7 functions of operations management (plus the skills you need to master them)

Summary

Companies have operations departments to keep everyday functions on track. The operations department focuses on maintaining the efficiency of the production process and helps teams make smart decisions. In this piece, you’ll learn the seven functions of operations management. These functions outline the essential duties of the operations team.

Operations management keeps processes running smoothly within organizations. Think of your company as an airport. Each team is an airplane taking off in different directions with their projects and ideas. As an operations manager, you’re the air traffic controller keeping everyone and everything on track.

An air traffic controller monitors things like weather, flight movement, and pilot communications. Similarly, there are seven functions of operations management .

Operational planning

Finance

Product design

Quality control

Forecasting

Strategy

Supply chain management

Operations is involved in almost every aspect of an organization. For example, if a project manager wants to hire a new team member, the operations team will first perform a cost-benefit analysis . When the production team wants to create a new product, the operations team starts by assessing customer demand.

You may spend more time managing some functions than others. For example, if your company doesn't provide a physical product, you likely won't focus much on supply chain management. But understanding every operational function is the best way to prepare to work in any industry.

1. Operational planning

Operational planning is the foundational function of operations management. Your duties within this function may include:

Monitoring daily production of goods

Managing and controlling your inventory

Keeping tabs on team member performance and well being

Production planning

The role of operations management is to uphold operational efficiency . Always be on the lookout for new advancements to remove bottlenecks and improve your operations strategy.

Skill needed: Resourcefulness

When you’re resourceful, you’ll have an easier time maintaining business processes. As an operations manager, you’ll have to manage your team and keep the company’s wellbeing front of mind. To handle these changes, you need to be fast on your feet. In situations when you don’t have the tools you need at your disposal, it’s critical to think quickly and use what you have to come up with solutions.

2. Finance

Finance is an essential—and universal—function of operations management because every company strives to reduce costs and increase profits. As an operations manager, you’ll ensure company leaders keep the budget in consideration when they make important decisions. Some of your tasks may include:

Creating budgets to meet production goals

Finding investment opportunities

Allocating budgets and managing resources

You may wonder how the financial duties of the operations team differ from those of the finance department. The finance department will handle everything from revenue to salaries. Meanwhile, you should limit your financial participation to things relevant to the production process.

Skill needed: Financial planning

Financial planning happens when you determine if your business has the budget to achieve strategic objectives and goals. To push your company leaders toward financial success, you’ll need to plan ahead.

Keep production costs low by finding high-quality vendors with low prices. You want to create a top-notch product that stays within your customer’s budget.

3. Product design

Product designers may be the creatives of the team, but the operations team is the eyes and ears that gathers information from the market. Once you identify customer needs and marketing trends , you'll relay what you've learned back to the designers so they can make a strong product.

Specific tasks your team may handle in this function include:

Consolidating market research into digestible results

Communicating results to a product design team

Offering design direction to help designers devise a product

Without the operations team, the product design team would have trouble knowing what to create. The market is always changing, and creating a successful finished product requires extensive research.

Skill needed: Data interpretation

The ability to interpret data is a key skill for this function of operations management. As the operations manager, you must turn data into understandable directions. Your goal should be to clearly communicate how you want your product to match or exceed other products on the market.

Once you have a plan in place, streamline communication across teams by using one platform or tool. Create a central project plan to track action items, information, and feedback. Then, share it in a project management tool so everyone can access it and view changes in real time.

4. Quality control

Quality control goes hand in hand with product design. After the production team creates a product, the operations team will ensure it meets quality standards. You’ll need to test the product to guarantee there are no defects before releasing it to the public. Your tasks for quality control may include:

Performing risk analysis to identify potential problems

Inspecting products to make sure they meet quality standards

Creating tests to control your product quality

Documenting any defects or deficiencies of products

The level and standards of quality control vary by industry—one of the first things your team should do during the quality control process is to perform market research to determine what quality standards should be in your industry. Once you’ve outlined a set of quality standards, use them as a benchmark for quality management moving forward.

Skill needed: Conflict management

Not every product will be top quality after one round through the production process. It may take many rounds of design and a few trips back to the drawing board to create a quality product up to standards.

This type of feedback will ultimately make your product the best version of itself, but it can be hard to hear in the moment. In order to excel at this function of operation management, build strong conflict management strategies . That way, you can weather these times of uncertainty and create products that wow customers.

5. Forecasting

Forecasting isn't just a term for the weather—operations teams also use forecasting to predict the demand for a product. Your team can master forecasting by trying to answer hypothetical questions like:

What will the demand for this product be in the future?

What marketing and promotions should we plan for this product?

What sales initiatives should we plan for this product?

Can we estimate the storage costs we’ll need for inventory?

Can we determine the cost of sourcing and raw materials?

Skill needed: Data driven decision making

Data driven decision making will serve you well in many functions of operations management. The only way to make accurate predictions is to base your predictions on facts. Start by forecasting product demand by analyzing past trends. Then, communicate forecast results to department leaders so they can adjust future plans accordingly.

6. Strategy

Strategy is a broad function of operations management that can involve operational planning , monitoring, and analysis. The goal of strategic management is to make sure production decisions align with business goals. Your company’s business objectives may include:

Prioritizing customer satisfaction

Improving the production system

Controlling costs while maintaining a competitive edge

Your job as operations manager is to find ways to meet the business objectives of your company. Some strategies you could use for the examples above include:

Analyzing your inventory: To prioritize customer satisfaction, start by analyzing your inventory. This can increase customer satisfaction by ensuring you’re always able to meet customer demand.

Collaborating among teams: More collaboration among teams will improve the production system because communication will increase, resulting in less room for error.

Prioritizing green processes: Switching to more environmentally friendly processes can save money in the long run and keep customers invested in your brand.

Skill needed: Critical thinking

Critical thinking is important for the strategic function of operations management because it’s how you create thoughtful ideas and tie them back to fundamental points. When you logically think through concepts, you’re able to develop strong strategies. You can use research and data to support your ideas and then use what you’ve learned to make well-supported decisions for your team.

7. Supply chain management

If your company produces products or services, your company will need supply chain management for sourcing, producing, and shipping. You may have a separate department for the supply chain, but supply chain issues related to internal production will be yours to handle. The supply chain should flow in a cyclical fashion as follows:

Raw materials

Supplier

Production/manufacturer

Distributer

Retailer

Consumer

The supply chain is cyclical because once you analyze consumer demand, you'll source more raw materials and go down the chain again.

You don’t necessarily have to follow each of these steps. For example, if you work at a small company, you may send products or services directly to consumers. This cuts out distribution and retail costs, but you’ll still need to keep the supply chain intact. If there’s a bottleneck in one stage of the supply chain, it can wreak havoc on every other stage.

Skill needed: Problem-solving

As an operations manager, you'll need to organize, plan, and delegate . But to take your skills a step further, you must be a good problem-solver as well. There are many problem-solving strategies you can study and keep in your toolbox—and your team members will appreciate your quick solutions when things get tough.

The importance of operations management

The functions of operations management are critical for every business—whether you’re in the manufacturing or tech industry. While tech companies may find finance and strategy more important and manufacturing companies may focus more on the supply chain, these seven functions draw a full picture of how to run any internal team.

Companies make many decisions through the production process, and the operations team often serves as a voice of reason between departments. Without operations management, departments may have trouble aligning decisions with company goals, avoiding conflict, and keeping operations running smoothly. In particular, operations management:

Motivates team members: The operations team motivates team members by keeping the workplace organized and improving workplace conditions. Team members are more excited to work when they have a functioning work environment.

Utilizes resources: Another part of your job as operations manager is to build a budget that uses the company's resources wisely. Try to reduce costs whenever possible, stretch resources to fit project needs, and keep resources from going to waste.

Enhances collaboration: You can enhance team collaboration within your organization by improving decision making. When you make good decisions, you establish trust among teams, which results in the delivery of top-quality products to customers.

Helps achieve objectives: You'll help achieve business objectives by serving as a checkpoint for big decisions. When department leaders consider changes or initiatives, you’ll assess whether their ideas align with company goals.

Improves productivity: Increase productivity by making the product’s delivery process more efficient. Team members in your organization may complete their work faster when you make improvements to production.

Understanding the operations team in relation to other departments

An operations department can take on different roles depending on company size and the product. If you’re a small company, the human resources team may share some duties with the operations team, like financial planning. But larger manufacturing companies often have clear lines between operations and human relations. In this setting, you’ll likely work hand-in-hand with a supply chain management team.

You may wonder why supply chain management is one of the main functions of operations management if it’s also a separate department. Even though these two processes are typically closely tied together, the teams focus on slightly different priorities.  Traditionally, operations management involves the internal part of production, while supply chain management involves the external part.

Guide teams toward efficiency with UDN Task Manager

The goal of operations management is to make your decisions smarter and your production leaner. Whether you’re keeping daily projects on track, monitoring product quality, or developing business strategies, UDN Task Manager can give you the high-level perspective you need to do it all.