Introduction:
Many people ask the question "Why do I need to know about production and operations management or for that matter any other area, when basically I am a finance (or accounting or marketing or HR) person?" In large organizations, many people do not know what is happening in other departments, except their own. I call this "Frog in a Pond" syndrome. There was a time when one could escape with this thinking, but not any more. It has become imperative that all people in all functions have at least a rudimentary understanding of all the areas of management. Acquiring cross functional knowledge and skills is the need of the hour. However, a good understanding of operations or production management is a must for all.
Supply and Demand:
In Economics, we have the supply and demand equation for goods and services. The Production/Operations side of business management deals with the supply side, whereas the Marketing side deals with the demand.
Marketing Managers need to understand what it takes to build and operate production systems and this understanding makes them serve their markets well. They must understand the capabilities and limitations of their total supply-demand system.
Financial managers can plan for capacity expansion and will be able to better understand inventories before they demand its reduction. They can also plan their future cash flow requirements for new machines, labor, materials, energy and overheads - just as if cash were another raw material.
Accountants and Controllers need to learn about modern computer based production and inventory control systems which can provide cost, accounting information, capacity utilization, various ratios, inventory valuation, cost of good sold and other information for internal controls, auditing and financial reporting. Internal auditors need to understand these to carry out their functions properly.
Certified public accountants would be severely hampered in their auditing of manufacturing companies if they did not have an understanding of EOQ, ROP, MRP, WIP, ABC analysis, methods of determining labor standards etc., Personnel and HRD managers can start appreciating the complexities of job design, functions and the skills required to perform the jobs effectively. This understanding will enable them design training programs, compensation systems and in proper recruitment and selection of people.
Computer and IT systems specialists need to have a thorough understanding of the various production and operating processes to design suitable programs.
Purchase managers are more than just buyers. Efficient purchasing can make a big difference in highly competitive industries. Let us say the cost of making a product is 90 and the selling price is 100. A good purchasing man comes in and manages to reduce the purchase cost by 10% thus making the CP to 81. The selling price remains the same because of extreme competitive pressure. The contribution or profit goes up from 10 to 19. One would observe that a 10% reduction in costs has led to 90% increase in profits! If the manufacturing person also manages to reduce the other cost of manufacturing, it is still better.
Asset Concentration:
It is found that approximately 70 to 80% of all assets in manufacturing and processing organizations are in inventories, plant and machinery. These assets are directly under the control of production and operating personnel. With this concentration of assets, one should know what these people do with them. Optimum use of assets is a key factor in maintaining competitive edge. Most importantly, you need good and competent people to manage these assets. As a result the production/operations department has the maximum concentration of people. One can learn management of people, the best, in this department.
Career Opportunities:
Thirdly, this department offers maximum number of career opportunities for people.
Social & Ethical Responsibility:
Production and operating managers were primarily concerned with occupational health and safety at workplace, in the past. However, they are now more concerned with consumer safety and environmental issues. They have to deal with Federal Trade Commission, Federal Drug Administration, Consumer Protection Agencies, OSHA, EPA and many other regulatory bodies. This makes the job extremely interesting, daunting and challenging.
Conclusion:
With the increase in the number of service companies and a decline in the manufacturing sector in the developed countries, young qualified people are not very keen to enter production or operations. However, I would still recommend young people spend the initial few years on the shop floor and get some blue collar experience. This will serve them in good stead in the long run.
Copyright. July 2007. www.madgopes.com. All rights reserved.
To learn more about this author, visit Madhavan T Gopalachary's Website.
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Madhavan T Gopalachary
(Visit Madhavan's Website)
Madhavan Gopalachary, nick name "madgopes"
(g pronounced as in go) given by IIT
classmates, is a Mechanical Engineer and
an alumnus of Indian Institute of
Technology, Madras having passed out
specializing in IC Engines &
Thermodynamics.
He has nearly 35 years of experience in
the Corporate World. He started off as a
trainee and handled sales, marketing,
manufacturing, product management, profit
center management, strategic planning and
corporate development including R & D in
various organizations and at various
levels before becoming a CEO. His last two
professional assignments were at CEO level
before embarking to start management
consultancy business on January 01, 1998.
He has worked for British, Swedish MNCs as
well as very large Indian business houses.
He has spent a large portion of his time
from June 1998 till date in East African
Countries practicing as an independent
Management Consultant.
More details can be obtained at the
following web sites:
mmg.name/
mtg.html
mmgconsu
lting.biz/
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