Operations Management and Decision Making

Keywords: decision making in operation management

Operations management focuses on carefully managing the processes to produce and distribute products and services. Usually, small businesses don’t talk about “operations management”, but they carry out the activities that management schools typically associate with the phrase “operations management” major, overall activities often include product creation, development, production and distribution. These activities are also associated with Product and Service Management. However product management is usually in regard to one or more closely related product — that is, a product line. Operations management is in regard to all operations within the organization related activities include managing purchases, inventory control, quality control, storage, logistics and evaluations. A great deal of focus is on efficiency and effectiveness of processes. Therefore, operations management often includes substantial measurement and analysis of internal processes. Ultimately, the nature of how operations management is carried out in an organization depends very much on the nature of products or services in the organization, for example, retail, manufacturing, wholesale, etc.  An operating system utilises resources to convert inputs into outputs in the form of goods or services. Conventionally, operations management is defined as the task of designing, establishing, planning, and running, controlling, maintaining and improving such systems. As the output of such systems constitutes both goods and services this establishes operations management as a field of activity somewhat broader than production (or manufacturing) management which solely provides goods or artefacts. However the distinction between goods and services is unclear and the latter category is broad and heterogeneous.

Operations Management (OM) is concerned with the running of the day-to-day operations of a business or other organisation as effectively and efficiently as possible. It is of crucial importance in all organisations, whether they manufacture products for customers or provide a service.

OM is the branch of management science concerned with the study of the factors involved in the successful management of an organisation’s day-to-day operations. It seeks to develop and apply the methods and techniques needed to design and implement systems which will enable the efficiency and effectiveness of these operations to be improved. Operational problems can range from purchasing, through manufacturing to the final distribution of the products. The last 10 years has witnessed the re-emergence of Operations Management as a critical function in the growth and profitability of organisations. The ability to deliver products and services fast and right first time while cutting costs has become fundamental to not only the competitiveness of a business, but also its survival.

Before operating any managerial activities successfully what comes first is the Decision-making.  Decision-making is the process of evaluating alternative courses of action to a given problem and arriving at the most suitable course of action. It entails thorough analysis of the pros and cons of every alternative solution. Scientific management facilitates decision-making. The factors of risk and uncertainty are taken into account while making decisions.

Description: The application of operations management whether new or old, big or small, to run smoothly and achieve the goals and objective which is has set fifth of elements. There are basically five management concepts that allow any organization to handle the tactical, planned and set decisions. The five basic functions of the operation management are just to have a controlled plan over the preventive measure. They are:

Plan: It is the foundation area of management. It is the base upon which the all areas of management should be built. Planning requires administrations to asses where the company presently set, and where it would be in the upcoming. From there and appropriate course of action is determined and implemented to attain the company’s goals and objectives.

Organize: The second function of the management is getting organized. Management must organize all its resources well before in hand to put into practice the course of action to decide that has been planned in the base function. Organizing is establishing the internal organizational structure of the business. The focus is on division, co-ordination, and control of task and the flow of information within the organization.

Staffing: The third function is stuffing. After employing individual to work for your company, you must create a proper “Project Management Procedure” that allows feedback and maximum productivity to occur. A staffing management plan or process is ultimately a document that explains the various human resources requirements that will be met for both staff management and employee alike. The plan is essentially a portion of the project management plan in which allows project to be successful by properly managing various teams to complete tasks effectively and efficiently.

Direct: Directing is the fourth function of the management. Working under this function helps the management to control and supervise the action of the staff. This helps them to assist the staff in achieving the company’s goals and also accomplishing their personal or career goals, which can be powered by motivation, communication, department dynamics, and department leadership.

Control: Control is the last of four function of management, includes establishing performance standards, which are of course based on the company’s objective. It also involves evaluating and reporting of actual job performance. When the management studies these points then it is necessary to compare both the things. This study on comparison of both decides further corrective and preventive actions.  

Before go to decision making on operation management we shortly discuss what is Operations, operations management and operations managers?

Every organisation has an operations function, whether or not it is called ‘operations’. The goal or purpose of most organisations involves the production of goods and/or services. To do this, they have to procure resources, convert them into outputs and distribute them to their intended users. The term operations embraces all the activities required to create and deliver an organisation’s goods or services to its customers or clients.

Within large and complex organisations operations is usually a major functional area, with people specifically designated to take responsibility for managing all or part of the organisation’s operations processes. It is an important functional area because it plays a crucial role in determining how well an organisation satisfies its customers. In the case of private-sector companies, the mission of the operations function is usually expressed in terms of profits, growth and competitiveness; in public and voluntary organisations, it is often expressed in terms of providing value for money.

Operations managementis concerned with the design, management, and improvement of the systems that create the organisation’s goods or services. The majority of most organisations’ financial and human resources are invested in the activities involved in making products or delivering services. Operations management is therefore critical to organisational success.

An understanding of the principles of operations management is important for all managers, because they provide a systematic way of looking at an organisation’s processes. The need to manage manufacturing and service operations efficiently and effectively has led to a considerable increase in interest in operations management in recent years. However, the concept of operations is not new.

Decision making is a central role of all operations management

Theabove comments aim to identify operations management as an area worthy of consideration, and also to suggest that some decisions of operations managers are of importance to those with decision-making responsibilities in other functions in the organization.

Paradoxically whilst much of what is written about operations management is concerned with a form of decision-making – solving of particular problems – relatively little attention has been given to the wider decision-making process. We define the operations management decision-making process at this level, as the formulation of overall strategies for operations, typically involving inter-related areas of responsibility with operations management, and the taking of decisions in those areas in the pursuit of these strategies, all within the broader business context.

Textbooks have in the past viewed operations management in terms of the occasional or repetitive solving of specific problems in areas such as scheduling, inventories, planning, control, etc. They have emphasised the analytical solutions of such problems, and other approaches involving the manipulation of variables in the pursuit of some given objective function, e.g. duration, utilisation, throughput, cost, etc.

Capacity Management Decision:The capacity management is to balance the level of operations with the level of demand. This involves the consideration of likely medium- to long-term demand patterns, to permit the determination of the capacity required to meet such demand, and the development of strategies for the development of resources, in particular for accommodating changes in the demand levels.

Two basic capacity management strategies exist, namely:

• To provide for efficient adjustment or variation of system capacity, to match demand level changes.
• To eliminate or reduce the need for such adjustment in system capacity.

The strategies offered operations managers the following – for use individually or in combination:

Strategies 1: Provide for efficient adjustment of system capacity (e.g. through sub-contracting, changes in make/buy balance, reducing material contents, work hour changes, workforce size changes, resource transfers, etc.)

Strategies 2: Eliminate or reduce the need for adjustments in system capacity through:

• maintaining excess capacity, i.e. sufficient to meet all future demand.
• Reducing or smoothing the effect of demand level fluctuations by:
• fixing an upper capacity limit, and beyond that expecting either loss or trade or customer queuing and reduced service;
• using output stocks to absorb demand level fluctuations.

The operation Manager are linked at:

• designing the operations system or its layout
• managing the operations system
• improving the operations system.

The five main kinds of decision in each of these relate to:

• the processes by which goods and services are produced
• the quality of goods or services
• the quantity of goods or services (the capacity of operations)
• the stock of materials (inventory) needed to produce goods or services
• the management of human resources.

Let us show how the above link are worked when a manager making decision on his / her operation management system.  

A person in managerial position who is poor in decision making is fit to be called only an administrator and not a manager.

The decision making process normally involves the following stages:

1) Defining the problem /issues / situations / challenges which calls for a decision making

2) Collecting relevant facts, figures and statistics to facilitate and support decision making process

3) Identifying the various alternatives of choice

4) Seeking opinions and alternative view points from “people who know”and “people who matter”.

5) Pondering over the issues peacefully (where time permits) and

6) Deciding on the best choice or a couple of best courses of action.

Some times, decision making may just involve taking “yes”or “no”decision in which case, if the problem or issue is simple, there may not really be a need for any elaborate data collection or need for wider consultations.

At times, where the issue is of serious nature, even making yes/no decision may involve all the elaborate stages listed above. Example: A company well established in manufacture of automobile accessories discusses a proposal to diversify in to manufacture of computer hardware accessories. Opinion in the top management is divided into two – some want to stick only to the proven core business line and some are very enthusiastic to diversify. The Chief executive has to decide yes or no for diversification.

Where the decision making involves multiple choices, it may get more complicated. Let us take the same example. The chief executive decides in favour of diversifying into manufacturing the computer accessories. Now, he would be confronted with decision making on several issues. He has to start off with defining the problems.

For example,

• Whether to float a separate company for the purpose in a new name or produce the new products in the existing set up but market it in a different brand name
• Whether to use the same company name (and to utilize the familiarity and reputation of the brand) but produce the items in a new factory
• Whether to go for indigenous or imported technology
• Whether to hire totally new managerial team or utilize existing talent pool in the company for key administrative positions
• Whether to locate the factory adjacent to the existing factory or find a totally new location

Decisions drive an organization. The theory on decision making is vast but can be summarized quite effectively by using Vroom and Yetton’s normative model for decision making.

 

The model characterizes several types of decision making, each suitable for varying situations. These types are:

A1: Leader takes known information and then decides alone.

A2: Leader gets for information from followers, and then decides alone.

C1: Leader shares problem with followers individually, listens to ideas and then decides alone.

C2: Leader shares problems with followers as a group, listens to ideas and then decides alone.

G2: Leader shares problems with followers as a group and then seeks and accepts consensus agreement.

According to Vroom and Yet ton each decision is influenced by twomajor factors:

1.    Decision Quality- Is the quality of the decision measurable?

a. Does the manager have the necessary skills and information to make the decision? Do employees possess that information?

b. Does the issue at hand have a structural resolution? Is the problem structured?

c. Can the probability of decision being the correct solution be measurable?

2.    Acceptance-

a. Does the implementation of the decision require employee acceptance? Do employees have an interest to be involved?

b. Will the decision be accepted by employees if taken alone by the manager?

c. Is there an identity between employee and organizational goals?

The implementation of the model is rather simple. If acceptance is of importance types A1 and A2 will be less suitable. If the manager sees decision quality as important and employees do not then G2 would be less suitable.

Example of Decision Tree:

Source: Time management Guide

However, decision theory and decision tree can be used together. For instant a construction company that has received favourable publicity from guest appearances of public TV have improvement program. Public TV programming decision seen to be unpredictable thus cannot estimate the probability of continued benefit benefits from its relationship with the shown demand for improvements next year may.

Thus, decision-making can be referred, as being a central role of all operations managers Decision-making is a central role of all operations managers. Decisions need to be made in:

• Designing the operations system
• Managing the operations system
• Improving the operations system.

Conclusion: Operations is one of the central functions of all organisations. It embraces all the activities required to create and deliver an organisation’s goods or services to its customers or clients. Some managers have a specific and central role in the management of operations such as a production manager in a factory or an operations manager in a hotel chain. However, most managers have at least some operations management aspect to their job. The main objective in the Operation Management on Decision Making is Create Money, Reduce Cost and Maintain Efficiency.

Slack et al (2006) argues that with operations management decisions you can see what you are dealing with. You ca touch inventory, talk to people and programme machines and so on but you cannot see strategy, feel it or touch it. The effects of most operations management decisions become evident relatively fast, it may be years before an operations strategy decision can be judged to be a success or not Slack et al adds (2006) on to say strategy is more than a single decision. Operations strategy will be revealed in the total pattern of decisions that a business takes in developing its operations in the long term.

In the management the manager or decision makers always have plane how can increase the company or establishment profit and have to take right decision. The decision maker also takes care of the organizational cost. If he failed to protect his cost then he will be not a good decision maker. Reduce cost create profit and profit is money. Finally the decision taken should maintain and continue its standards, quality, and services with efficiencies.

The transformation model is a tool for analysing any type of organisation in terms of the inputs, transformation process and outputs involved in the operations function. 

During the operation incidents or disruptions that may impact their normal operations. Such incidents may range from external threats such as a terrorist attack, natural disaster or pandemic, to localized and more common incidents such as loss of key IT systems.

We have viewed operations management decision-making as a process where outcomes are influenced by feasibility, desirability and preference factors. This supports the contention that the operations manager’s decision-making process has clear cause and effect relationship with policy decision-making and the decisions in other business functions. The recognition of these relationships and the adoption of a suitable decision-making process is a principal requirement for effective operations management, and the solution of particular problems must be seen as subsidiary part of this decision-making process. The operation manager’s responsibility within the broad business context must include the recognition of the fact that decisions in other functions will limit his own decision; but, equally important, he must also seek to influence those factors which give rise to feasibility and desirability constraints on his decisions in order to exercise his own performance.