10 Operations Management Principles
Operations management is a production management function that makes the production of manufactured goods more efficient through the optimization of business processes. The main goals of operations management are profitability and total quality.
Every company has operations that ensure goods or services reach customers. Operations management is about managing every operation to make it as efficient as possible and support company goals. This business process focuses on frequent holistic process improvement activities to get better results including:
- Better quality products
- Faster delivery
- Enhanced workforce and equipment utilization
- Smaller inventories
- Reduced work-in-process (WIP)
This involves operations research that engages in process analysis, visualizes the current state of affairs with business analytics, and uses lean supply chain techniques to identify areas of improvement.
The Principles of Operations Management – According to Randall Schaeffer
According to Randall Schaeffer (CPIM) – Renowned manufacturing & operations management expert, there are ten operation management principles that must be followed to help manufacturers avoid common problems and thrive. The principles include:
Principle 1: Reality
Operations and management must focus on the larger problem as opposed to small techniques that are part of a problem. According to Schaeffer, there is no single tool that offers a universal solution.
Principle 2: Humility
Managers must understand and respect limitations, avoiding trial and error at all costs. Doing this saves time and money and has an overall positive outcome in the long term.
Principle 3: Organization
Since everything is interconnected in a production process, all elements must be predictable and consistent. Operational management can’t be profitable without production planning and control that fosters predictability and consistency.
Principle 4: Accountability
Every person who manages operations must be accountable. Managers should have checks and balances to guarantee accountability.
Principle 5: Change
Change is welcome in operational issues. New solutions must be welcome for continuous operational improvements to be possible. It is helpful to embrace modern change management methodologies including Agile, Six Sigma, Lean, and Kaizen.
IT operations management, the subset of manufacturing that manages production systems, is a critical business function. Change management methodologies are very useful for making decisions on how to upgrade, replace, or augment existing production management systems.
Principle 6: Quality Control
Manufacturing operations must have quality controls in place. Without quality management, the quality of the end product/service can’t be guaranteed. Total quality management is a holistic process and involves excellence in many areas including:
- Procurement
- Logistics
- Materials management
- Warehousing
It involves carefully monitoring the raw materials as they move through the entire logistics and supply chain and become finished goods.
Principle 7: Success
For success to be achievable in operations, the end customer must be happy with the end product/service they receive. They should also be willing to come back for more.
Principle 8: Know your competition
To optimize operations, it is important to study competitors, understand their practices, customers, products, and competitive advantage.
Principle 9: Causality
Operational problems have tell-tale signs before they occur. To streamline operations, managers must identify underlying problems and eliminate them.
If you already have an operations management system, like an enterprise planning system (ERP), manufacturing execution system (MES), or material requirements planning system (MRP) then you can set up standard metrics and reports that will help you to identify problems like bottlenecks and other inefficiencies.
Principle 10: Consumer Collaboration
Lastly, managers need to understand customers in-depth by collecting insights from them on how they can improve products/services.
Benefits of Effective Operations Management
The functions of operations management, when run in adherence with the 10 operations management principles, produce many benefits to the manufacturing organization including:
Increased Product/Service Quality
Goods/services produced after a meticulous process are bound to be of higher quality.
Increased Customer Satisfaction
Operations management includes processes like proper planning, stringent quality controls, and proper employee placement which all result in products/services that meet the needs of customers.
Increased Revenue
Companies that produce high-quality products/services that match the needs of customers are bound to get new customers and increase their revenue.
Ensures Compliance
A lack of compliance can attract serious problems like expensive lawsuits. Effective management tools and process controls ensure that operations managers have the right safeguards to avoid legal issues.
Competitive Advantage Through Software Systems
Today, manufacturing software is making it easier than ever to implement gold standard operations management principles into even the most complex enterprise manufacturing organizations.
For example, a production scheduling software that is used by many Fortune 100 manufacturers globally allows them to improve production efficiency by:
- Reducing changeovers
- Reducing planning/scheduling time
- Improving resource utilization
- Achieving on-time production of orders.
The name of this advanced planning and detailed scheduling software (APS) is Optessa and its patented Fast Optimization technology is being utilized by manufacturers like Nissan, Ford, and Honda to unlock millions of dollars in cost savings in their plants.
