Traditionally, operations management is considered to be something related mainly to production activities or physical change of the products. That is why it is often defined as follows: operations management is an activity on managing the process of acquiring materials and their transformation into the finished product and delivering the product to the buyer (Galloway, 2004).
This definition, in our opinion, is too generalized. It includes the functions of purchasing, production and the physical distribution, which, although closely connected to the operations, are typically considered as separate disciplines. Even more important is that this definition is limited because it does not include any other actions non-related to physical production.
Any useful activity is related to the processing of something: for example, the processing of information in the financial sector, publishing business or in communications sphere. In some spheres of provision of services, for instance hairdressers or medical, even customers are involved the processing. Operations of processing of something are also conducted in the functional areas of industrial organizations, for example, in the finance department or human resources department.
A more precise definition, therefore, may sound like: operations management is all types of activities associated with the deliberate transformation of materials, information, or customers. Thus, operations management lies in the effective and sustainable management of any operations. The degree of inclusion of the physical goods in them is generally not important. The theory is equally applicable to both the hospital ward and an insurance office, as well as for the factory workshop and a factory. Below we’ll discuss some examples illustrating the central type of operations of Wal-Mart Stores, Inc., the world’s largest retailer.
Operational Function in the Organization
Considering the case of a supermarket, it is assumed that the buyer knows what he wants, so that the transformation would be:
A customer with certain needs (r) A satisfied customer
At the same time, operations management consists is both efficient and rational management of any operations. In this case, efficiency can be defined as the achievement of the objectives set for the system; in general, efficiency is satisfaction of customer’s needs. Rationality is the achievement of the objectives, i.e. satisfaction of needs, using minimum resources (Stevenson, 2008).
At the most basic level, commercial organizations of this type exist only on their profit, which may be expressed as
Profit = Income – Costs
Due to its dual effect on profit operations management plays a vital role in the success of a retailing organization. The main thing in improving efficiency is to ensure the performance of operations which would satisfy the demands of customers. The organization provides a customer with the services that he wants, and in the way which complies with his requirements, or produces the goods that a buyer needs in accordance with certain specifications.
The improvement of efficiency increases the income through the increased competitiveness of the organization. The improvement of rationality, without a doubt, reduces costs, but it should never be done at the expense of efficiency.
Without proper application of the principles of operations management an organization can be profitable only by sheer luck. Either it accidentally has done everything properly, or competitors are not much better. In any case, such luck is unlikely to last forever. For instance, Wal-Mart significantly succeeded in its struggle for the market share with its direct competitor Kmart.
Generally, the structure of most organizations is based on division of functions. The specific allocation of particular responsibilities may vary in a very wide range. Sometimes the purchasing function is completely subordinate to the production department, quality assurance department to the research and development department, and sometimes even to the marketing department. In some organizations there is a separate function of the technical service which includes research and development, production engineering, quality assurance, data processing, and even production control.
However, operational function is the cornerstone of any organization; it interacts with all other functions. Staff and procurement can be regarded as service functions in relation to the basic operations, while the finance department not only provides a service, but also performs the supervisory function. The relations with the departments of research and development and marketing are not so unambiguous. They are both focused on the corporate tasks and often regard operations as a matter of course, designed to help them in their work (Galloway, 2004; Heizer & Render, 2008).
This conflict can be well illustrated by often incompatible opinions of the sales and production departments, when the first is convinced that the only function of the production department is to produce what the sales department is to sell, while the second believes that the main objective of the sales department is to sell what the production department is to produce. In fact, they both must find ways to meet the needs of the market.
Therefore, for the normal organization of the operations management it is necessary to determine one distinctive competence in each unit, which will be its useful contribution to the company’s marketing, as it is implemented by Wal-Mart.
Experts determine four separate types of activities that can be described as operations: Production, Supplies, Transportation, and Service (Galloway, 2004; Stevenson, 2008). Further, we will focus on the specificities of these operations in Wal-Mart management.