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“Operations Management-A brief insight on evolution and revolution”

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Do you know the one thing that gives industries the power to gain huge profit margins while maintaining high standards of quality and resourcefulness? Have you ever wondered what keeps a packet of those branded chips you buy consistent with their taste and quality or a gadget like an iphone so apt in it what Apple has to offer? How is it that a bottle of coke invariably tastes the same no matter which amongst the millions you pick up? Do you know how your car has that exact power and comfort you were promised? The answer to all these questions lies in the two terms- Operations Management.

What is Operation Management?

It is as per the theoretical definition a planned and executed, managerial and informed transformational process by which inputs are transformed to outputs. The terms sustainable and cross disciplinary approach form the base for it as a holistic and integrated process.

What makes it so important?

Operations Management has been the pivot for the design and implementation of products, processes, services and supply chains. It takes into picture the acquisition, development and utilization of resources that firms need to deliver the goods and services their clients want.

A brief insight into the history and evolution of operations management would help us better analyze the trends that time has shown and pose for the future with the upcoming emergence of technologies and computer aided process improvement mechanisms. So let us briefly understand what transformed operations management to what it is today.

Here’s a short video to facilitate understanding on it at Nestles’ Training Centre:

How did it start in the first place?

After World War II the American corporations mainly concentrated on finance and marketing functions. United States was the global manufacturing leader a large part attributed to their efficient operations. Japan and Europe were in ruins with their businesses and with their factories destroyed. This period served as the golden era for US business as there was a huge market opportunity. The companies could sell whatever they produced. In the 1970’s and 80’s things started changing and the American companies were faced with international market competitions. They had not improved their processes and methods over the years due to lack of competition in the markets while the foreign firms were rebuilding their facilities and designing new production methods. When the foreign firms recovered many US firms could not stand the competition.  The companies now turned to operations management, a field that had been lying neglected and ignored for many years.

The industrial revolution changed the concept from human power to machine power. The invention of the steam engine was a major development of this period. Then another important building block of operations is the segregation of a huge task into small tasks and then the overall outcome assimilated led to final outputs. Then the concept of ‘division of labor’ by Adam Smith in 1776 in the wealth of nations came into picture and the production of a good was broken down into small, elemental tasks performed by a different worker that made him highly specialized in that task.  Higher volumes were produced and marketing became easy because of development of means of transportation. In1790 Eli Whitney introduced the concept of interchangeable parts and parts were standardized so that every item in the batch fits equally. This development led to the progress from one-at- a-time concept to volume production, for example in the manufacture of clocks, watches etc.

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Frederick W Taylor brought about the scientific approach at the advent of the 20th century and aimed at increasing worker productivity and the organizational output. This concept was based on the assumption and featured that money was the only motivation for workers and physical ability was the worker’s only limitation. He segregated management and labor. Management he held responsible for designing productive systems and for determining whether the worker output was acceptable or not. The concept of scientific management was not liked by many as they thought that management used these methods to unfairly increase production without paying them accordingly. Still many companies adopted this and this became a major milestone in the field of operation management. Henry Ford used the introduced scientific management with division of labor and the concept of interchangeable parts to develop the concept of man production.

Hawthrone studies conducted at electric plant in Illinois and found that irrespective of the effects of environment changes such as light and temperature the productivity of the workers continued to improve. This was due to the huge amount of attention given to the workers and this effect came to be known as the hawthrone effect and laid the foundation for the human relations movement. Job enrichment was incorporated along with workers being given a greater role in planning.

While one movement concentrated on the technical aspects of job design and the other on the human relations the movement of management science evolved which focused on developing quantitative techniques for solving operations problems. F.N. Harris in 1913 developed the first mathematical model for inventory management. With the advent of computers data processing became easier and forecasting, scheduling and inventory management became effective and efficient with the introduction of MRP(Material Requirements Planning).

What is the Modern Scenario?

The modern day environment for operations management  is not only complex and challenging with customer demands for better quality goods, faster speed and lower costs but in order to sustain the companies have to master the basics of operations management. This is practiced by organizations by implementing the lean system concept. This concept creates an efficient operation by pulling together best practice concepts such as Just In Time(JIT),  Total Quality Management(TQM), continuous improvement, resource planning and Supply Chain Management(SCM). Large information systems such as the ERP (Enterprise Resource Planning ) has also helped companies to increase efficiency.

This is the golden ring that can make or create that difference, that cutting edge in the business which can get companies to rule over the markets or draw swords at their competitors by being better, sharper and more efficient. In this modern business scenario with respect to the ‘Kaizan’ principles of the Japanese that do it correct the first time and also that there is always room for improvement it is indeed true that there is little scope for mistakes. The business scenario is grim and the battle for customers and opportunities is bloody so in order to be the best you have to meditate it out with everything you have got and operations management can be your key.

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Priyo Ranjan

The author is an ex-employee of Infosys and he is currently pursuing MBA from Xavier’s Institute Of Social Service (XISS).