Define Operation, Business Operations and Management Operation With examples?
As an accounting aspirant, I’m often asked to define operation and business operations. Business entities are involved in the different operation to generate revenue. These operations vary from business to business. A manufacturing entity will have different operations from a retailer. Their business plans might also be different. For example, the sole aim of a retailer will be to sell the product at a maximum margin, whilst a manufacturer will try to reduce costs as well as making efforts to sell the product at a higher price. I’m also explaining management operations alongside operations and business operations.
What are Operations?
Operations are activities used by an organization to convert inputted resources into finished goods or services. Every business uses its operations to convert raw materials into finished goods, this way value is created for customers. This’s how customers are compelled to buy their finished goods or services.
These operations when performed together, make a process. A process is a combination of two or more operations. For example, a typical manufacturing process might have the following operations:
- Creating the design for the products
- Acquiring Raw materials
- Processing of Raw Materials
- Production (Conversion of input to output)
- Quality Control
- Marketing the product.
A process in general has the following four steps:
- Transporting, and
What is the Meaning of Operations?
If we search dictionaries for the meaning, we get the following different meanings for operations:
- A manner of functioning something,
- Performing a practical work,
- A business transaction is also an operation.
What are Business Operations?
A business operation is generating value from assets of the business.
For example, if a business owns a van, it might use the van for transportation. This’s what we call getting back value from your assets.
You might be wandering a business also has some intangible assets, how is it possible to generate a value from an intangible asset? The answer is very simple, value is derived from intangible assets in the form of royalty.
Business operations use the following three factors to maximize the value derived from an asset:
- Generation of recurring income – An asset is valuable if it is generating more recurring income.
- Increasing the value of an asset– An asset generates more recurring income if it’s generating more value.
- Securing the income and value of the business– Both the above factors are useless if a business does not have a mechanism to secure the income and value of the business.
What is Operations Management?
Operations Management deals with designing and controlling business operations. As discussed earlier, business operations are used for the creation of values, thus it’s the responsibility of management to oversee these activities and other operations in general. This is how management can control and redesign business activities to suit its business needs. This helps the business to use few resources and get the best possible customer satisfaction.
What are the Sectors where Operations Management is used?
It is used mainly in the following sectors:
- Banking Systems
- Technology-based firms etc.
What types of decisions are made in Operations Management?
Main decisions made in are:
- What operation strategy should a firm have?
- What should be the perfect product design?
- What should be the process design?
- In addition to these inventory control, capacity decision, quality management are also decided by operations management.
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