Operations management is the act of planning and overseeing business processes to improve efficiency and maximise profits.
Examples of OM include:
analysing and optimising production lines
Why is operations management critical?
Improve customer relationships
Businesses that meet and exceed customer expectations have a competitive advantage because customers who are happy with a product or service are more likely to return.
Operations management improves customer relationships by:
ensuring quality control
providing faster turnaround on orders
streamlining the overall customer experience.
Increase productivity
OM ensures productivity and continuous process improvements. It also increases efficiency by automating routine functions.
Streamline inventory management
Inventory requires ongoing management to ensure there’s enough on hand but not so much that it increases storage costs or expires. Operations managers monitor reorder points and adjust stock and inventory levels based on forecasts. They may also automate this process, using software that reorders based on parameters that operations managers define.
Reduce costs and maximise profits
Generally, operations costs are variable, meaning the profitability of every product or service is contingent upon strong OM.
When exploring cost-cutting, OM teams must consider:
maintaining optimal inventory levels
reducing shipping and packaging costs
lowering materials costs
keeping machinery productive
maintaining the correct staffing levels.
What are the three types of operations management?
1. Internal
Internal OM refers to people within the organisation monitoring and managing internal processes that contribute to efficiency, cost savings, minimised risk and greater output.
Internal OM helps:
increase output
improve organisational flexibility and efficiency
prepare for product rollouts.
2. External
External OM focuses on the processes and factors that impact customer expectations, such as:
Quality
Quality management is about meeting a promise to the customer, whether for a product or service.
Delivery
Products or services require on-time delivery, along with reasonable shipping costs and frequent order updates.
Service
The responsiveness of the company and the level of service at every contact point is the responsibility of external operations management.
Cost
External OM seeks to meet the customer's price expectations and ensure competitive pricing.
Flexibility
Customers appreciate choice around how they interact with brands. That could mean developing more customer communication channels, expanding payment options or starting a referral program.
3. Financial
Management of the financial aspects of operations is critical and consists of applying the best processes, cost accounting and labour economics.
Some functions of financial OM include budgeting, forecasting and determining which financial tasks to automate.
The benefits of enterprise resource planning (ERP) in OM
An ERP is an operations management system that offers these benefits for operations managers:
An ERP serves as a single data source for KPIs such as financial figures and sales performance data.
An ERP will help managers spot and react to unexpected issues, whether in production, the supply chain or financial management.
Operations managers can use an ERP to automate many manual processes related to data collection, material handling and inventory management.
ERP systems can automate specific customer outreach, like informing customers when a product has shipped. An ERP also tracks conversions, providing marketing and sales with invaluable information.
An ERP can help field employees track project progress, schedule appointments and manage contracts and warranties.
Tips for implementing an operations management system
1. Conduct a SWOT analysis.
Identify your strengths, weaknesses, opportunities and threats (SWOT) regarding your operations to help you identify where to prioritise efforts.
2. Set goals.
What are the results you wish to see? Set reasonable goals for ongoing operational improvements like cost savings or greater production efficiency.
3. Choose the right software.
Take time when choosing ERP software. Ask for a demo so you can determine whether a specific software platform will serve your needs, and look at the pricing for different service tiers.
4. Train your staff.
Once you’ve chosen a solution, train your staff on how to use it. Many ERP vendors offer face-to-face training and online tutorials that can help teams with onboarding and ongoing training.
5. Monitor and review.
Continually monitor and review the system's data to identify where and how you can continue to improve performance.
Manage your operations with MYOB
MYOB is a business management platform that allows you to optimise and automate your operations across your core business workflows – supply chain, customers, finances, accounting and tax, employees and projects.
MYOB gives you complete visibility over all your operations and activities with everything that you need to run your business in one place. With MYOB, you can pay for what you need today and scale your platform as your business grows and your requirements increase. Whatever your size or industry, with MYOB you can unleash your business’ full potential.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.