5.1: The role of operations management

Role of operations

Operations management plays a crucial role in a business organization by ensuring that products and services are produced efficiently and effectively.
It influences all functional areas of the business, as changes in production methods can impact areas like marketing, finance, and human resources.
The role of operations management is to turn factors of production (land, labor, capital, and entrepreneurship) into goods and services in a cost-effective way.
It involves various aspects like production methods, planning, quality control, contingency planning, and research and development.
The factors of production are commonly known as the Five Ms (Materials, Manpower, Money, Machines, and Management).
The goal of operations management is to ensure that the transformation process adds value during production, resulting in a profit for the business.

The production method used to provide a good or service affects both the quality and individuality of the product.
Exclusive products can be marketed at a premium price due to their uniqueness and high quality.
Mass-produced goods are standardized and have more competitive pricing and promotional strategies.

The production method used affects the financial implications of a business.
Capital-intensive production methods require heavy investment in machinery and equipment, which can be expensive. Investment appraisal techniques can be used to assess the risks and benefits of capital expenditure.
External sources of finance may be needed to fund investment projects. A contingency fund may also be reserved to cover unexpected events that would delay production. Labor-intensive production requires a greater proportion of a firm's cost to go into remunerating workers.

The production method used affects a business's human resource management implications.
Changes in production methods can either reduce or increase the size of the workforce.
For example, multinational companies may set up labor-intensive operations in countries with low labor costs.
Mass production tends to deskill the workforce, while job production can benefit from using the individual skills of people working within a team.
Training needs also vary depending on the production method used.