Operations Management Theory: Definition and Modern Examples

Operations management theory is the set practices companies use to increase efficiency in production. Operations management is concerned with controlling the production process and business operations in the most efficient manner possible.

Key Takeaways

  • Operations management theory encompasses the strategies companies employ to increase efficiency in operations and production.
  • To operate efficiently, firms should use the least amount of resources needed and strive to meet the customer's requirements to the highest possible standard.
  • Maximizing resources involves managing how raw materials and labor are used to create final goods and services.
  • Modern operations management is comprised of four theories: business process redesign (BPR), six sigma, lean manufacturing, and reconfigurable manufacturing systems.

Understanding Operations Management Theory

Operations management involves certain responsibilities. One of those responsibilities is ensuring that the business operates efficiently, both in terms of using the least amount of resources necessary and in meeting customers' requirements to the highest standard economically viable.

Operations management involves managing the process by which raw materials, labor, and energy are converted into goods and services. People skills, creativity, rational analysis, and technological knowledge are all important for success in operations management.

Historic Operations Management vs. Modern Operations Management

In the history of business and manufacturing operations, division of labor and technological advancements have benefited company productivity. Systematically measuring performance and calculating with formulas was a somewhat unexplored science before Frederick Taylor’s early work in the field.

In 1911, Taylor published his principles of scientific operations management, characterized by four specific elements: developing a true science of management, scientific selection of an effective and efficient worker, education and development of workers, and intimate cooperation between management and staff.

Modern operations management revolves around four theories: business process redesign (BPR), reconfigurable manufacturing systems, six sigma, and lean manufacturing. BPR was formulated in 1993 and is a business management strategy that focuses on analyzing and designing workflow and business processes within a company. The goal of BPR is to help companies dramatically restructure the organization by designing the business process from the ground up.

Reconfigurable manufacturing systems are production systems designed to incorporate accelerated change in structure, hardware, and software components. This allows systems to adjust rapidly to the capacity to which they can continue production and how efficiently they function in response to market or intrinsic system changes.

Six sigma is an approach that focuses on quality. It was primarily developed from 1985 to 1987 at Motorola. The word "six" references the control limits, which are placed at six standard deviations from the normal distribution mean. Jack Welch of General Electric started an initiative to adopt the six sigma method in 1995, which brought the approach a great deal of popularity. Every six sigma project within a company has a defined step sequence and financial targets, such as increasing profits or reducing costs. Tools used within the six sigma process include trending charts, potential defect calculations, and other ratios.

Lean manufacturing is a systematic method of eliminating waste within the manufacturing process. The lean theory accounts for waste that is created through overburdening or uneven workloads. This theory sees resource use for any reason other than value creation for customers as wasteful and seeks to eliminate wasteful resource expenditures as much as possible.

Article Sources
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  1. Frederick Taylor. "The Principles of Scientific Management." Harper & Brothers. 1915.

  2. University of Warwick-Department of Computer Science. "Chapter 3-Business Process Reengineering," Page 69.

  3. Six Sigma Daily. "Remembering Jack Welch and His Relation to Six Sigma."

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