The role of operations management impacts on all functional areas of a business organization including marketing, Human Resources (HR) and finance.
In general, the Operations Department depends on other departments in the firm, if it is to run smoothly. It is because it is concerned with providing the right products in the right quantities, at the right quality level, to the right customers, in a cost-effective and timely manner.
How is operations management linked with other business functions?
The relationship between operations and the other business functions is fairly easy to understand, so let’s take a look.
Impact of production on Marketing
Production affects quantity, uniqueness and quality of products.
Product, price, promotion and distribution play an important part in the overall Marketing Mix. The production method used will affect both the quality and the individuality of the product. An exclusive product means that it can be marketed at a high price due to its uniqueness and high quality. However, when there are likely to be plenty of substitutes of the product available on the market, prices will be much more competitive. Promotional strategies are also more impersonal and aggressive in order to gain market share from rival firms. Marketing will ask questions where to distribute products. Businesses that rely on high volume sales to gain high profits such as supermarkets aim to increase the number of distribution channels to ensure maximum sales. The correct types of packaging to appeal to customers. Process, physical evidence and people also play an important part in the extended Marketing Mix. Research and Development (R&D) of products will be done jointly by the operations department and marketing department.
Example 1: Customers of the car brand Lamborghini are invited by a sales manager to meet in person and discuss personal requirements for their super cars. By contrast, mass produced products such as Coca-Cola or BigMac are standardized and sold in millions every single day.
Impact of production on Human Resources (HR)
Different production methods require workers to possess different expertise.
The role of operations management has a direct impact on Human Resource (HR) management. Any change in production methods can either increase or decrease the size of the workforce. Job production will increase the number of workers required while mass production uses capital-intensive technologies, so it tends to deskill the workforce. Motivation will also be affected by aspects of operations management. Whilst flow production suffers from a lack of teamwork and group dynamics, cell production benefits from using the individual skills of people working within a team. There are also training implications when it comes to different production methods – both training and organizing training for staff. Job production techniques require more training whereas mass production requires minimal instructional training only. When it comes to recruitment, it is relatively easy to hire workers for mass production whereas attractive remuneration packages may be needed to entice specialist workers for job production. Crisis management can be highly disruptive and unsettling for people, so effective contingency plans are needed. The Human Resources (HR) department will also need to handle any disputes and grievances involving staff.
Example 2: Many multinational companies managed to enter China prior to its membership of the World Trade Organization (WTO) by setting up labor-intensive operations – manufacturing plants where the operations could easily be automated.
Impact of production on Finance
Capital-intensive production or labor-intensive production affects the sources and amount of finance differently.
Different types of products require different production techniques. Questions will be asked which supplies to use. Capital intensity and lean production require heavy investment in machinery and equipment. This is expensive although with mass production the fixed investment costs can be spread over time. Capital-intensive firms are likely to use investment appraisal techniques to assess whether the risks are worthwhile. They are also likely to need external sources of finance to fund the investment projects. A contingency fund, which is finance kept for emergency use, may also be reserved in case of machinery breakdowns or late deliveries from a supplier, which would delay production. On another hand, labor-intensive production requires a greater proportion of a firm’s cost to go into remunerating labor with wages, salaries and other financial benefits. Methods of payment to be used for employees departmental budgeting. Operations management will also suggest efficient ways of warehousing the produced products.
Production is part of an integrated system of a business, therefore cannot be considered in isolation. As a consequence of the fact that all business functions depend on one another, operations managers of large businesses company must work with the other departments to make necessary requests and valuable recommendations.
Now you can think about the role of operations management in connection with other areas of your business’s activities such as marketing, Human Resource (HR) management and finance.
