Operations Management

Last Updated: 28th June, 2016 (RSS)
Analyst Coverage: Simon Holloway

Operations management is one of the central functions of all organisations whether producing goods or services, or in the private, public or voluntary sectors. It is an area of business that is concerned with the production of goods and services, and involves the responsibility of ensuring that business operations are efficient and effective. It involves the management of resources, and the distribution of goods and services to meet customers requirements. Operations management deals with the management and analysis of queues.

The Association for Operations Management (APICS) also defines operations management as "the field of study that focuses on the effective planning, scheduling, use, and control of an organisation through the study of concepts from design engineering, industrial engineering, management information systems, quality management, production management, inventory management, accounting, and other functions as they affect the organisation". Operations Management involves a lot of different disciplines.

Organisations have focused on the efficiency and performance of their customer facing operations. Fuelled by intense competition, customer expectations, and the need to contain escalating costs, performance management in these areas plays a critical role in helping organisations maintain the balance between service and cost.

Having addressed performance in the front office, many organisations are seeking further efficiencies and have turned to an area that is often overlooked in technological and process enhancements: back office operations. Back office operations encompass a range of white-collar processes that are necessary for an organisation to function and serve its customers, vendors, and employees, such as claims processing and document management. Each of these processes represents a cost to the organisation. There is a tendency to underestimate the inter-departmental impact that back office functions have on customer service and satisfaction. Individual performance tracking in back office operations is often incomplete and inaccurate. In addition, back office operations face challenges in meeting performance goals as a result of:

  • Limited understanding of unit costs and the means to make improvements
  • Little to no integration of data across multiple legacy systems
  • Performance goals that do not reflect factors such as work complexity and employee tenure and skill levels
  • Manual entry and tracking in multiple systems resulting in entry errors and duplicated work
  • Manual consolidation of data, resulting in untimely and often inaccurate information
  • Resource intensive data collection procedures which are a wasteful use of expensive resources

A variety of technologies have been developed to monitor and measure these areas of the organisation. Operational Management Platform solutions are being provided from three distinct classes of vendors: specialised niche applications, Business Intelligence vendors and ERP vendors (see Market Map at head of page).

Specialised niche vendors
These vendors tend to offer more than just a platform solution; they also offer a set of specialised consultancy and training services to underpin the implementation of Operations Management. It is this combination of software and services that uniquely gives them the ability to deliver the required solutions. Their solutions lend themselves to integrating with software products already in use by the customer. Modules can be selected and deployed to extend, rather than replace, existing functionality. This flexibility, plus their services arm with greater vertical knowledge, are the key reasons behind their selection. The vendors in this group have tended to develop their solution for certain industries and business processes, such as call centres and financial services. They have started from a workflow management capability and then added additional functionality such as quality management and price management.

Manufacturing industry examples are: Apriso (now part of Dassault Systèmes), Camstar (part of the Siemens MOM portfolio), GE, Invensys (now Schneider Electric Software), Rockwell, Wonderware (part of Schneider Electric Software).

Service industry examples are: Agentlogic, Aspect, Blue Prism, Covalent, eg solutions plc, Genesys, Longview Solutions, PivotLink (acquired by SmartFocus), Q-Max Systems Limited, QPR Software Plc, Symphony Technology Group and Verint Systems.

Business Intelligence vendors
As many of the requirements of operations management are about monitoring processes, BI BI solutions, vendors have identfied this area as one they can market to. The main issue for users is that they have to define what is measured, which is not the case in the niche and ERP vendors. BI software has all the right technology in place to carry out the analysis.

Examples include: IBM, Oracle, SAP, Zap technology.

ERP vendors
In ERP solutions, operations management tends to be part of a number of different application modules rather than a single module. The exception is that, recently, Performance Management has become a specialised sub domain of the data warehouse/business intelligence part of the offerings. Vendors offer just the software and this is then implemented by a Systems Integrator partner. The package can be implemented as-is (very rare), through a template of the SI (a certain amount of specialist knowledge is used to customise the package to a particular vertical) or the package is customised with the assistance of an SI to fit the organisation.

Examples include The Access Group, IFS, Infor, Oracle and SAP.

Operations management is key to maintaining the efficiency and effectiveness of the internal back-office processes of any organisation. Within the retail and manufacturing verticals, the key operations of the business are usually the ultimate responsibility for the director responsible for the shop floor of the plant or warehouse.

The move to control back office operations, particularly in the service sector, has meant the management responsible for back office operations such as claims processing find Operations Management software very useful.

So Operations Management is a key to making an organisation efficient and effective in its key internal operations. All the things that have been put forward about being a Lean orgnaisation are inherent in Operations Management software.

The answer to the question of who should care is firstly the Operations Director, but also the Finance Director and CIO.

A barrier to effective operations management in the back office has been the use of multiple, disparate systems, to provide insight into key areas that directly impact efficiency and customer satisfaction. Bloor Research have identified that there are two key approaches of IT solutions built to support Operations Management in the back office.

The first is based around business intelligence and involves significant effort to tailor an appropriate solution.

The second approach involves the use of specialised applications (Operations Management Platforms-OMP) consisting of a variety of automated components, including workforce management, capacity management, customer management, process management, quality management and price / cost management. These OMP solutions are being supplied from two different sources: in-built as part of ERP packages or by niche application vendors. In both cases, the solution is a mix of software and services.

OMP solutions cover the following tasks:

  • Capacity Management - forecasting and scheduling
  • Strategic planning - staffing demands in the future
  • Quality Management - assesses staff and process performance in terms of structured quality sampling and measurement
  • Process Management - reporting and analytics of process performance
  • Application analysis - shows extent and frequency of desktop and web applications usage by individual staff members
  • Full-time recording - captures documents, emails, faxes and telephony interactions in their entirety to meet compliance or quality requirements
  • KPI scorecards - measure individual staff performance against predefined key performance indicators (KPIs).
  • These back office OMP products can enable the right staff to be scheduled at the right time while allowing organisations to capture employee desktop activity, evaluate recorded samples, identify best practices, and then use this information to improve processes and train staff effectively

When one looks at the products available from specialised niche vendors in the market space, it is very noticeable that they are very diverse in terms of what they support. This is due to two factors. Firstly, the products have usually been developed from a consultancy-based initiative that has been turned into a repeatable solution. Therefore there is a focus on the areas that were covered in the initial work. Secondly, when operations management solutions are implemented, they have to take into account what already exists within the organisation's software portfolio and be able to adapt through the dropping of modules and the integration of existing applications. This means that any solution must be capable of being easily integrated into an organisation's existing platforms, so an integration bus and its associated APIs, in association with a process and rules engine, are very important to provide the required flexibility.

There has been a lot of marketing of BI solutions as business performance platforms. This is all about positioning. What is interesting to note is often the BI solutions offered by some vendors can be different to what is available through their ERP solution.

In ERP solutions, what you will find is a little added functional capability to handle the core functional areas of operations management. It is up to the user to define and configure what they want.



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