A New concept of operation function

Traditionally, the operations function has been as optimally utilizing the resources of men, machines ad materials (and, hence, money) while producing the designed output. It has been interpreted as ensuring efficiency in the operations function. Thus production costs should be low; men and machinery should be fully utilized; materials wastage should be curtailed; production /operations should properly plan and control the people and the output. The entire operations management discipline has been built around these basic tenets. Accordingly, inventories are economically ordered and controlled, production runs are scheduled, maintenance programs are arranged, people assessment and reward systems such as work study, O&M, incentive schemes, merit rating etc are devised, and physical layouts and locations are decided upon.

While efficiency is a virtue, it is being increasingly realized these days that the operations function needs to address some basic issues:

‘Optimization’ needs an objective. Optimization for what? What is the basic purpose behind optimization? Should optimization be limited to minimizing costs and/or maximizing profits to the company? Shouldn’t the customer enter into the calculations regarding optimization?

Is ‘profits’ the primary objective, or is it the ‘customer service’ that should be the primary objective guiding the company?

How should ‘efficiencies’ and ‘optimizations’ help towards fulfilling the organization’s objectives?

Resources do not comprise of men, machines and materials (and hence, money) only. Time and technology are equally important (if not more important). In fact, technology also relates to men, machines and materials as its subsets. People, on other consideration, are the ‘mother resource’ from which technology and the competitiveness / preparedness of the organization originates.

In light of the last point, should management be viewed as doing only planning and controlling activities? The role of management in general and that of operations management in particular has changed more and more to that of providing a vision, strategic direction and leadership to people and managing change.

This is true of manufacturing companies. In an industry such as computer software, the span of retention of the employee could be quite low. While the HRD function should try to retain these software professionals as long as possible, the emphasis would be on hiring quality personnel and align their attitudes with the company’s objectives in as short a time-span as possible.

Marketing strategy based on any of the P’s such as Price, Positioning. Place should be congruent to the manufacturing strategy and vice versa. For instance if ‘place’ is important in the marketing strategy, then the manufacturing function must gear up to the challenge of, say, multi-location operations or providing the product on time at different (possibly distant) locations. Marketing strategy may lead to the company’s technology strategy. Manufacturing strategy has to be in line with the latter. Its strategic actions involve preparation of people, equipments, process, and system for the technology up-gradation or new product introduction. Manufacturing strategy should provide perfect back-up for the customer service goals of the marketing function. Marketing function should provide market feedback to operations.

Research and development:

Operations cannot bring in additional flexibility, beyond a point, unless the R&D function helps in process capability improvements, in the design of new processes, and in the design of new products that can be produced / worked on existing operations facilities.


Provide for the quick movement of materials inside and outside the factory. Arrange for storage, distribution and other support to help manufacturing strategy of ‘providing product/service on time’.

Finance / Accounting:

If technology leadership or new product introduction is a strategy, appropriate finance must be raised through an aggressive financing strategy. The accounting, budgeting and control system should be supportive of the manufacturing strategy. For instance, a Just in Time production system requires that the accounting system and control system be different from the traditional system where machinery utilization and labor utilization were being emphasized.

Make the company a preferred employer, thus attracting the best talent and keeping it. This would help the manufacturing function in terms of improving productivity; quality and flexibility. Enhance the capabilities of the people through training and other individual/group activities. These capabilities should be congruent to the manufacturing strategy. Create coherence between the people’s attitudes and the organization’s objectives and strategies.

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However, as with most strategic decisions, the issue is more complex than it first appears.