Role and importance of operational management (2023)

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Operations Management is very important to run and run large businesses successfully. Operations management mainly deals with the production of goods and services in an organization. The main goal of operations management is to run business operations successfully, smoothly and efficiently with minimal use of resources and to meet customer expectations. Therefore we can say that operational management is the process of converting minimal inputs like raw materials and labor to produce maximal outputs like products, goods and services. Operations management is a very important factor in increasing corporate profits. Operational management is responsible not only for the production of goods, but also for controlling the distribution of services. Operations management simply has nothing to do with organizations but can also be seen in our daily activities of life. The following quote explains how Operations Management can be found in our daily lives.

“Operational management deals with the way organizations produce goods and services. Everything you see, eat, sit on, carry, read, or walk onto the sports field comes to you courtesy of the operations managers who orchestrated the production. Every book you check out from the library, every treatment you receive in the hospital, every service you expect in shops and every lecture you attend at the university has been produced.' (Slack et al., 1995)

Some examples of operations management might look like this:

  • A carpenter takes a piece of wood, cuts and planes it, and then polishes it to make a piece of furniture.
  • When you want to book a holiday, a tour operator meets you, gives you information and helps you by giving you tips on places to visit and where to stay.


Operations Management plays a very important role in organizations as it produces professional managers who are able to achieve the organization's strategic goals in a defined period of time. Operations management is at the heart of any organization as it governs the entire operating system of the organization. Operations management deals with issues such as designing, operating, maintaining and improving the systems used to manufacture the company's vital products and services. Operations management has clear managerial responsibilities, such as in marketing and finance. Operations management is very necessary in an organization to manage the activities. With the help of operations management, an organization can use its resources such as manpower and inputs wisely as needed. Operational management helps an organization achieve its main goal of generating profits and maximizing its shareholders through its activities. Production costs are reduced to ensure that tangible and intangible assets are not spread too thinly or wasted in an organization. Organizations leverage their product and service management through operations management. Product management encompasses a wide range of activities, from developing a new idea for the product to providing customer care to those who bought the product. Every organization engages in product management, whether intentionally or unintentionally.

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Another important aspect of operational management is quality management. Every organization is very concerned about the products that are manufactured or developed for the customers in the market. Quality management is very important for efficient operations management, especially when it comes to continuous improvement to meet consumer tastes and preferences. Recently, benchmarking and quality management, outsourcing and re-engineering have brought operational management to an advanced level to produce high quality. The organization's adoption of re-engineering and benchmarking helps them to be market leaders in their product category. Benchmarking is considered to be the best internal audit process by which the company identifies its weaknesses and then converts them into strengths to increase its customer base in the market.

(Video) The Importance of Operations Management in an Organization

Operational management is unthinkable in an organization without a management control and coordination function. Management control and coordination includes various types of activities to ensure that the company's goals are constantly being met effectively and efficiently. Organizations primarily use organizational coordination and control to take a systematic approach to determining whether you are actually doing what you want to do. Some of the most important approaches to organizational control and coordination in business include product evaluation, product distribution, advertising and promotion, sales and service, and product development. Organizations use advertising as the primary tool to reach the customer and refocus customer awareness of their products. In this competitive and fast-growing market, the company ensures that its products and services are firmly anchored in the minds of its customers. This occurs as a result of the organization's ongoing advertising and promotions. Facility management is also a necessary function and has a high priority in operational management. Effective operational management of business activities depends largely on the effective management of facilities such as buildings, computer systems, signage, lighting, and plant and machinery. In a high demand situation that may require larger or mass production, facilities must be managed to produce large quantities of products that must be standardized to meet market demand in a given time period. Well-managed facilities such as plant and machinery in the company contribute to the speed of production, lower unit cost, ease of manufacture and control, and efficiency in the company's production process.

Strength 19.1.b

Toyota's strategic goals are:

  • Benefit
  • quality and innovation
  • image and reputation
  • Social problems
  • satisfied costumers
  • market power
  • Survive


A SWOT analysis is a simple but widely used tool that helps to understand the strengths, weaknesses, opportunities and threats of a project or business activity. It starts with defining the goal of the project or business activity and identifying the internal and external factors that are important in achieving the goal. Internal factors can be broken down into strengths and weaknesses, and opportunities and threats can be identified as external.


  • Toyota is the largest automaker in the world by sales.
  • Toyota also owns and operates the Lexus and Scion brands and holds a controlling interest in Daihatsu and Hino engines.
  • Toyota also provides financial services through Toyota Financial Services and also builds robots.
  • Toyota Motor Corporation (including Toyota Financial Services) and Toyota Industries form the majority of the Toyota Group, one of the largest conglomerates in the world.


It was to increase its stakes in Fuji Heavy Industries, Isuzu Motors, Yamaha Motors, and Mitsubishi Aircraft Corporation.


On May 8, 2009, Toyota posted a record annual net loss of $4.2 billion, becoming the last automaker to be hit hard by the 2007-2010 financial crisis.

  • Manufacturers need to ensure that their models meet what consumers want compared to the competition.
  • Sales were impacted by the financial crisis
  • Toyota production system failure based on recent recalls.
  • The company must cautiously continue producing cars to maintain their operational efficiencies, particularly in the case of the Prius, whose case study shows that it needs reprogramming of its ABS system.


In January 2010, Toyota announced the recall of up to 1.8 million cars across Europe, including around 220,000 in the UK, over problems with faulty accelerator pedals.

Many Toyota models were involved, covering the 2007-2010 model years. Toyota later withdrew the Prius model to reprogram its ABS system.

US Sales Manager James Lentz was questioned by the US Congress Oversight and Investigative Committees on February 23, 2010 regarding the recent recalls

(Video) What is Operation Management? | Duties and Responsibilities in Operation Management

On April 6, 2010, the US government sought a record $16,375,000,000 fine from Toyota for delaying response in notifying the National Highway Traffic Safety Administration of faulty accelerator pedals.

The company said recalls could cost up to $2 billion (GB1.25 billion) in lost production and sales.

A company's primary goal should be to meet its customers' demands for fast, reliable services at a reasonable price and to support its own suppliers in improving their services. There are five basic performance goals that apply to all types of operations:

  • quality
  • speed
  • trust
  • flexibility
  • The limp (Slack, N. et al., 2001).

These operational performance targets are discussed here in agreement with Toyota.

Toyota's record is successful worldwide and has been voted Car of the Year by several studies and market analyzes over many years. Toyota's success continued to grow due to the high quality that makes it the best-selling automaker in the world. Toyota has also made better quality cars that are suspended and don't emit nasty fumes. For example, more than 40 emission management systems and equipment that have improved passenger car protection. (Ahmed, A., 2003).

Another core task is agility, i.e. reducing the time between instruction and availability of products and services, which generates agility advantages for customers. Toyota performance focuses on tasks with small, simple machines that reduce effort and are flexible. and strong. Reprogram plans and flows to improve manufacturing simplicity and speed. At the end of the 1980s, the statistics show that productivity per employee is even two to three times higher than in the US and European factories.

The third delivery goal is reliability, which means getting tasks done on time so customers get their goods and services on the promised date and time. The “Just in Time” (JIT) production system allows the engineers to deliver the highest quality products through the “Kanban” control system. Toyota needs to improve its efficiency and quality as it is important for managers, technicians and employees, and as a result, customers will have more confidence in Toyota products.

A clear result of responding to a dynamic environment is that the organization changes its products and services and the way it does business. This performance goal is known as "flexibility".

(Peters, T., 1998) argues that we must learn to love change and develop flexible and receptive organizations to deal with the dynamic business environment.

At the Toyota plant, this means the ability to adapt its manufacturing resources to bring new models to market. The coursework argues that Toyota was able to achieve a high degree of flexibility and produce relatively small batches of different models with little or no loss of productivity or quality. Over the years, Toyota has provided a range of options for customers to choose from.

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(Video) Importance of Operations Management

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One of the main objectives of operations, especially when companies compete on price, is “cost”. A low price is a generally attractive goal for customers that can be achieved by producing goods at a lower cost. In order to "make things cheap", Toyota is trying to influence the cost of goods and services, so for the future Toyota planned to shift its production of MPVs and pickup trucks to different countries around the world (e.g. Argentina, South America). ). Africa). Internally, cost performance is also supported by good performance on other performance targets that Toyota has achieved in order to produce quality vehicles at reasonable prices.

By leveraging and improving operational performance for quality, speed, reliability, flexibility and cost, TMC has experienced global growth and a high percentage of customer satisfaction. Because of the success of these operational performance goals, the Japanese (Toyotismo) style of manufacturing and product development has been studied and emulated around the world. TMC is a world leader in supply chain management and to maintain its production with high quality, maximum speed, on-time delivery, flexibility and at the lowest cost, TMC works with its suppliers to ensure they also have the best suppliers in the industry . . Moving operations to different countries in search of cheap inputs (raw materials and labor) facilitates the production of lower cost and quality products. The continental operation also offers its customers a reliability advantage and makes it easier to get its production to market. With these operational performance goals, TMC has been able to satisfy its customers and successfully compete with other companies in the global marketplace.

Toyota uses a "lean" manufacturing system to continuously produce goods and services. Tools like just-in-time, cell fabrication, full productive maintenance, tool change in a minute. The lean manufacturing system arrived in Japan after World War II when material, financial and human resources were exhausted. This system is also known as the Toyota Production System, which is now recognized around the world. The basic ideas behind the lean manufacturing system are avoiding waste, reducing costs and empowering employees.

The empowerment of Toyota employees is reflected in the fact that the company employs around 320,000 people worldwide. The lean manufacturing system aims to work in all aspects of the value stream, eliminating waste to reduce costs, raise capital and generate more revenue and remain competitive in a growing global market, reflecting the fact indicates that Toyota is the largest automobile manufacturer. through sales.

As defined by the Praxiom Research Group, an audit is “a process of gathering evidence”. The main objective of the quality audit is to provide the greatest possible amount of evidence to determine whether or not the company is in control of its processes and documents. This type of evidence is gathered through observation, interviews, and requests for documentation. Extensive training is provided to auditors so that they know exactly whether the company's quality management systems are in compliance with established standards. Recall issues at Toyota suggest there was a general lack of quality due to poor decision making and poor supply chain management. In my opinion Toyota should have an external audit done by an outsider as I think the company has a malfunction in their production system. Therefore, it is better to entrust the audit to a professional agency so that there will be no mistakes next time models are developed and to ensure that the raw materials and products manufactured are safe.

Quality culture generally means the incorporation of quality into an organization's overall system that creates a positive internal environment and ensures customer satisfaction. Good decision-making at all levels of management is very necessary to maintain this culture of quality in the organization, which can be achieved through self-actualization at the highest level or through training and workshops or following reference organizations.

Toyota's culture of quality is about making the best products, first time. Innovation is also a very important part of Toyota's culture of quality, facing challenges with courage and creativity in order to continually improve. Customer satisfaction is also a very important aspect of Toyota's quality culture. Another important aspect of the quality culture is to follow up on customer complaints and analyze them in order to resolve them quickly. In my opinion, Toyota shouldn't compromise on the quality of their product and should prioritize growth over quality. In a race to make more products, they don't give 100% to making their products. In order to meet its growth goals and become the world's largest automaker, Toyota lost sight of the core values ​​that gave the company its reputation in the first place.

Throughout its history, from Kaizen to the Toyota Production System and more Kaizen, Toyota Motors Corporation has sought not only to maintain but to improve upon its current market position. Engineers need to make sure they make the best products the first time. The organization should not rush into manufacturing products just to increase growth.

In Toyota Motors Corporation's 2008 Annual Report, the company said, "As the automotive industry faces a turning point in its history, Toyota intends to achieve sustainable growth by building a more flexible and robust corporate structure" (p. 1). The real question remains. What specific strategies will Toyota employ to build a stronger and more flexible corporate structure when the times and business environment dictate that 'Kaizen', more 'Kaizen' and the Toyota Production System are no longer sufficient today and in the future? . market requirements?

blue ocean strategy

In the foreword to their book Blue Ocean Strategy, W. Chan Kim and Renee Mauborgne succinctly write that “just as there are no consistently great industries” (2005, p. x). Regardless of how successful Toyota Motors Corporation has been in its 70 years of existence, it does not guarantee the same success in the next 70 years. The authors therefore proposed a new management theory: the blue ocean strategy. The Blue Ocean Strategy is according to Kim and Mauborgne

“The Blue Ocean Strategy challenges companies to break out of the red ocean of bloody competition by creating an unhindered market space that renders competition irrelevant. Instead of dividing up existing and often declining demand and comparing competitors, the Blue Ocean strategy is to increase demand and differentiate yourself from the competition” (2008, p. x)

The most striking conclusion of the Blue Ocean strategy is well illustrated by the authors' conclusion about Cirque du Soleil's circumstances: The circus company "succeeded because it recognized that in order to win in the future, companies had to stop competing with each other .” ( Kim & Mauborgne 2005, p. 4). In the Toyota story, it's clear that management didn't come to the same conclusion. This is reflected in President Fujio Cho's message in Toyota Motors Corporation's 2008 Annual Report: "Toyota strives for long-term sustainable growth by providing quality vehicles to people around the world and contributing to the realization of a generous and stimulating society. “ (2008, p. 6). What doesn't align with the blue ocean strategy in that sentence is that every other automaker (Ford, GM, Honda, etc.) is saying the same thing or something similar. Obviously, this strategy won't work in the long run if Toyota wants to stay in the top ten of the Fortune Global 500.

(Video) 01. Strategic role of Operations management

Instead, the Blue Ocean strategy goes beyond providing quality vehicles that everyone else is providing. As shown in the figure below, blue oceans have the most impact on profit while having the least impact on sales compared to red oceans.

Figure 1 Blue Oceans vs. Red Oceans

Source: Kim & Mauborgne 2005, p. 7

The changing environment presented by Toyota in its presentation of its 2008 financial results and as discussed in the previous part of this document and described in the Blue Ocean Strategy represent several "drivers behind a growing need to create blue oceans" (Kim and Mauborgne 2005, p. 8). Unfortunately, these drivers aren't going away, so Toyota must act now and carve out its own undeniable market in the automotive industry. In order to take full advantage of the blue ocean strategy, a strategy screen must be created. The Canvas is “the central diagnostic and action framework for building a compelling blue ocean strategy” (Blue Ocean Strategy, 2008).

The total customer experience is now the “new differentiator” (Mascarenhas, Kesavan & Bernacchi 2006, p. 397), which is exactly the point of the Blue Ocean strategy. Toyota Motors Corporation must provide a comprehensive customer experience in its current and future business environment. However, caution must be exercised when interpreting the overall experience of each customer: “Obviously, TCE is by definition customer dependent and therefore different for each customer. Compared to touchpoints such as restaurants, hotels or banks, there is potential for greater diversity in the customer experience as the customer may be looking for a variety of different services or products. Each phase of this consumer journey implies an experience that the provider must seek to optimize and the customer must [capitalize]” (Mascarenhas, Kesavan & Bernacchi 2006, p. 415). Therefore, it is important to gain an accurate understanding.

More than ever, the organization's people strategies, goals, systems and processes must be integrated and synchronized with the overall strategies, goals, systems and processes of Toyota Motors Corporation and the rest of the organization. Human resources, as one of the central success factors in the implementation of the Blue Ocean strategy, must be able to support the company and not harm it. Therefore, the selection, training, and development of people and performance appraisal processes must be seamlessly integrated into the overall organizational structure and systems to ensure that all of these systems work towards the same goal: to create a market space without competition and to make competition irrelevant.

Mondy & Noe defines recruitment as the “process of attracting and encouraging individuals to apply for positions with an [organization] in a timely manner, in sufficient numbers and with appropriate qualifications” (2005, p. 199). The goal of the selection process for any type of [organization] is to choose the most suitable person for a specific position and organization (Mondy & Noe, 2005, p. 162). Therefore, for TMC, the goal of the organization's selection process should be to select the most suitable individual for the vacancy, who has the skills needed to support the company in its quest to render competition irrelevant.

On the other hand, the performance appraisal system is a "formal system for reviewing and evaluating the performance of individual or team tasks" (Mondy & Noe, 2005, p. 252) "to determine who should be promoted, demoted, transferred, or we shall shoot" (Anthony , Kacmar & Perrewe, 2002, p. 354).Some of the factors affecting the effectiveness of an appraisal system are job-related criteria, performance expectations, standardization, trained appraisers, ongoing open communication, performance appraisals, and due process of law (Mondy & Noe, 2005, p 270-272 ).Employee performance management is one of the most difficult and complex activities within an organization.Unlike the other resources of a company, human resources are not very easy to manage: people think and act accordingly.

Anthony, Kacmar & Perrewe wrote that an effective performance appraisal system is "not only a tool for evaluating the work of employees, but also for developing and motivating employees" (2002, p. 351). These benefits are essential to explain why the performance appraisal system was developed in organizations: Employees need to be motivated and developed to perform their jobs effectively and efficiently. In addition, a company's rating system can also be used to 'determine who needs formal training and development opportunities' (Anthony, Kacmar & Perrewe, 2002, p. 354). All of this will ultimately lead to a better equipped human resource. As a result, Toyota Motors Corporation's performance appraisal system needs to be redesigned to fit the company's Blue Ocean strategy. As an essential part of motivating your employees, TMC's HR performance measurement system must not operate in a vacuum, but support the goal of developing organizational skills to make competition irrelevant.

What Toyota Motors Corporation has done for human resource management around the world is admirable: it has developed human resource management practices to underpin the Toyota production system (Winfield 1994, p. 41). Today, however, it is no longer enough. It's time for Toyota to model its people management practices to support the Blue Ocean strategy. The researcher believes that TPS is part of the Blue Ocean strategy; Therefore, this should not be the ultimate goal when designing the company's HR management system and its other systems. The four goals promoted by the company's existing human resources management practices are “employee engagement, workforce flexibility and adaptability, quality” (Winfield 1994, p. 50) from the perspective of the Blue Ocean Strategy are just some of the factors , which are required to create an undeniable environment. market as opposed to current practice (these four objectives are the main objectives).

As competition intensifies, companies like Toyota Motors Corporation, which are leaders in their industries, cannot afford to become complacent. Instead, they must once again pioneer in their fields. These companies need to integrate all of their resources and use those resources efficiently and effectively to achieve the organization's goals.

As the workforce becomes more diverse and competition within industries intensifies, the need to effectively and efficiently manage human resources to gain, develop and maintain competitive advantage becomes ever more important. In integrating the Blue Ocean strategy into its overall strategy, Toyota Motors Corporation must remember that the most important factor in the success of the Blue Ocean strategy is its human resources.

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What are the top 3 important functions of operations management from your understanding? ›

Planning, organizing, and strategizing the daily operations and routine is the primary function of operations management. A well-planned implemented strategy can help in meeting the deadlines and production goals of an organization.

What are the 7 main function of operational management? ›

We can distinguish seven main functions of operation management in the industrial enterprise: planning, scheduling, purchasing, controlling, quality control and inventory control. In each of those fields operations managers should conduct many decision affecting of-organization effectiveness.

What is the most important role of an operations manager? ›

The Operations Manager role is mainly to implement the right processes and practices across the organization. The specific duties of an Operations Manager include formulating strategy, improving performance, procuring material and resources and securing compliance.

What are 2 of the roles of operations management? ›

This includes planning, organizing, and supervising operations, manufacturing and production processes, and service delivery to produce the desired outcome of a high-quality product or service that satisfies customer demands.

What are the four 4 responsibilities of operation manager? ›

In most businesses, operations managers oversee the big picture of their organization. They are responsible for managing processes, purchasing, accounting, human resources, inventory, and IT.

What are the 5 key goals of operations management? ›

Slack et al. (2007) describe five basic operations performance objectives which allow the organisation to measure its operations performance. The performance objectives are quality, speed, dependability, flexibility and cost.


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