Understanding the operations side of an organization is important for comprehending how efficiency, productivity, and controls contribute to that organization's success. Operations management is defined as the design, operation, and control of the transformation process that converts resources into finished goods and services. Improving productivity is a major goal for most organizations. Productivity is the overall output of goods and services produced, divided by the inputs needed to generate that output.
Organizations can improve productivity by looking at both people and production variables.
Manufacturing organizations are organizations that produce physical goods such as steel, automobiles, textiles, and farm machinery. These types of organizations dominated the economic base during the first half of the century. Now, service organizations dominate. These are organizations that produce non-physical outputs such as educational, medical, and transportation services that are intangible, can't be stored in inventory, and incorporate the customer or client in the actual production process. A major challenge for management is deindustrialization which is the conversion of an economy from dominance by manufacturing to dominance by service-oriented businesses.