What are the business operations of a company?

Business operations are a fundamental element of any running business, and should also cover the key elements of any new business venture development strategy.

Regardless, in my contact with the younger generations, I have found that there is often a misunderstanding on what the operations of a business are, which aspects it covers and how important it is for business success.

I am sure that for many laymen or laywomen, the concept of operations may bring memories or ideas around battles (military operations), intrigue movies (black operations), or medical environments (surgical operations). Well, they are not far off, since there are real links to all of these concepts.

In this post, I would like to explain some basic concepts surrounding business operations. I would also like to put it in a relationship with what is, in my view, the other key concept of any running business: the supply chain.

The operation of a company refers to the set of complex activities that allow any business (from a multinational company to a factory or even the small grocery shop on your street corner) to deliver value to their customers. You may notice that I introduced the term “complex” in the definition, and this is a key element that I would like to consider.

Keep in mind that business operations are about managing complexity, in the sense that it deals with the management of different elements of the business. You may want to envision the business operation manager of a factory as the conductor of an orchestra: he needs to give pace (rhythm) to the whole team and also manage the entry of each section (department) in complete coherence with the company strategy (the score) and the other sections.

The number of different departments or areas that the business operation manager needs to coordinate depends of course on the particular business or market of the operation. In general, however, there will be a consensus that areas like production, logistics, quality, engineering, purchasing will be part of his “orchestra.” You can see that these latter areas are directly linked to the value created by the company, and this makes the operation manager a key element in the execution of the company strategy.

I usually explain to my students that business operations and the supply chain are interlinked. To help visualise the relationship, I like to refer to the example of a manufacturing company delivering different products, produced in distinct product lines (see figure below).

Business Operations of Manufacturing Company

In general, each product line will have a different supply chain, and the alignment of the different links of the chain will be managed by the supply chain manager. He will try to optimise the value for the customer by reducing costs, reducing delivery times, widening up the possible options for the chain and improving the overall quality of the product. He will do that without paying much attention to the other supply chains, even though some elements may overlap, particularly those performed within the same company (manufacturing). In many cases, the factory might be the black box for the supply chain managers, as the factory runs on departments like engineering, manufacturing and quality.

The operation manager has no direct control over these aspects, mainly because these are common resources to all production lines. This black box is the complex environment I was referring to above, and the operation manager is responsible for the alignment of the different departments in order to optimise the yield and performance, not of one, but of all production lines within the company. The alignment between operations and supply chain is therefore essential for the success of any business.

Ramon Garcia