Operations and Productivity
Unless one has had some training in engineering, or has worked in an organization where he or she has
actively observed how work is accomplished, the field of operations management is confusing. Open a
textbook and the student confronts obscure mathematical formulas, unfamiliar terminology, and strange
concepts. However, in the end, an excellent class in operations management provides the student with
better management capability, appreciation for the complexity of organizations, and insight to solving
vital financial and marketing problems.
Operations management is part of a complete set of procedures that transform materials and knowledge
into useable goods or services. We define a good as a physical product like a couch. We define a service
as either enhancing a good (such as stain-guarding the couch) or performing a task that provides value for
a client or customer (a haircut). Production and operations activities combine with those of the marketing
and financial functions to generate revenue, produce profit (or budget surplus in government or a not-for-
profit), and grow.
Operations managers are involved in 10 decision areas. Each decision resolves vital organizational issues,
and the textbook organizes itself around these decision areas. The importance of these decisions rapidly
developed over the last century. As organizational complexity advanced, knowledge of science,
engineering, information technology, mathematics, human behavior, and customer motivation have
guided managers to better solutions and thus more customer value.
While manufacturing was the original focus for operations management principles, the rise of services has
not diminished their importance. Services include education, lodging, leisure activities, and health care.
They also include, as noted, enhancements to physical products. Not only are they intangible, they also
involve, among other characteristics, high customer interaction and virtually no need to inventory
materials. Add globalization, environmental concerns, demand for mass customization, supply chain
reconfiguration, empowered employees, just-in-time performance. Clearly, this field demands bright,
energetic professionals to tackle very tough challenges.
One of those challenges involves improving productivity. Productivity measures the ability of an
organization to turn out its goods or services by consuming as few resources as possible. We measure
productivity by dividing (the ratio of) output of goods or services by inputs such as labor, capital, or
management. Productivity is the source of wealth and increases in the standard of living. While
productivity is not the only key measure in operations management, it is a starting point. The ratio may
not consider important quality or ethical criteria.