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OM/U1 Topic 4 Relationship of Operations Management With Other Functional Areas

Operations managers are integral to organizational strategy in many companies and organizations. This provides some indication of their overall importance for the development of the organizations for which they are employed.

Planning

Operations management professionals are responsible for collaborating with other managers and executives to determine how operational planning can contribute to the long-term strategy of the organization. They provide the functional component of the strategic operations of the company by planning the activities that contribute to the overall goals of the organization. This planning can include determining goals and policies for logistics management, budget management and support services management. In short, the operations manager ensures that all departments on the same page about the direction the company is heading.

Direction

To ensure that planning is carried out, operations management professionals are also responsible for providing direction to various managers under their watch. Operations managers ensure that all departments are completing their necessary function within the organization by meeting productivity goals and budgetary guidelines. The operations manager may need to make corrections or modifications when goals are not being met or carried out in a manner consistent with company policy.

Coordination

Operations managers also help in the achievement of organizational strategy goals by coordinating the activities between various departments within their companies. They improve efficiency and focus by facilitating and improving relations between departments, especially those that often operate independently of one another. They play the same role that an orchestra conductor plays in the field of music, coordinating and directing the activities of each section of musicians (departments) as it completes its part in the production.

Resources

The operations manager is also integral to the continued strategy and vision of a company in his role as a resource manager. Operational managers must be able to assess the resources of the organization, whether they be monetary or otherwise, and ensure that the resources are used as efficiently as possible. An effective operations manager can assess whether or not resources are being used wisely and increase profitability as a result of his assessment. Profitability contributes to long-term company goals and strategies by providing additional resources for planning strategy.

Production and other functional areas

An organization is considered as a system having several sub-systems. Marketing sub-system has to make available the products to the consumers for their consumption. It receives sales orders, which are communicated to the production sub-system. Production utilizes raw materials, which are processed on plant and machinery to turn out a value-added finished product. In other words, an organization utilizes the available facilities to satisfy the market.

While manufacturing products, the production function organizes its resources in accordance with the production plan. The finance function makes available finance necessary to carry out their functions to all other departments. Personnel function is a support function which plans and provides manpower to all other sub-systems. It formulates suitable personnel policies.

All business sub-systems are inter-linked and inter-dependent. Marketing may fail, if the production does not fulfill the expectations of customers by providing suitably manufactured products.

Production may fail in the absence of the working capital necessary to buy raw material for turning out the product. If skilled manpower is not available all other plans will come to a naught. The co-ordination amongst the various sub-systems is necessary for effective functioning of any organization.

Interface of Production and other Functions

  • Accountants have to understand the basic inventory management and capacity utilization.
  • Management Accountants must know process costing and variance analysis.
  • Financial Managers take capital budgeting decision, based on production requirements. Cash flow statements and current asset management has to be examined in the light of production decisions. Make-or-buy or plant expansion has financial implications.
  1. Marketing Managers have to understand production schedules to meet their delivery requirements. They should understand ho-w products can be customized. Production has a great role to play in new product development. In service industries, marketing and operation overlap each other.
  2. Personnel department is interested in understanding job analysis, job descriptions, job specifications and job evaluation. They develop compensation plans and incentive system, keeping production requirements in mind.
  3. MIS has to install suitable control systems for production control which takes inputs from marketing information system and provides output to purchasing information system.
  4. Entrepreneurs owe their success to successful production planning supported by working capital management and inventory management.
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