Every small business needs a simple guide to operations management. To begin, lets look at one of the best definitions of operations management which is found in Wikipedia. “Operations management is an area of management concerned with designing and controlling the process of production and redesigning business operations in the production of goods or service.” This can include everything from designing and creating your product to the method of production and delivery. It also includes areas like – managing purchases and employees, inventory and quality control, storage and logistics and even how you plan to evaluate these processes.
In a nut shell, it’s the management of how your product is made all the way to the delivery into a customer’s hands. To clarify a bit farther, let us continue to the Wikipedia definition: Operations Management involves the responsibility of ensuring that business operations are efficient in terms of using as few resources as needed and effective in terms of meeting customer requirements. It is concerned with managing an entire production system which is the process that converts inputs (in the forms of raw materials, labor, and energy) into outputs (in the form of goods and/or services), as an asset or the delivery of a product or services.
Simple Guide to Operations Management: What do we manage?
Inventories (SKU) Management
Inventory is basically everything we sell, produce or even provide as a service. The most common way to track these items is using the universally accepted Stock Keeping Units or SKU. The SKU is often referred to as the bar code. These little bar codes can be scanned into the computer to make tracking easier.
In business this is sometimes referred to as Composition Management (often used in technology sector). Just imagine keeping track of all the new updated versions of various software developments. Think of android’s versions 2.1, 2.2, 2.3, 2.4 etc.
Inventory, and its management, is often the make or break portion of a business. Having too much means lost revenue and write offs. Having too little means angry customers being driven away to competitors who will have what the customers want. Today most inventory is tracked using software.
Here’s a link to Best Inventory Management Software Reviews & Comparisons.
Procurement and Purchasing Management
To provide any product or service we need materials. Many small businesses underestimate the importance of this area of management. The process can be complicated. For example, we need to find the right materials, negotiate costs, determine purchasing structures, set up delivery and storage, and then manage all the materials, supplies and equipment necessary to make the goods and services we offer.
Our profit margins are mostly determined by labor costs and the price we pay for the components/items used to make and deliver our product. Finally, the ability to turn a profit may just depend on our ability to manage the materials necessary to produce quality products at prices customers are willing to pay.
Thus, managing our supply chains should be one of our top priorities regardless of our business size. To learn more try reading over the information found in the site below.
Best Procurement Software Reviews List & Comparisons
Quality Management
Quality management is basically putting together a system to ensure you produce a consistent product or service. Typically, we set up a benchmark like a target goal, sample product or system to help us determine whether our product/service is meeting a certain standard of practice.
There even is an organization that sets standards called the ISO 9000:2015 and ISO 9001:2015 standards. Below are the seven quality management principles business leaders can focus on.
- Customer focus
- Leadership
- Engagement of people
- Process approach
- Improvement
- Evidence-based decision-making
- Relationship management
Logistics & Transportation Management
Logistics is the term used to describe the flow of materials and goods from our suppliers through our business and onto our customers. Transportation is how we move products from place to place. How we manage this flow depends on the size of operations. The longer and more complicated the process, the greater its importance.
The main priority is keeping things efficient and cost effective. Basically, it means making things flow smoothly, quickly and keeping costs under control. Most often we focus on the bottlenecks which is where things slow down the most.
Here’s a site called managmentmania.com that links to numerous concepts and ideas on this subject.
Facilities Management
Facilities is not just the physical property and buildings. It also includes everything inside as well. Again, the importance of this area depends on the size and number of facilities. Due to the complexity of issues, most business outsource various areas through service contracts, third party operators or outsourcing agencies.
For more info check out the International Facilities management Association
Management Control
The best definition of this comes from businessdictionary.com: A management function aimed at achieving defined goals within an established timetable, and usually understood to have three components: (1) setting standards, (2) measuring actual performance, and (3) taking corrective action.
A typical process for management control includes the following steps:
1) actual performance is compared with planned performance,
(2) the difference between the two is measured,
(3) causes contributing to the difference are identified, and
(4) corrective action is taken to eliminate or minimize the difference.
For our next part in this simple guide to operations management we will look at the stoplight approach to managing the various aspects of our small business operations.