Operations Management: Definition and Best Practices 

A complex environment in which most medium to large companies operate can quickly become chaotic without a structured formalized approach to business strategy and processes. Operations management brings the structure and clarity needed to align business operations with the larger strategy.

In this article, we’ll explore what operations management is, what its best practices are, and what role resource management plays in improving organizational efficiency.

Key takeaways:

• Operations management is a high-level multi-faceted process aimed at increasing efficiency of all business operations and managing its overall strategy.
• The operations management includes setting objectives, designing processes needed to achieve them, managing company resources, and overseeing execution to improve operational efficiency and business performance.
• The benefits of introducing operations management in an organization include improvements in efficiency of operations and resource utilization, cost cutting, increased margin rates, and improvements in quality of products and services.

What Is Operations Management?

Operations management (OM) is defined as the process of designing, planning, executing, and monitoring business operations, meaning all processes that are included in creating products or services a company sells. 

Areas that operations management covers include:

• Product or service strategy.
• Pricing.
• Distribution.
• Marketing.
• Sales.

The two major goals of operations management are achieving operational efficiency and customer satisfaction.

Read more: Resource Management at Enterprises: Exploring Multi-Project Environments

What are the types of operations management?

Operations management can be divided into three main types according to the scope:

• Objectives management. Setting up company goals and making high-level operational decisions.
• Task management. Managing daily operations.
• Individual management. Managing individual assignments by ground managers.

Strategic vs tactical operations management

Operations management exists across two axes: forming operations management strategies and making tactical decisions. Here is a brief comparison between the two.

	Strategic OM	Tactical OM
Timeline	Long-term	Short-term
Scope	Company-wide decisions	Team or department decisions
Example	Forming a product strategy	Changing production workflows

Benefits of Effective Operations Management

Implementing operations management into your organization requires structural changes and considerable effort, but can produce the following benefits:

Efficiency improvements

The most important benefit of implementing OM practices is the gradual improvement of efficiency across the organization. This is achieved through standardizing processes, streamlining workflows, and eliminating bottlenecks in production, which allows the organization to deliver more value with the same amount of resources.

Improved resource utilization

Through improvements in resource capacity visibility, operations management helps detect inefficiencies in resource utilization and allocate people, equipment, and materials in a more efficient way. This leads to workload optimization and improved throughput.

Reduced operational costs

Increased process efficiency and improved resource allocation help organizations reduce waste that leads to unnecessary expenses. This results in a decrease of operational costs that doesn’t compromise neither productivity nor quality of goods or services produced.

Increased profitability and margins

A decrease in resource costs and efficiency optimization helps organizations deliver products and services at a lower cost while maintaining the same level of quality. This leads to healthier profit margins and improved financial performance.

Improved quality and consistency

A large part of OM is establishing and upholding clear processes and strict quality standards, which helps reduce errors and inefficiencies across the organization. This improves production quality, creates a competitive advantage, and contributes to meeting customer expectations.

Higher customer satisfaction

As a result of all of the benefits described above, organizations that implement OM practices deliver high-quality reliable products and services more consistently. This results in continuous meeting of customer expectations, leading to an increase in satisfaction and loyalty.

Core Elements of Operations Management Process

Operations management combines multiple processes, each equally important to its final goal of increasing organizational efficiency. Here are the most important ones.

• Strategic planning. One of the main responsibilities of the operations management  team is creating long-term strategic plans for organizational activities.
• Financial planning. Finances and budgeting also play a crucial role in long-term planning, specifically in terms of cost cutting and margin increase.
• Forecasting. Business forecasting helps predict resource demands and market shifts, which assists in data-based planning and decision making.
• Process design. Operations managers map out roles, responsibilities, workflows, dependencies, and quality standards to create a holistic view of how company operations should be held.
• Supply chain management. Overseeing procurement and logistics ensures that the supply chain doesn’t become a bottleneck in production.
• Resource management. Making data-based resource allocation decisions ensures that all resources are used as efficiently as possible to achieve high-priority goals.
• Research and development. Bringing together market analytics and management of internal company processes helps OM support R&D endeavors.
• Quality control. Developing and implementing quality control procedures keeps the quality of products and services high and increases customer satisfaction.
• Delivery. After all the planning comes the actual work that results in goods or services being produced. OM is responsible for creating and overseeing workflows that lead to their delivery, including operational change management in cases that call for it.

What Roles are Responsible for Operations Management

Operations management is a rather wide field, and requires multiple roles and positions to add their efforts. Here is a brief overview of the most important ones.

• Operations managers. This is the main dedicated role in OM that is responsible for all high-level planning and decision making.
• Operations analysts. This role is responsible for providing operations managers with data-backed insights based on the analysis of company performance data.
• Production managers. People in these roles are responsible for transforming OM practices into actual products in the most efficient way possible.
• Supply chain managers. Supply chain management is a crucial aspect of operations effectiveness and people in these roles ensure seamless flow of goods.
• Quality control managers. Quality assurance processes maintain the quality of products or services a company produces at the acceptable level.
• Project managers. This role is responsible for managing and finishing projects on time and within budget in the OM framework.
• Capacity planners. Capacity planners allow operations managers to understand the real resource constraints of the organization and plan business operations with that in mind.

Operations Management Process in 5 Steps

Operations management involves multiple processes, but the high-level approach can be represented by six major steps. Here is an overview of each one.

Define company objectives

The first step towards establishing a well-functioning operations management in an organization is defining company objectives. This is a high-level strategic step that will often involve C-suite executives and might not be only in the purview of an operations manager.

Establishing clear and achievable objectives requires analysis of both the company’s capabilities and the state of the market the company is in. Depending on the company’s capabilities and market dynamics, operations managers together with higher management create a list of long-term goals and objectives.

Those goals can include increasing customer satisfaction score by 15% in a year or launching a new competitive product.

Identify key deliverables

The next step is identifying what deliverables are needed to achieve those goals. In the case of the two examples above, this could be improving customer support processes or creating the first product prototype.

Design processes

Operation managers need to design processes that can result in those deliverables in the most efficient way. In most companies, this takes the form of redesigning old processes as some processes have already been formed naturally.

To take account of the informal processes that were formed without OM supervision, a series of interviews need to be conducted with team managers, leaders, and employees. Based on those findings, map out the processes that go into production, project management, or decision-making.

Then, analyze those processes to find inefficiencies. Some of that data can be obtained through the initial interviews because employees and managers typically know what stages of the process create the most drag.

But data analytics also plays a big role, especially when it comes to finding inefficiencies tied to high-level decision making or resource utilization.

Redesign old processes based on these findings and present the new workflows to the company.

Initiate projects

When it’s clear what deliverables take priority for the company’s goals and how they can be achieved, initiate projects needed to achieve them. Project prioritization and resource demand estimation need to be developed to that end, as well as processes of defining clear project success criteria.

Allocate resources based on data

After projects are initiated and prioritized, resources should be allocated based on data about project priority and resource capacity.

The main idea behind resource allocation is to ensure that each resource being used, be it equipment, supplies, or human resources:

• Speeds up achieving company objectives.
• Doesn't slow down other operations.
• Is allocated to the most efficient use currently.
• Is not overloaded.

In large organizations with multiple concurrent projects, it’s impossible to ensure all of these factors manually. That’s why resource management tools like Epicflow are crucial for finding optimal data-based resource allocation solutions.

Read more: Optimising Allocation of Resources in a Multi-Project Environment

Monitor execution & adjust

Once all of these steps are taken, operations managers and other personnel involved in the process should monitor the execution of business operations. This involves tracking and evaluating:

• Does achieving key deliverables follow the planned timeline?
• Are resources optimally loaded at all times?
• Do chosen objectives lead to the expected results?

Analyze business operations on all levels from objectives to individuals and change your approach if necessary.

Challenges and Best Practices of Operations Management

A complex and broad field of operations management has several core challenges. Here are the main ones and best practices for addressing them.

Business operations complexity

The primary challenge that penetrates all decision-making and planning processes of large organizations is the inherent complexity of the environment in which large companies operate. The sheer amount of factors that go into making any decision, the interdependencies between processes, projects, and resources makes each decision progressive more complex.

Best practices for this challenge

The solution for this issue lies in data analysis. When an organization can gather all the data relevant for the operations it oversees, it can process it to find inefficiencies in the processes, and arrive at the most efficient way to conduct operations.

Prioritization

Among all of the objectives, initiatives, and projects an operations management team can pursue under the constraint of limited resources, selecting the right ones to focus on has a great impact on business performance. This poses a challenge to the OM team as they need to create and uphold uniform prioritization standards with multiple factors like financial returns, risk, or urgency pointing to immediate priority of different projects.

Best practices for this challenge

The solution is in developing and following a formal prioritization framework. The most common way of doing that is developing several criteria based on which the management can rank projects to compare projects and initiatives, e.g., strategic alignment, margin rate, or cost cutting potential.

Inefficiency of manual decision making

Due to the complexity of the multi-faceted environments operations managers deal with, making decisions through manual processes can be hard. It often leads to errors because the most efficient way of doing things can sometimes not be entirely obvious without advanced data analytics.

Best practices for this challenge

Integration of technology and automation of routine tasks, especially with the help of AI-augmented tools is the best solution for this challenge. This can ease the analytical load on the team and result in more effective decisions.

Technology integration

Integrating advanced analytical technology into core operations management processes is a solution for many challenges on the list, but it also is a challenge. Due to complexity of the OM environment and data that is often siloed between departments, integrating technology can come at a significant cost, both in terms of finances and efforts.

Training the staff to use said technology also takes some investment.

Best practices for this challenge

These few tips will make it better for most companies:

• Survey the data your company holds and find ways of centralizing it.
• Choose software providers with a good track record.
• Look for tools that offer their services in integrating and automating data processing.

Resource allocation

Resource allocation poses a few important challenges to operations managers. Company resources should be kept at an optimal level of load, while focused on initiatives that can bring forward the most important business objectives and not impede progress of other ones.

This challenge is even more important in operational service management as payroll takes a bigger proportion of expenses in service-based businesses.

Best practices for this challenge

The answer to multiple questions posed by resource allocation challenges lies in implementing resource management methodology and using specialized tools. Tools like Epicflow are designed to operate in multi-project, multi-resource environments to improve resource utilization across projects in the portfolio and help organizations deliver strategic goals faster.

Upon a closer look at the key challenges in operations management and the best practices for addressing them, it becomes clear that many of these issues share a common root cause: the increasing complexity of data, resources, and interdependent decisions.

The common solution is also shared between many of the points above: replacing traditional manual frameworks that can fall into the trap of relying on personal judgement instead of data by data analytics systems that reduce human error and provide a centralized way to visualize and analyze business operations.

Modern portfolio management software addresses exactly these needs. In the next section, we’ll look at how tools like Epicflow support operations management by improving resource allocation, decision-making, and overall operational efficiency.

How Portfolio Management Software Supports Operations Management

Epicflow is a resource and portfolio management tool that brings project prioritization, resource capacity forecasting, and workflow optimization into a single centralized decision-making environment, supporting operations management. Below, we’ll explore how it enables more accurate data-based planning and effective execution in complex multi-project environments.

Data centralization

Analyzing resource performance allows organizations to understand resource constraints better and make more informed resource allocation decisions. To analyze them effectively, Epicflow requires integration of all data relevant to the resources the operations manager oversees.

This makes Epicflow a convenient single source of truth for resource-oriented data, both inputs and outputs of the analysis. The added data visibility helps control process execution and analyze their effectiveness.

Work prioritization

Epicflow solves prioritization challenges of most organizations by bringing together multiple factors that influence project importance:

• Strategic importance.
• Business value estimations.
• Resource constraints.
• Impact of the delivery.

These factors are taken into account to sort projects sorted automatically by Epicflow’s AI-based Project Optimizer.

Bottleneck management

Through workload management features, Epicflow supports operations managers in finding bottlenecks, overloaded resource groups, both in current processes and in ones planned for the future. This helps prevent resource overload that leads to unstable productivity and inability to plan effectively.

Capacity-aware predictive planning

Predictive analytics features like Future Load Graph help operations managers understand whether resource capacity can meet resource demands imposed on it by planned projects. This ensures that company resource capacity is utilized in the most efficient way, without either overload or underload.

Data-driven decision making

AI-driven scenario analysis software supports operations management by providing a way to analyze how resource allocation and project sequencing decisions affect the whole portfolio of projects. This allows operations managers to find the most efficient way of distributing resources and prioritizing projects to maximize business value delivery without increasing headcount.

Shift in operational efficiency towards resource constraints

A major way in which Epicflow helps operational management is by helping organizations identify and account for resource constraints in planning and execution. By visualizing what capacity the company commands, it improves planning possibilities and keeps the work in progress constrained to actual capabilities.

Improved throughput

All the benefits above lead to an increase in productivity and throughput across the organization. In the case of the Dutch Ministry of Defence, implementing Epicflow has led to:

• 30% decrease in lead times.
• 300% increase in due date performance.
• Delivering 50% of most important projects 424 days earlier than planned.

All of these results were achieved without increasing headcount.

Book a call with our team to learn more about aligning Epicflow features with your company’s operations management efforts.

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