout the transformation
of inputs into outputs. OM pertains to the production of services
as well as physical goods but it originated in manufacturing.OM
is believed to have begun with Adam Smith and the concept of
‘division of labor’.His contributions revolved around job
specialization. Eli Whitney then introduced the idea of
standardization. Specialized workers could become more
proficient in repetitive tasks. Frederick Taylor introduced
scientific management, which focused on improving work
methods. Henry ford further advanced standardization and work
method improvements with the advent of the assembly line for
mass production of automobiles. A major contribution to the
development of OM was the introduction of quality
control.Deming and others believed that it was important to
improve not only work methods but also the work environment.
More recently, the introduction of just-in-time
(JIT)manufacturing and lean production enhanced OM by
moving material more quickly into and through the plant. Also,
firms began concentrating on core competencies to produce
quality products. Major newer approaches emphasize
 manufacturing flexibility over economies of scale.The coming
of the information age in conjunction with the computer have
also revolutionized OM. Computer integrated manufacturing
(CIM), Electronic data interchange (EDI), and the World Wide
Web (WWW) have all added methods for improving productivity.
Globalization of market places and production facilities now
heavily influence OM.

1776 Specialization of labor in Manufacturing Adam Smith

1799 Interchangeable parts, cost accounting Eli Viihitney
1832 Division of labor by skill; assignment of jobs Charles
by skill Babbage
1900 Scientific management time study and work Frederick W.
study developed; dividing planning and Taylor
doing of work
1900 Motion of study jobs Frank B.
Gilbreth
1901 Scheduling techniques for employees, Henry L.
machine jobs in manufacturing Gantt
1915 Economic lot sizes for inventory control F.W Harris
1927 Human relations; the Hawthorne studies Elton Mayo
1931 Statistical inference applied to product W.A Shewart
quality; quality control charts
1935 Statistical sampling applied to quality H.F Dodge &
control; inspection sampling plans H.G Roming
1940 Operations research applications in World P.M Blacker
War II and others
1946 Digital Computer John Mauchlly
and J.P
Eckert
1947 Linear programming G.B Dantzig,
Williams and
others
1950 Mathematical programming, on-linear and A. Charnes,
stochastic processes W.W
Cooper
& others
1951 Commercial digital computer; large-scale Sperry
computations available Univac
1960 Organizational behavior; Continued study of L. Cummings,
people at work L. Potter
1970 Integrating operations into overall strategy W. Skinner J.
and policy. Computer applications to Orlicky and
manufacturing. Scheduling and control. G. Wright
Material requirement planning (MRP)
1980 Quality and productivity applications from W.E Deming
Japan robotics. CAD-CAM and J. Juran