By Don Rosenfield
LGO Program Director
How does one define "operations"? Formally, the term refers to the production and distribution of goods and services.
But that answer only begins to tell the story. To enrich your perspective, these are the types of questions we examine in our operations courses at MIT Leaders for Global Operations (LGO):
- How do businesses coordinate the flow of material from suppliers to factories to customers?
- How do they decide what to produce in their factory?
- How do the airlines or package delivery companies schedule their complex systems?
- How does Disney manage waiting lines within its parks?
- How do hospitals plan capacity and schedule their beds?
Questions such as these are important both for small companies (which must decide how much inventory to keep) and the largest companies (which manage global product and service networks).
How to Source in a Global Environment
In addition to the direct questions posed above, we also ask students to consider broader questions in our operations courses. For example:
- Under what circumstances does it make sense to outsource? To offshore?
- How can you develop new products and services?
- How do you handle the challenges of managing suppliers?
Today, the most significant operations-related questions concern how to source in a global environment. Whether to offshore operations to China or India, whether to own your own production assets or outsource them, and how to coordinate with overseas companies are complex issues that lack clear-cut answers. The operations field provides a framework and approach for assessing these issues and making better-educated decisions.
Societal & Business Competitiveness
Why does operations matter on the societal level? For one thing, it is the basis of competitiveness and wealth generation. Operations represents a major portion of any society's economic activities, and understanding how to manage operations is the key to development.
Despite impressions to the contrary, advanced societies such as the United States are responsible for a significant fraction of global output in manufacturing. This is the basis of our society's high standards of living. Less wealthy countries, on the other hand, are in such a position because they have not mastered manufacturing and service skills to the same degree. For these societies to develop, they must invest in manufacturing and service operations to spark job creation and raise living standards.
If notions of societal competiveness seem too abstract, the role of operations at a business level underscores the importance of the field. Capabilities in operations are often the basis of competitive advantage in the marketplace, as numerous examples show. For instance:
- BMW and Apple, two companies known for their innovative products, have unique capabilities in how they design, develop and bring to market new products.
- Amazon, which aspires to be the "Earth's most customer-centric company" and offers access to an enormous variety of products, has superior capabilities in the way its technology interfaces with customers and in its distribution systems.
These examples are based on concepts of operations management — and are the types of issues we explore in our operations courses every day.