1.3 The Operations Function

Regardless of whether it explicitly labels it as ‘operations,’ every organization has a fundamental function related to producing goods and services. This involves resource procurement, conversion into outputs, and distribution to users. Operations encompasses all activities necessary for delivering an organization’s goods or services to customers and clients.

In large and complex organizations, operations is a critical functional area. Designated individuals manage various aspects of the organization’s operational processes. The effectiveness of operations significantly impacts customer satisfaction. For private-sector companies, the operations function aligns with profit, growth, and competitiveness, while public and voluntary organizations focus on delivering value for money.

Some examples to illustrate the concept of operations within organizations:

• Manufacturing Company: A manufacturing company produces automobiles. Its operations involve sourcing raw materials (such as steel, plastic, and electronics), assembling components, and delivering finished cars to dealerships.
• Retail Chain: A retail chain operates multiple stores. Its operations include inventory management, restocking shelves, handling customer transactions, and ensuring a smooth checkout process.
• Healthcare Facility: A hospital’s operations encompass various functions, such as patient admissions, medical treatments, laboratory testing, and maintaining medical records.
• Online Marketplace: An e-commerce platform manages operations related to product listings, order processing, payment gateways, and logistics for shipping products to customers.
• Service-Based Organization: A consulting firm’s operations involve client engagement, project management, resource allocation, and delivering high-quality consulting services.

Operations management is concerned with designing, managing, and improving the systems that create the organization‘s goods or services. The majority of most organizations‘ financial and human resources are invested in the activities involved in making products or delivering services. Operations management is, therefore, critical to organizational success. 

Other Functions of the Business

A typical organization has four fundamental functional areas: operations, marketing and sales, finance, and human resources. Operations directly produce the product or service that customers pay for, while the other three departments provide support to ensure smooth business operations.

Marketing: The Voice of the Customer

Marketing acts as the bridge between customers and operations. They ensure the company creates products or services that fulfill customer needs and desires. They identify the most valued features and benefits, keeping operations on the right track.

Finance: The Engine that Keeps Things Running

Finance is the lifeblood of the company. They manage the money flow, ensuring there’s enough to cover everything from materials and payroll to equipment upgrades. This allows operations to run smoothly without disruptions.

Human Resources: Building the Dream Team

HR is the foundation of any successful organization. They recruit, hire, and train the talented individuals who make up the operations team. They handle everything from compensation and benefits to ensuring a smooth succession plan and guaranteeing a skilled workforce for the future.

“1 Introduction to Operations Management” from Introduction to Operations Management Copyright © by Hamid Faramarzi and Mary Drane is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.—Modifications: used section The Operations Function, some paragraphs rewritten.