Every business relies on processes, and every process requires efficiency. That’s where operations management comes into play. Public and private companies all rely on operations management to ensure things are running on-time and, notably, on-budget. But what are the functions of operations management? And what are the skills you need to be a high-performing operations manager in modern business?
In this article, we’ll examine the purpose of operations management, why it’s critically important to businesses large and small, and how you can succeed in an operations manager role.
What Is Operations Management?
At its core, operations management is the development and execution of business strategies that maximize the flow of information and productivity. Consider the role of an operations manager on a factory floor. It’s that person’s job to examine the materials, equipment, and workforce and determine the exact process to deliver the company’s goods or services into the hands of its customers.
Unlike project management — which also involves a step-by-step process but has a clearly defined beginning and end — operations management is the ongoing day-to-day oversight of organizational activities and processes with constant analysis to determine what’s working and what’s not.
What Are the Key Factors of Operations Management?
Key factors include:
- Cost – Managing costs of production, labor, and other operating expenses to keep your prices at an acceptable level while still turning a profit.
- Quality – Delivering goods or services of the highest quality while also improving products.
- Speed – Delivering products on-time and determining ways to make the process faster while still maintaining cost and quality.
- Flexibility – Keeping up with changes in the market and pivoting quickly to match a competitor who develops a faster process.
What Are the Functions of Operations Management?
Operations management is a multi-tiered, “big picture” process, though some tiers may get more attention than others, depending on your business or product. For example, if you’re an operations manager for an online travel company that specializes in selling rooms to customers, you won’t utilize the supply chain in the same way a company making energy bars would.
Here are four common functions of operations management:
1. Strategy: When developing strategy for your organization, you will spend significant time analyzing data and information in order to determine how to reach your objectives. Multiple factors must be taken into consideration during your strategy sessions, including the size of your workforce, your budget, your supply chain configuration, and your timeline.
As an operations manager, your strategic tasks may include:
- Analyzing data — including identifying the underlying principles, reasons, or facts — by breaking it down into separate parts
- Estimating the quantifiable characteristics of products, events, or information, such as sizes, distances, and quantities; and determining time, costs, resources, or materials needed to perform a work activity
- Planning or directing activities — such as sales promotions — that require coordination with other department managers
- Developing or implementing product marketing strategies, including advertising campaigns or sales promotions
2. Forecasting: Predicting the financial future of your organization is known as forecasting. The process involves knowing how much money you have to work with in the present, how much you hope to earn from the sale of your product, and how environmental factors – inflation, consumer demand, technology upgrades, etc. – will impact your budget and earnings in the years to come.
In an operations manager role, your forecasting responsibilities may include:
- Reviewing financial statements, sales or activity reports, or other performance data to measure productivity or goal achievement or to identify areas needing cost reduction or program improvement
- Directing or coordinating financial or budget activities to fund operations, maximize investments, or increase efficiency
- Setting prices or credit terms for goods or services, based on forecasts of customer demand
3. Supply Chain Management: Supply chain management may feel similar to operations management in that both involve overseeing processes within the organization. But as we’ve discussed, operations management exists at a higher level – viewing the company holistically and looking for efficiencies – while supply chain management is focused on the processes that turn your raw materials into a final product. Take, for example, a company that cultivates fruit that is shipped directly from the farm to the grocery store. Supply chain management would involve processes such picking the crops, cleaning them, packaging them, and putting them on trucks.
Operations managers are intimately involved in supply chain management decisions, and some of their responsibilities include:
- Directing and coordinating activities of businesses or departments concerned with the production, pricing, sales, or distribution of products
- Managing the movement of goods into and out of production facilities to ensure efficiency, effectiveness, or sustainability of operations
- Monitor suppliers to ensure they efficiently and effectively provide needed goods or services within budgetary limits
4. Quality Control: Because so much of operations management involves searching for efficiencies and the fastest, safest, and most cost-effective ways to serve your customers, quality control is key. Not only are you working to determine if your business processes are efficient, but you’re also constantly examining your own product. Does it meet your brand standards? Does it meet customer expectations? Is it of the highest quality?
Operations managers ask these questions and others every day, and their quality control responsibilities may include:
- Inspecting equipment, structures, or materials to identify the cause of errors or other problems or defects
- Monitoring and reviewing information from processes, materials, events, or the environment to detect or assess problems
- Using relevant information and individual judgment to determine whether events or processes comply with laws, regulations, and standards
- Assessing value and importance of objects, services, and even people
- Handling complaints, settling disputes, and resolving grievances and conflicts, or otherwise negotiating with others
What Skills Do You Need in Operations Management?
Operations management is a leadership-level role that involves overseeing multiple departments, and a successful operations manager will need to bring a combination of relevant hard and soft skills. According to O*NET Online, a typical operations manager will need the following skills:
- Complex problem-solving: Like putting together the pieces of a puzzle, it will be your job to determine how all the departments of your company will work together to ensure the business is running efficiently.
- Management of personnel resources: Can one person do the job of two? As an operations manager, you’ll need to determine how to maximize productivity using the human capital at your disposal.
- Management of material resources: Do you have the necessary equipment, tools, or facilities to run your business effectively? An operations manager will strategize to determine how to best use the resources at hand, or determine how to get the proper tools for the right price.
- Persuasion: An essential soft skill for leaders, the art of persuasion is necessary to bring others onboard with your vision for the company.
- Time management: This goes back to speed as a key performance objective. Operations managers know how to manage their time while creating organization-wide processes that move things along at the right pace.
- Systems analysis and evaluation: What’s working? What’s not? Analysis and evaluation are day-to-day responsibilities for operations managers, who must constantly tweak the system in order to achieve better results.
What Is the Job Outlook for Operations Managers?
Operations management is vital to every organization, which means the demand will always exist for qualified, educated leaders who can get the most out of a company’s resources. According to O*NET, operations management is a growing field, with as many as 300,400 projected openings through 2031. The median wage for operations managers was $97,970 in 2021.
Overview: What Is Operations Management?
In summary, operations management is needed to make organizations run efficiently. You can have all of the talent and all of the materials, but if you don’t have an operational strategy to put those resources to use, your company will not succeed.
Operations management is not an entry-level discipline. Nearly 30% of operations managers have bachelor’s degrees, according to O*NET and professionals in these roles must have several years of work-related experience before rising to the leadership level. But if you have a passion for analyzing data, creating strategy, and developing systems to see how things work, operations management may be the right career for you.