Learning Outcomes:

(1) To appreciate the historical evolution of operations management.

(2) To understand the relevance of operations management to business success.

(3) To understand the span of operations management.

Introduction

Operations management is commonly defined as the administration of the processes used in the
production of goods and services. All businesses depend on operations management for its success. A
company can assemble a great marketing team only to fail because its product could not deliver what was
promised in the advertisement. A product can be a good or a service. Many organizations today provide
both. The operations department is managed by the operations manager who ensures that the company
produces its product/s according to set standards. World-class companies like Ford Motors attribute its
success to an effective and efficient operations management. 

History of Operations Management

“Systems for production have existed since ancient times. The Great Wall of China, the Egyptian
pyramids, the ships of the Roman and Spanish empires, and the roads and aqueducts of the Romans
provide examples of the human ability to organize for production. The production of goods for sale and
the modern factory system had their roots in the Industrial Revolution.

The Industrial Revolution began in the 1770s in England and spread to the rest of Europe and to the
United States during the nineteenth century. Prior to that time, goods were produced in small shops by
craftsmen and their apprentices. Only simple tools were available; the machines that we use today had not
been invented. Then, a number of innovations changed the face of production forever by substituting
machine power for human power. Perhaps, the most significant of these was the steam engine, made
practical by James Watt around 1764, because it provided a source of power to operate machines in
factories. Ample supplies of coal and iron ore provided materials for generating power and making
machinery. Despite the major changes that were taking place, management theory and practice had not
progressed much from early days. What was needed was an enlightened and more systematic approach to
management.
 

The scientific-management era brought widespread changes to the management of factories. The
movement was spearheaded by the efficiency engineer and inventor Frederick Winslow Taylor, who is
often referred to as the father of scientific management. Taylor believed in a science of management
based on observation, measurement, analysis and improvement of work methods and economic
incentives. During the early part of the twentieth century, automobiles were just coming into vogue in the
United States. Ford’s Model T was such a success that the company had trouble keeping up with the order
for the cars. In an effort to improve the efficiency of operations Ford adopted the scientific management
principles espoused by Frederick Winslow Taylor. Ford also introduced the moving assembly line. A
second concept used by Ford was the division of labor, which Adam Smith wrote about in the Wealth of
Nations.

Whereas the scientific-management movement heavily emphasized the technical aspects of work design,
the human relations movement emphasized the importance of human element in job design. During the
1930s, Elton Mayo conducted studies at the Hawthorne division of Western Electric. His studies revealed
that in addition to the physical and technical aspects of work, worker motivation is critical for improving
productivity. During the 1940s, Abraham Maslow developed motivational theories, which Frederick
Hertzberg refined in the 1950s. Douglas McGregor added Theory X and Theory Y in the 1960s. These
theories represented the two ends of the spectrum of how employees view work.

Computers have had an enormous influence on the practice of operations management, particularly in
scheduling and inventory control. Because they are capable of rapid, error-free computations and keeping
track of thousand of bits of information with instantaneous retrieval, computers have had a major impact
on operations management. Moreover, the growing availability of software packages covering virtually
every quantitative technique has greatly increased management’s use of the computer,” (Stevenson,
2017).

Span of Operations Management

The operations manager is responsible for the management of the following areas needed in production:
(1) demand forecasting; (2) product design; (3) capacity management; (4) process selection; (5) facility
layout; (6) inventory management; (7) location; (8) scheduling and (9) quality management. There is
interdependence among the areas. A failure in one area will lead to failure in another. The operations
manager should plan and execute well to produce a quality product that the company can offer to its
customers.

Case: Ford Motors and Model T

“Henry Ford was an American automobile manufacturer who created the Model T in 1908 and went on to
develop the assembly line mode of production, which revolutionized the automotive industry. In 1913,
Ford launched the first moving assembly line for the mass production of the automobile. This new
technique decreased the amount of time it took to build a car from 12 hours to two and a half, which in
turn lowered the cost of the Model T from $850 in 1908 to $310 by 1926 for a much improved model.
Simple to drive and cheap to repair, especially following Ford’s invention of the assembly line, nearly
half of all cars in America in 1918 were Model T’s,” (https://www.biography.com/business-figure/henry-
ford).

Summary

Operations management is commonly defined as the administration of the processes used in the
production of goods and services. All businesses depend on operations management for its success. The
production of goods for sale and the modern factory system had their roots in the Industrial Revolution. A
number of innovations changed the face of production forever by substituting machine power for human
power. The scientific-management era brought widespread changes to the management of factories. The
movement was spearheaded by the efficiency engineer and inventor Frederick Winslow Taylor. Taylor
believed in a science of management based on observation, measurement, analysis and improvement of
work methods and economic incentives. During the 1930s, Elton Mayo conducted studies at the
Hawthorne division of Western Electric. His studies revealed that in addition to the physical and technical
aspects of work, worker motivation is critical for improving productivity. Computers have had an
enormous influence on the practice of operations management, particularly in scheduling and inventory
control. The operations manager is responsible for the management of the following areas needed in
production: (1) forecasting; (2) product design; (3) capacity management; (4) process selection; (5)
facility layout; (6) inventory management; (7) location; (8) scheduling and (9) quality management.

Review Questions

(1) What is operations management?

(2) Relate operations management to the success of a business.

(3) Discuss the invention of steam engine as a turning point in operations management history.

(4) What are the areas of operations management?

Case Analysis
Discuss the importance of the moving assembly line to the success of Ford Motors.

Videos to Watch

(1) The Industrial Revolution | BBC Documentary

https://www.youtube.com/watch?v=GYln_S2PVYA

(2) Taylorism ABC World Report

https://www.youtube.com/watch?v=CCsOqWbK46o

(3) What is the Fourth Industrial Revolution | CNBC Explains

https://www.youtube.com/watch?v=v9rZOa3CUC8