Operations management
Operations management turns inputs into the goods and services customers want, efficiently and at the right quality.
What operations is
Operations management designs and controls the process of turning inputs (materials, labour, energy, information) into outputs (goods and services). It covers capacity, process design, quality, inventory, scheduling, and location. Services, from hospitals to restaurants, have operations too.
Production methods
Job production makes one-off, customised products, such as a wedding dress or bridge. Batch production makes groups of identical items, such as bread or clothing runs. Flow (mass) production makes large volumes continuously on assembly lines, such as cars or soft drinks. Mass customisation, such as configurable laptops, combines flexibility with scale.
Productivity and efficiency
Productivity measures output per unit of input, such as units per worker-hour. Efficiency improves productivity by reducing waste. Capacity utilisation, actual output divided by maximum possible output, shows how fully resources are used; very high utilisation can strain staff and equipment.
Henry Ford and the assembly line
Henry Ford's moving assembly line, introduced in 1913, cut the time to build a Model T from about 12 hours to about 90 minutes, making cars affordable for millions. It built on Frederick Taylor's scientific management, which broke work into simple, measured tasks, though critics noted its toll on workers.
Lean production
Lean production, developed at Toyota (the Toyota Production System), aims to eliminate waste: overproduction, waiting, unnecessary transport, over-processing, excess inventory, unnecessary motion, and defects. Lean tools include just-in-time inventory, kaizen (continuous improvement), and kanban signals to control flow.
Location decisions
Businesses choose locations based on costs (land, labour, taxes), access to customers and suppliers, transport links, skilled workers, infrastructure, regulations, and quality of life. Retailers prioritise customer access; manufacturers often prioritise costs and transport; tech firms seek skilled talent clusters.
Service operations
Services differ from goods: they are intangible, often produced and consumed at the same time, variable in quality, and cannot be stored. Managing queues, scheduling staff to match demand, and designing the customer experience are key. Technology, such as self-service kiosks and online booking, changes how services are delivered.
Worked example
A bakery makes 600 loaves per day with 4 bakers working 8 hours each: productivity is 600 / 32 = 18.75 loaves per worker-hour. After reorganising the kitchen to reduce walking and waiting, it makes 720 loaves with the same hours: 22.5 per worker-hour, a 20% productivity gain from removing waste, a lean idea.
Key takeaways
Operations management turns inputs into goods and services efficiently. Production can be job, batch, flow, or mass customisation. Productivity is output per input; capacity utilisation shows resource use. Ford's 1913 assembly line transformed manufacturing. Lean production, from Toyota, eliminates waste using just-in-time, kaizen, and kanban. Location depends on costs, access, and talent. Services are intangible and cannot be stored, so managing demand and experience is key.
Flashcard
Turning inputs into outputs efficiently
Check your understanding
A factory can produce 10,000 units a month but currently produces 7,500. What is its capacity utilisation?