What Is Operations Management? Definition, Types, and Importance

Operations management influences every part of how you run a company. That includes how you produce a product or service, how you track and improve your efficiency, and how you contribute to the bottom line. Simply put, operations management drives efficient workforces, processes, and supply chains.

This guide explores the types of operations management and how they bring value to a business. Explore the ins and outs of operations management strategy and learn the best practices to achieve success.

What Is Operations Management?

Operations management is the practice of handling day-to-day business functions in a manner that is efficient and that maximizes profitability. This discipline focuses on formulating strategies and taking actions to optimize production and supply chain performance.

It involves planning and overseeing processes such as sourcing, staffing, production, and delivery. A core focus is managing resources effectively while identifying and resolving inefficiencies that can disrupt business performance. In addition to supporting daily functions, strong operations management also helps a business run safely, securely, and at scale.

Key Takeaways

• Operations management focuses on multiple aspects of an organization’s day-to-day operations, not just resolving the inevitable one-off problems that arise.
• Managing operations well ensures that a company’s inputs (materials, labor, technology) are converted into outputs (goods and services) efficiently.
• Without operations management, critical business functions like R&D, client service delivery, information technology, and inventory control are prone to mismanagement and underfunding.
• Behind most successful supply chains is solid operations management because it provides managers the means to direct resources toward desired results.

Operations Management Explained

Operations management emerged from early 20th-century manufacturing practices and became increasingly important after World War II, when military logistics research highlighted the power of process optimization. The field evolved rapidly in the late 20^th century with the rise of lean manufacturing, Six Sigma, and global supply chains—all of which demanded tighter coordination, cost control, and quality management at scale.

Today, operations management plays an integral role in industries like manufacturing, logistics, healthcare, supply chains, and quality assurance. The goal is to use resources (e.g., labor, materials, technology) effectively to consistently deliver cost-efficient results. As businesses grow, good operations management practices can help them stay agile and resilient.

What Is the Purpose of Operations Management?

The purpose of operations management is to promote and support efficient business processes. The practice focuses on the staff, procedures, and physical resources required to operate a business.

Operations management also refers to how an organization coordinates and oversees the flow of information among its departments; how successful it is at complying with business and regulatory requirements; how well it ensures customer satisfaction; and how efficiently it manages daily operations. It’s a discipline focused on proactive coordination, not just reactive problem-solving.

What Are the Goals of Operations Management?

The goals of operations management are about maximizing the organization’s efforts, mainly around producing goods and/or services and managing the supply chain and infrastructure. The focus is on controlling costs, maximizing profitability, and driving consistent performance. This is done by taking actions that:

• Align operations with business goals, such as expanding into new markets without increasing overhead or improving on-time delivery rates.
• Identify and address inefficiencies and waste in workflows, production processes, or resource allocation.
• Improve sourcing selection and supply chain management, including logistics and supplier relationships.
• Optimize inventory to avoid stockouts and reduce excess holding costs.
• Ensure consistent product or service quality through effective controls.
• Reduce disruptions and mitigate operational risks such as supply chain delays, equipment breakdowns, or staffing shortages.
• Improve compliance with legal, environmental, and safety standards.
• Increase adaptability to market changes and demand fluctuations through flexible staffing, scalable systems, and data-informed planning.
• Develop workforce skills through targeted hiring and ongoing upskilling.
• Increase communication across teams and business functions to improve coordination and decision-making speed.
• Monitor and improve performance using operational metrics and KPIs.

The Importance of Effective Operations Management

At a high level, effective operations management practices prevent a business from wasting time, money, and resources on activities that don’t support its strategic goals. Its importance is rooted in aligning day-to-day work with broader business objectives. Operations management directly impacts key business outcomes, including profitability, productivity, customer satisfaction, compliance, and the ability to grow and compete over time.

Smart process optimization leads to faster delivery, better quality, and leaner resource use—all of which can help a business operate more efficiently (and, in turn, scale sustainably). Strong quality control reduces errors, strengthens brand reputation, and supports customer loyalty. Effective operations management can also help a business respond to shifting markets without losing momentum, reducing the impact of risks such as supply chain disruptions.

Operations management can help companies across all sectors run better, but industries like manufacturing, retail, and healthcare heavily rely on it to stay competitive and operationally sound.

Types of Operations Management

The three main types of operations management focus on the objective, the task, or the individual employee. Which you use depends on your company’s needs and goals, and a manager might use different types based on the situation.

• Objectives management:

  Setting priorities, making operational decisions based on business goals and aligning operations to support overall company objectives.

• Task management:

  Managing daily operations based on work in progress and linear workflows to assign tasks before moving to the next phase.

• Individual supervision:

  Using real-time information from managers and employees on the ground performing the work to optimize operations.

Some facets of operations management may require additional functions. For example, tasks may consist of planning and researching; creating operational budgets; and managing physical inventory, supply chains, and vendors.

In addition to the types of business functions, there are three categories of modern operations management environments:

• Centralized:

  Shops with centralized operations management typically use one central control system to manage essential supply chain functions and oversee multiple employees who work in one location.

• Decentralized:

  Decentralized operations management uses multiple systems, including advanced infrastructure and technology like web applications and cloud databases, to coordinate work across global supply chains and multiple locations.

• Hybrid:

  A hybrid operations management environment leverages the advantages of centralized and decentralized operations. For example, you might have a centralized production center with unified manufacturing and warehousing capabilities and equipped with an automated infrastructure connected to cloud-based networks for real-time monitoring.

Core Functions of Operations Management

There are two main functions of operations management: Designing efficient processes and managing resources effectively. The end goal of both is to deliver goods and services in the most cost-effective way possible while supporting broader business goals.

These core functions span a range of responsibilities, listed below. They often require cross-functional coordination to balance efficiency, costs, and quality while preserving organizational reliability, resilience, and competitive advantage.

• Organizational planning: Planning along multiple dimensions—strategic (long-term goals), tactical (mid-term goals), and operational (day-to-day workflows)—is critical to effectively aligning resources with business objectives. A focus on resource allocation, as well as structured processes and timelines, is essential.
• Process design and analysis: Operations managers map out tasks, resources, and roles to identify and eliminate inefficiencies in workflows. This is an ongoing effort that uses operational KPIs to track progress, support continuous improvement, and respond to changing conditions.
• Financial oversight and budgeting: A major aspect of operations management is controlling costs through budget planning, expense tracking, risk mitigation, and project management. Operations managers rely on tools like cash flow statements and real-time monitoring technology to keep spending within limits and ensure investments deliver anticipated returns.
• Supply chain management: The goal is to balance cost, efficiency, and reliability to meet production needs. This includes overseeing procurement, supplier relationships, and logistics to ensure materials and products are available at the right time.
• Inventory management: This function is focused on having the right amount of inventory available to avoid stockouts while minimizing overstocking, which ties up cash and increases holding costs. Companies use demand forecasting to determine what to order, what to make, and when.
• Scheduling: Scheduling aligns key resources (personnel, equipment) with demand to avoid bottlenecks, inefficiencies, and other slowdowns. It’s essential for guaranteeing availability, maximizing productivity, and meeting deadlines.
• Product and service development: Operations management supports the development of products and services by aligning R&D with production capabilities. Creating viable offerings that meet customer needs is essential for long-term growth and competitiveness.
• Quality control: This function keeps production quality consistent, which is necessary for customer satisfaction and regulatory compliance. It involves developing and implementing quality standards, inspections, and corrective actions.
• Business forecasting: Forecasting helps predict demand, market shifts, and resource needs based on historical data, marketplace insight, and analytics. The better the forecasting team, the more proactive the business can be in terms of production planning, inventory management, and resource scheduling.
• Delivery: All of the hard work of operations management would be for nothing if goods and services didn’t make it to the right place at the right time. Think of it as the last mile of managing operations, involving logistics optimization and monitoring to ensure timely distribution. A company’s ability to deliver on time can affect customer satisfaction and brand reputation.

Strategic vs. Tactical Operations Management Decisions

Strategic operations management focuses on long-term success, while tactical operations decisions are about reacting and adjusting in the short term. Use a combination of these approaches for the best results.

Strategic operations decisions involve estimates, predictions, goals, and comparative analyses. This approach concentrates on the future to meet long-term objectives and ensure lasting success. One key aspect is using operational data to analyze results and adjust long-term strategic plans where necessary.

Tactical operations decisions, on the other hand, involve how the company responds to changing operational conditions. For example, an organization might need to adjust production schedules or workforce planning as the marketplace fluctuates.

Operations and Supply Chain Management (OSCM)

Operations management is vital for any company that relies on logistics management and the supply chain. The practice protects supply chain operations, boosts productivity, and reduces costs.

Operations management is critical in companies that have complex supply chains because it provides a framework for process-specific technology, tools, and activities to support a steady flow of materials and finished goods and gives managers the means to efficiently direct resources toward reaching goals. Operations managers rely on strong logistics management and supply chain management.

A mature operations management practice helps create processes and systems to manage and measure supply chain activities. For example, when customers cancel orders or return goods to the warehouse, the operations management team is responsible for having procedures in place to reduce administrative overhead, adjust production levels, and/or maximize the resale value of the items.

Effective operations management touches all aspects of essential work, including supply chain, and ensures the company is meeting key performance indicators (KPIs). Managers use operations management KPIs to make informed decisions and coordinate efforts across the supply chain and organization as a whole.

Operations Management Process

The operations management process is about making a company’s daily actions as sharp and effective as possible. The process involves smart use of resources and data to reach goals while keeping costs down.

Operations management also refers to the processes, tools and resources necessary to support an organization’s full workflow. It requires communication with clients, stakeholders and business units.

Three categories of operations management processes, based on desired business outcome, include:

1. Implementation

Designing and engineering infrastructure and systems so your business operations function efficiently.

2. Optimization

Ensuring that your staff and infrastructure serve the business’s goals as effectively and efficiently as possible.

3. Improvement

Introducing operational methods that previously did not apply—for example, remote work—and maximizing the efficiency and effectiveness of existing processes.

The ideal operations management process for a given company varies by industry, company size, and other factors. Generally, it captures the process of managing the daily flow of tasks and information to ensure consistent and effective performance across projects. This process can include variables such as finance, human resources, information technology, facilities management, inventory management, and more.

Role of Operations Management

The role of operations management boils down to driving optimal results while reducing costs. An effective operations manager allocates a company’s resources to achieve goals and meet standards.

Most companies have an operations department for this reason, although the specific role may vary from company to company and industry to industry. The responsibilities of an operations manager include the overall direction of company operations, financial planning, and resource allocation for specific projects and service offerings.

In general, ops managers direct their companies’ day-to-day business activities. They ensure that the workforce conducts daily operations following company policies and standards and relevant laws and regulations. Their key responsibilities include overseeing daily business activities, studying processes, and preparing operational and financial reports.

In addition, these managers measure the impact of business operations by collecting, processing, and communicating operational KPIs.

Effective operations management requires a holistic view of the business, including resource allocation, documentation review, quality control, coordination of efforts, sharing information across departments, and initiating appropriate actions when needed. Typically, operations managers have a cross-departmental view, carry out duties assigned by leaders, ensure the efficient use of resources, and help plan and prepare to achieve future goals. Day-to-day operational management tasks include record-keeping and operational reporting.

Depending on company size and scope, ops managers may take on business development or marketing roles. For example, ops management teams may include financial analysts, sales leaders, software developers, and IT support. The practice typically includes cross-functional coordination among department heads and units.

Required Skills of Operations Management Teams

Given the breadth of operations management functions, these teams demand a mix diverse of capabilities to get the jobs done. Having the right mix of competencies—both hard and soft skills—is necessary so that these groups can manage complex processes and workflows, implement the right technology solutions, navigate disruptions and marketplace changes, and align day-to-day operations with long-term strategy. Without the right capabilities on board, the function won’t succeed and could actually damage the company’s competitive stance, financial health, or growth prospects.

Some of the most important skills required on the operations management team include:

1. Organization and project management: Since managing operations involves designing workflows, allocating and scheduling resources, and overseeing projects from start to finish, organization and project management are near the top of the skills list. Professionals with these capabilities are better able to identify and address bottlenecks, meet deadlines, and optimize resource allocation. Strong project management skills also help operations managers to juggle a variety of tasks or initiatives while meeting deadlines, controlling costs, and maintaining quality standards.
2. Technology prowess: It pays to have operations management professionals who are comfortable with technology, recognize its limitations, and understand how best to deploy it.Tech-savvy team members can apply tools such as automation, analytics, and AI to drive innovation and business outcomes—without chasing trends that don’t serve business goals. A skilled operations manager can evaluate ERP platforms for production management and inventory tracking, or CRM tools for customer insight, and choose what truly adds value.
3. Emotional intelligence: Emotionally intelligent managers are able to recognize, understand, and manage their own and others’ emotions. This makes them more capable of resolving conflicts or disputes, solving problems constructively, creating environments in which it’s safe to share new ideas or concerns, building stronger supplier relationships, and fostering more cohesive and engaged teams.
4. Collaboration: Operations managers must work with teams, cross-functionally across departments, and with third parties (suppliers, logistics partners) to meet goals. The ability to collaborate across silos, align around shared aims, and collaboratively solve problems is essential for success.
5. Leadership: Managers and executives who are skilled at communicating, setting strategy, inspiring individuals and teams, and fostering accountability can elevate operations management from a support function to a strategic asset. Those with strong leadership skills are also more likely to retain valuable talent, build engagement on their teams, empower employees to innovate, and align the function’s work with larger business goals.
6. Problem-solving and decision-making: When operations teams can tackle issues, particularly using data to drive informed decision-making, they can prevent emerging problems from growing into full-blown crises. Willingness to dive into issues, analytics skills, the capability to identify root causes, and the ability to come up with solutions under pressure are invaluable.
7. Financial literacy: One of the primary aims of operations management is controlling costs while meeting operational requirements to promote profitability. That requires facilities in budgeting, cost-benefit analysis, cash flow, and other aspects of financial management.
8. Time management: When everything is a priority, nothing is. Operations management can be a pressure cooker, so the ability to manage time and prioritize tasks in a fast-paced, dynamic environment is key to success. The alternative can lead to haphazard decision making, missed deadlines, and burnout, resulting in operational mismanagement.
9. Business acumen: To align operations with enterprise strategy, operations teams need a solid grasp on the business and its domain. Professionals who not only understand the business and industry in which it operates, but also track marketplace and demand changes, are better poised to stay ahead of the curve and drive long-term growth.

Operations Management Example

To understand operations management, consider these examples. The first is a manager who oversees a company’s production, workflow, inventory, equipment, and people. Another one is a manager overseeing a service, such as IT.

The field has evolved to include service-related tasks involved in making efficient, value-driven operational decisions. For example, IT operations management includes maintaining the hardware and software to enable IT strategy, planning, decision-making, research, and technical support.

Operations workflows in IT ops management include the techniques that support the organization’s efficient and safe use of technology resources and deal with the design, implementation, administration, monitoring, and performance of security measures in information systems. Those tasks protect the integrity, confidentiality, and availability of data. This role requires a comprehensive knowledge of IT security policies and operational awareness combined with proactive thinking and problem-solving skills.

Best Practices for Operations Management

Operations management best practices start with modern methods that allow employees to do their jobs efficiently and deliver a desirable product or service to customers. However, best practices may vary by company and need to evolve in tandem with changing priorities.

While there is no single path to efficient operations, organizations, and individuals have found effective ways to improve modern operations management. These include:

• Use Technology to Gain Efficiency

  As workforce automation eliminates more and more routine business processes, modern operations managers optimize operational capabilities using data-led design and engineering.

• Turn to Data for Decision-Making

  Modern ops management strategies focus on making sound business decisions based on data-driven analysis rather than relying solely on past results, employee and customer behavior, and personal biases.

• Use Operations Management for Business Processes

  Use operations management methods for business process redesign (BPR) and business process automation (BPA) projects.

BPR for ops management refers to overhauling your critical business processes using information and data gleaned from operations management performance metrics. BPR can improve return on investment, reduce operational costs, increase production capacity, and enhance service capabilities.

BPA for ops management refers to using technology to assist with or replace manual tasks and processes. BPA can increase efficiency, save time and money, reduce errors, and increase transparency. Automating ops management is most effective when replacing tasks that involve inefficient use of time and resources.

Benefits of Operations Management

Operations management can deliver a number of clear and measurable benefits to an organization. But capturing these benefits requires strategic planning and mindful execution. Because it often requires significant investment of time, money, and talent, sustained success depends on data-driven decision-making and a commitment to continuous process optimization.

Below are some of the more common benefits of effective operations management, with tips on how to achieve them.

• Optimized budgets:

  Smart operations management can uncover cost-saving by streamlining processes, reducing waste, leveraging automation, and improving supplier collaboration. Using financial analytics to monitor cash flow, adopting flexible budgeting or zero-based budgeting, and renegotiating contracts with suppliers can all help with budget optimization.

• Improved efficiency:

  Streamlining workflows and digitizing tasks with tools such as ERP platforms can reduce redundant efforts, address production delays, and minimize manual errors. Process mapping can be a valuable tool for pinpointing production bottlenecks (like excessive handling or inefficient workspace layouts). Automating mundane and repetitive tasks, such as inventory tracking, is another efficiency booster.

• Better quality control:

  Setting and communicating clear quality benchmarks, establishing robust quality control processes, and training employees on compliance can minimize product defects. This supports greater production consistency, more efficient operations, and happier customers. Investing in real-time product quality monitoring throughout the production process can help identify issues at the source, before they compound.

• Enhanced decision-making:

  Effective operations management teams use data and advanced analytics to support their decisions, from forecasting demand and budgeting to allocating resources and mitigating supply chain disruptions. Investing in centralized data repositories, such as through ERP platforms, creates the unified visibility that makes real-time, business-wide decision-making possible.

• Happier customers:

  A 2024 study published in the International Journal of Advances in Engineering and Management suggests that efficient operations management can increase customer satisfaction and provide businesses a competitive edge. Better operations management can lead to high quality products, more timely delivery, and more responsive customer service, for example, all of which can keep customers satisfied. Companies can supercharge this effect by implementing feedback loops to address customer concerns, while making proactive efforts to identify the root causes of operational issues—and address them promptly.

• Increased competitive advantage:

  Keeping costs under control, adapting quickly to change, and improving processes through new tools or ideas can help companies outperform rivals. Businesses that continuously refine operations and respond to shifting customer and market demands are better positioned to lead in their industries.

Challenges in Operations Management

Operation management challenges include decision-making, resource allocation, and time management; the goal is to ensure objectives are met on time and within budget.

Common operation management challenges include:

• Business dynamics:

  Operations managers juggle multiple business functions and make decisions that touch other departments in areas such as product development, customer support, and finance.

• Global ops:

  Global supply chains challenge operations management to stay current with global market trends and find operational efficiencies across international operating environments.

• Advanced technology:

  Advances in technology continue to increase the technical complexity of this discipline. Today, ops managers require significant technical proficiency and information management expertise.

• Time management:

  Operations management problems arise from many places, but the most frequent challenge is inefficient time allocation caused by factors such as labor shortages.

• Sustainability:

  Evolving regulations and resource shortages challenge operations managers to find sustainable business practice efficiencies that account for future operating environments.

Human Behavior and Operations Management

Another challenge in managing operations well is addressing the role of human behavior in how tasks are carried out and decisions are made. Even the most efficient systems can falter if they don’t reflect how people actually think and behave in real-world situations. Flesh-and-blood employees don’t always base their decisions on logic and factual information; They may narrow their choices unintentionally based on experience or gut instinct. And, as humans, we can make mistakes—especially when under pressure. Ignoring this reality can quietly undermine operational performance.

The field of behavioral operations management explores how these human factors affect everything from planning and scheduling to risk-taking and compliance. Drawing on knowledge from psychology, sociology, and behavioral economics, it brings a people-centered lens to traditional operations thinking. The goal is to account for the impact of human emotions, biases, and social dynamics on decision-making and, ultimately, operational processes.

Research from the Journal of Operations Management shows how behavior like risk aversion can directly harm performance, for example, by causing delays in adopting process changes or leading teams to overstock inventory. These tendencies can seem minor, and to many, risk aversion may seem like a “good” trait. But regular overstocking or change avoidance can lead to larger inefficiencies over time.

Understanding how human behavior could negatively impact operations allows leaders to design smarter, more resilient systems. This might mean building error-resistant processes, devising forecasting and modeling plans with human limitations in mind, or offering better support during high-pressure decisions.

An Example of How Technology Fuels Operations Management

The family-owned, online furniture company casalife needed an integrated business solution to become more efficient to stay competitive with larger online retailers. The small retailer couldn’t afford the high up-front IT investment and maintenance costs associated with typical on-premises solutions.

With NetSuite’s SuiteCommerce solution, casalife was able to meet the demands of its ecommerce operations and become more agile and able to take on growth opportunities. The result was an estimated savings of $120,000 a year in personnel and other costs using NetSuite for purchasing, operations management, and CRM compared to the competing solution.

NetSuite Has Powerful Tools to Propel Your Operations and Business

Redefine your operations workflows and more effectively monitor manufacturing processes by integrating industrial monitoring devices and software with NetSuite’s Advanced Manufacturing solution. NetSuite eliminates the gap between operational intelligence and business outcomes with real-time visibility and reporting and customizable operations dashboards that bring clarity and context to ops management.

Gain a more cohesive picture of your manufacturing operations and empower quicker response times to ensure optimal production. The system’s built-in business intelligence toolkit helps you create more informed strategic decisions through real-time analysis of supply chain data that drives system improvement. Empower your ops managers, put ops data into action, and get products to market faster and more efficiently with unified global manufacturing management in the cloud.

Operations management is a broad discipline, and in many industries, it’s a strategic one. When done well, it can mean the difference between business success and failure. Though it requires meaningful investment, deliberate and consistent effort can deliver strong returns in profitability, alignment, and customer satisfaction.

Operations Management FAQs

What does operations management do?

Operations management oversees daily business activities to ensure efficiency and profitability. It focuses on optimizing production, improving processes, and managing supply chains.

What is the role of operations manager?

An operations manager directs daily business activities, allocates resources, ensures compliance with policies, and strives to achieve organizational goals efficiently.

What is the difference between an operations manager and a project manager?

Operations managers focus on improving and maintaining ongoing business functions such as production, supply chain, quality control. Project managers oversee temporary initiatives with defined goals, timelines, and budgets. While both use similar skills, operations work is continuous; project work is time-bound.

What are the 5 P’s of operations management?

The five “P’s” of operations management are:

• Planning: Setting objectives, forecasting demand, and allocating resources.
• Process: Designing and optimizing workflows to improve productivity and efficiency.
• People: Hiring, training, and fostering a collaborative, high-performing workforce.
• Possessions: Managing physical resources such as inventory, equipment, and space to reduce waste.
• Profits: Prioritizing long-term growth and profitability over short-term cost-cutting.

What are 7 core functions of operations management?

Seven of the most common core functions of operations management include:

• Operational planning: Aligning long-term, mid-term, and daily plans with business goals. This includes designing processes, allocating resources, and selecting and tracking key performance indicators.
• Finance and budgeting: Forecasting costs, managing budgets, and analyzing financial data to improve profitability and reduce waste.
• Product/service development: Designing offerings that customers want and are feasible to produce. Includes prototyping, testing, and refining.
• Supply chain management: Overseeing procurement, logistics, delivery, and supplier relationships to maintain a steady flow of goods and services while minimizing disruptions.
• Inventory management: Keeping the right amount of inventory on hand to avoid stockouts and overstocking. Uses demand forecasting to guide ordering and production.
• Business forecasting: Predicting demand, resource needs, and market shifts to guide inventory, production, and staffing decisions.
• Quality control: Maintaining consistent output quality through inspections, performance standards, and process monitoring to meet compliance and customer expectations.

What departments fall under operations?

While it varies by company, common departments under the operations umbrella include production, supply chain, quality assurance, process improvement, facilities, and maintenance. In some cases, IT, sales, or project management may also sit under operations.