What is operations management? Why is operations management a critical topic of business study? Operations management is the management of resources used to create salable products and services. It consists of those tasks necessary to turn business inputs into more valuable outputs. The inputs consist of the traditional business resources—employees, equipment, inventory, and facilities—combined with some not-so-traditional assets—knowledge, skills, customer relationships, and reputation. For an increasing number of firms, the resources include such things as Internet server speed and capacity, the technical acumen of staff, and bandwidth. The salable outputs are products, services, information, and experiences. The challenge of operations management is to manage these resources effectively to generate a positive financial return.

For decades, operations management has been described as a business function, analogous to accounting, marketing, and finance. To be fair, there's nothing inherently wrong with that statement. Many businesses have taken on a very different look in recent years. Business functions look different, too. Responsibilities have changed, decisions have changed, and the role of traditional business functions has changed. In many firms it has become difficult to distinguish between some of these functions. Despite the fact that marketing, engineering, and operations tasks are still accomplished, their role as distinct and independent functions has changed. Managers in all functions must interact and coordinate their decision-making processes.

While it is generally agreed upon that operations management consists of managing resources that create value, some of those resources extend to beyond the walls of a business. They include resources used to transport products from a supplier on to a customer, or to store products somewhere in between. The management of the interactions between businesses has come to be known by many businesses as supply chain management (SCM). It is difficult, if not impossible, to draw a line between what is supply chain management and what is operations management. Fortunately, it doesn't really need to be drawn. Supply chain activities are so dependent on operations activities and operations activities are so dependent on supply chain activities that they can't be realistically separated.

Many companies bring experts together into cross-functional teams rather than have them continue to function behind the barriers that have traditionally separated business functions. The teams change as each project is accomplished and as new ones arise. All team members must be cognizant, from a broad business perspective, of what has to be done and why. The isolated departments that once existed, sometimes referred to as “functional silos,” have seen their walls disappear. The business where people interact only with their own kind—accountants, human resource managers, or information systems staff—is no longer effective.