Operations Management Must Be Regarded

Operations management must be regarded from two perspectives: the first perspective refers to operations management's contribution to the company's overall activity, and the second perspective refers to the daily activities that are ruled by operations management.

The traditional theory defines operations management as the management of the conversion process that transforms inputs like raw material and components into outputs like finished goods and services. In other words, operations management refers to organizing direct resources in order to produce and deliver the company's goods and services.

Regarding the strategic, tactical, and operational decisions, operations management requires a top-down approach. Strategic matter regarding operations management include: the manner in which the product will be manufactured, the location of facilities, the required space, and other issues. The advantages of operations management include: higher standard of living, better quality goods and services, concern for the environment, and improved working conditions.

Operations research started to develop due to the fact that World War II created the need for the development of the field of operations research. This field is a very complex one, as it comprises fields like mathematics, psychology, and economics. Nowadays, operations research is responsible for providing the sophisticated quantitative tools required by operations management. In other words, operations research serves the interest of operations management, and operations management needs operations research to develop.

2. Given the strong competition on today's global market, companies must have a certain competitive advantage in order to differentiate themselves from their competitors and to be successful. As a consequence, operations strategy must focus on creating value for customers.

The basic competitive priorities were initially: cost, quality, delivery, and flexibility. However, over the past decade, companies have started to acknowledge the value of a new competitive priority: service.

There are certain products categories that address each of the five competitive priorities. For example, a market segment purchases only on the basis of price. Strategies based on cost are very suitable for products that satisfy primary needs. However, for other categories of products, cost-based strategy is not enough anymore.

Regarding quality, it has two dimensions: product quality and process quality. High quality products lead to high prices for these products, which is not always convenient for all customers. Therefore, the quality level must be established in accordance with customers' requirements and purchasing power.

One of the most important factors that customers take into consideration when making a purchasing decision refers to the speed of delivery. Several studies have revealed that profits and market share are determined by speed of delivery.

Flexibility refers to the company's processes design, on the one hand, and to the company's ability to modify its facilities in order to produce new goods and services, on the other hand. This factor's importance is related to the duration of a product's life cycle.

Regarding service as a new competitive priority, companies provide value-added services, because this helps them gain competitive advantage.

3. The activity-based costing techniques consists in allocated overhead costs in actual proportion to the overhead consumed by the production activity. Activity-based costing technique was created from the need for a more clear costing technique.

Due to activity-based costing techniques, the allocation process has been generally refined. In other words, due to this technique, the overhead allocation process reflects more directly and more accurately the actual proportions of overhead involved in the production activity.

In addition to this, the activity-based costing technique is able to identify causal factors, like cost drivers and use them as means for allocating overhead. Such factors usually include: machine hours, beds occupied, computer time, flight hours, and miles driven. These factors are very important, since their selection influences the accuracy of overhead allocation.