What is Operations Management

In recent years Business was all about money and profits, but now the scenario has changed. Businesses are all about delivering value now. The main objective of business is value maximization rather than income maximization.


Operation Management is the set of activities to create a value. Value is created in the form of goods or services.Value is an input output system. A system is a set of interrelated activities with a defined boundary. All the components of a system receive inputs and process it and give the output. Each and every system has 2 important components used for the purpose of self evaluation. The first one is the feedback which tells you how well the system is performing. The second one is the Control. This component understands the feedback and evaluates the input output process.


The system architecture has 3 components :

  1. Environment : All things that lie outside the system.
  2. Subsystem: a part of larger system
  3. Interface: A shared boundary or overlap between system r components.


There are 3 different types of systems. The first one is the closed system. In this type the system doesn’t interact with the environment. The second one is the open system . THis system interacts with other systems in the environment.The last and the final one is an adaptive system. This system can adapt itself to the environment and improve.


Production is the process of manufacturing or developing goods and services.Production activities that go in an organization are called operations. The combined process is called Operation Management.


A company needs high high productivity. Higher productivity implies higher standard of living.

When a company has higher productivity the company has an strategic advantage in the competition and will come out with good profits against the competition. For an industry with high productivity it is very less likely that it will be supplanted or purchased by a forign company or any other bigger company.


There are certain factors that are used to calculate productivity.

  1. SIngle factor productivity: In this only a single factor such as labour, electricity, money or resource is used to  measure productivity.
  2. Multi factor productivity: In this 2 factors are used to calculate the productivity of the company. Factors such as labour and electricity,Money and labor,Electricity and resources,Human labor, money, electricity and resources.


The most important variables in productivity are 

  1. Labour: Number of people who do the work 
  2. Capital: Tools for production ( the money required to buy the required material for production)
  3. Management: The organization that is required to manage the labor and capital to run the company successfully.


Requirements for labor:

  1. Basic education of labor is required
  2. Proper health care needs to be taken
  3. Labour needs to be educated to improve the skill for skill development.
  4. Take care of overhead expenses such as transportation, sanitation etc.

Requirements for Capital:

  1. Inflation And increases in taxes need to be taken care while planning the capital amount.
  2. As capital per employee drops the productivity also goes down . This is because you can’t find skilled labour at minimal cost. Less in skill, less productivity.
  3. Investment plans need to be changed based upon the capital required.


Requirements for Management:

  1. Proper management is required to manage and coordinate the workers.
  2. Workers need to have the knowledge to do the required job and the management needs to be responsible for that
  3. Technology and knowledge must be used the hand in hand to increase the productivity of the company.

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