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To understand operations management, we must first look at production. Production is the creation of products and services and is an essential function in every firm. Production turns inputs, such as natural resources, raw materials, human resources, and capital, into outputs, which are products and services. Managing this conversion process is the role of operations management.
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Production and operations management involve three main types of decisions, typically made at three different stages:
In the past, the manufacturing or production function in most companies was inwardly focused. Manufacturing had little contact with customers and didn’t always understand their needs and desires.
EXAMPLE
In the 1980s, many U.S. industries, such as automotive, steel, and electronics, lost customers to foreign competitors because their production systems could not provide the quality customers demanded. As a result, today most American companies, both large and small, consider a focus on quality to be a central component of effective operations management.Stronger links between marketing and manufacturing encourage production managers to be more outwardly focused and to consider decisions considering their effect on customer satisfaction. Service companies find that making operating decisions with customer satisfaction in mind can be a competitive advantage.
Operations managers, the people charged with managing and supervising the conversion process, play a vital role in today’s firm. They control about three-fourths of a firm’s assets, including inventories, wages, and benefits. They also work closely with other major divisions of the firm, such as marketing, finance, accounting, and human resources, to ensure that the firm produces its goods profitably and satisfies its customers. Marketing personnel help them decide which products to make or which services to offer. Accounting and human resources help them face the challenge of combining people and resources to produce high-quality goods on time and at reasonable cost. They are involved in the development and design of goods and determine what production processes will be most effective.
At Glow & Grace Salon, owner and operations manager Tasha Brooks ensures the business runs smoothly while delivering top-tier service to clients:
IN CONTEXT: Glow & Grace Salon
With a team of stylists, nail technicians, and receptionists, Tasha manages daily schedules, inventory, and customer satisfaction. She noticed that appointments were frequently running behind schedule, causing long wait times and frustrated clients.
To improve operations, Tasha implemented an online booking system that automatically buffers time between appointments and sends reminders to clients. She also introduced a new inventory tracking system to prevent stockouts of popular products like hair color and nail polish. Additionally, Tasha developed a monthly performance review process for staff, tying bonuses to client feedback and punctuality.
By optimizing scheduling, streamlining inventory, and motivating staff, Tasha reduced wait times by 40% and increased repeat bookings. Her hands-on role in coordinating people, services, and resources demonstrates how effective operations management can elevate both customer experience and business performance in a salon setting.
In production planning, the first decision involves which type of production process—or the way a good or service is created—best fits with company goals and customer demand. An important consideration is what type of good or service is being produced, because different goods may require different production processes. In general, there are three types of production:
Mass production, manufacturing many identical goods at once, was a product of the Industrial Revolution.
EXAMPLE
Henry Ford’s Model-T automobile is a good example of early mass production. Each car turned out by Ford’s factory was identical, right down to its color. If you wanted a car in any color except black, you were out of luck.Canned goods, over-the-counter drugs, and household appliances are other examples of goods that are mass-produced. The emphasis of mass production is keeping manufacturing costs low by producing uniform products using repetitive and standardized processes. As products became more complicated to produce, mass production also became more complex.
EXAMPLE
Automobile manufacturers must now incorporate more sophisticated electronics into their car designs. As a result, the number of assembly stations in most automobile manufacturing plants has increased.In mass customization, goods are produced using mass-production techniques, but only up to a certain point. Once that point has been reached, the product or service is custom-tailored to the needs or desires of individual customers.
EXAMPLE
Nike by You is an example of customization. On the website, customers can choose a basic shoe type and customize colors. The process begins with a modular product design—standardized parts like soles, laces, and insoles that are produced in bulk and stocked at the factory.Customization is the opposite of mass production. In customization, the firm produces goods or services one at a time according to the specific needs or wants of individual customers.
EXAMPLE
Consider our earlier example, Glow and Grace Salon. Since every haircut is different, Tasha uses a system of customization. Unlike mass customization, each product or service produced is unique.An illustration shows a can of cola, a house, and a barber shop pole.
Exhibit 10.5 Classification of Production Types (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)
| Mass Production | Mass Customization | Customization |
|---|---|---|
|
Highly uniform products or services. Many products made sequentially. |
Uniform standardized production to a point, then unique features added to each product. | Each product or service produced according to individual customer requirements. |
| Examples: Breakfast cereals, soft drinks, and computer keyboards | Examples: Dell Computers, tract homes, and Taylor Made golf clubs | Examples: Custom homes, legal services, and haircuts |
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Some types of service businesses also deliver customized services. Doctors must consider the illnesses and circumstances of each individual patient before developing a customized treatment plan. Real estate agents may develop a customized service plan for each customer based on the type of house the person is selling or wants to buy.
Let’s look at a few more examples of the production types:
IN CONTEXT
Mass Production: Toyota is a classic example of mass production. They manufacture millions of vehicles each year using standardized processes and assembly lines designed to produce large quantities efficiently and consistently.
Mass Customization: Dell Computers offers mass customization. Customers configure their laptops or desktops online by selecting components like processors, memory, and storage. Dell’s operations then assemble the customized computers quickly using modular parts and flexible manufacturing.
Customization (Service-Based): Starbucks exemplifies customization in service. While they have a standard menu, each customer can personalize their coffee drinks with choices like milk type, syrup flavors, and toppings, creating a unique beverage tailored to their preferences.
Remember that production involves converting inputs (natural resources, raw materials, human resources, capital) into outputs (products or services). In a manufacturing company, the inputs, the production process, and the final outputs are usually obvious.
EXAMPLE
Harley-Davidson converts steel, rubber, paint, and other inputs into motorcycles.But the production process in a service company involves a less obvious conversion.
EXAMPLE
Hospitals convert the knowledge and skills of their medical personnel, along with equipment and supplies from a variety of sources, into health care services for patients.There are two main ways businesses turn inputs into finished products:
Assembly manufacturing is all about putting different parts together to make a final product.
EXAMPLE
Building a car involves combining thousands of components like the engine, tires, and seats. The same goes for something like a smartphone—it’s assembled from screens, chips, batteries, and other parts that come together to form one product.In the world of services, the process can look a little different because the customer is often directly involved.
EXAMPLE
In tax preparation, the tax pro brings their knowledge, but they also need your personal and financial info to get the job done. It’s a team effort between the service provider and the customer to create the final result.While we wouldn’t normally think of a service provider using a process manufacturing or assembly manufacturing process, in some ways, they still do:
IN CONTEXT: Glow & Grace Salon Manufacturing
Consider Tasha, our Glow & Grace Salon owner. She could offer custom haircare kits or beauty boxes tailored to different hair types or client needs.
She might create a “Curly Hair Care Kit” by combining pre-made items like shampoo, conditioner, curl cream, and microfiber towel. These kits are assembled from individual components (just like building a car or phone) and packaged for retail. Similarly, if she runs a training program, she might assemble toolkits for new stylists with scissors, brushes, capes, and color bowls—each kit assembled from standardized items.
Tasha could also be doing a form of process manufacturing when mixing products during treatments. When a stylist mixes hair color, bleach, or a custom facial mask, they combine raw ingredients (creams, powders, pigments, etc.) in specific proportions to create a new, single-use product. Once it’s mixed, it can’t be separated back into its original ingredients—just like process manufacturing. This also applies to things like creating signature hair treatments or in-house skincare blends that are customized and prepared on-site.
Source: THIS CONTENT HAS BEEN ADAPTED FROM RICE UNIVERSITY’S “INTRODUCTION TO BUSINESS”. ACCESS FOR FREE AT OpenStax. LICENSE: CREATIVE COMMONS ATTRIBUTION 4.0 INTERNATIONAL.
