I get this question fairly often; is there any difference between operations and projects.
What I know in terms of Financing, Projects are under CAPEX and Operations are under OPEX.
Well, having said that, is there any other big difference?
Does any organizations are classified mainly into these two (Operations and Projects)? And if so, this is where the organization hierarchy starts? Saving Changes...
Projects are unique and temporary (definitive beginning and ending), while operations are ongoing and permanent with a repetitive output.
Projects have a fixed budget; on the other hand, operations have to earn a profit in order to run the business.
Projects are executed to start a new business objective and terminated when it is achieved, while operational work does not produce anything new and it is ongoing.
Projects create a unique product, service, or result; Operations produce the same product, aim to earn a profit and keep the system running.
A Real-World Example
Let’s say you have been given a project to build a car manufacturing facility.
You build the facility and deliver to the client. Your job is completed, and the client has started manufacturing the cars.
In this example, building the facility is an example of a project, because here you constructed a car manufacturing facility and handed it over to the client and signed off.
Designing the car is also a project (Unique).
However, once the facility starts working and the car manufacturing process starts, this will be an example of operation, because here the facility is producing a repetitive output, i.e. cars, and the process is ongoing. Saving Changes...
Thanks Kevin Drake, Noted but, I don't know to apply this practically to understand it particularly in the industry I am working in. For instance, my industry is Pharmaceuticals. In this, we have production, maintenance, QA, QC, Finance, Administration and finally Projects. Does that mean, all departments fall into Operations and my department fall into Projects?
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2 replies by Eduard Hernandez and Pradeepsai Lokanadham
Feb 12, 2018 5:18 AM
Eduard Hernandez
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From your comment it looks like you are working in a projectized matrix. If this is the case, you shall have resources from all the listed departments (QA, QC, Finance, Engineers, etc.) that work ONLY in projects and that report ONLY to the PM. These resources shall then not be involved in Operations.
Feb 12, 2018 8:38 AM
Pradeepsai Lokanadham
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Dear Muthu ,
In your case ...you are into Projects which means you need to look into your factory/Manf.Units expansions according to the organization business visions.
In my view , Generally the hierarchy starts with the Business head who can decide on the expansion units and generate multiple projects either at PMO or at manufacturing unit specific.
Product Operations Program ManagerBarcelona, Cataluña, Spain
Feb 12, 2018 5:06 AM
Replying to Muthukrishnan Ramakrishnan
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Thanks Kevin Drake, Noted but, I don't know to apply this practically to understand it particularly in the industry I am working in. For instance, my industry is Pharmaceuticals. In this, we have production, maintenance, QA, QC, Finance, Administration and finally Projects. Does that mean, all departments fall into Operations and my department fall into Projects?
From your comment it looks like you are working in a projectized matrix. If this is the case, you shall have resources from all the listed departments (QA, QC, Finance, Engineers, etc.) that work ONLY in projects and that report ONLY to the PM. These resources shall then not be involved in Operations.
From your comment it looks like you are working in a projectized matrix. If this is the case, you shall have resources from all the listed departments (QA, QC, Finance, Engineers, etc.) that work ONLY in projects and that report ONLY to the PM. These resources shall then not be involved in Operations.
Yes it is the same. Thanks for commenting Saving Changes...
Hello Muthukrishnan, that question can be confusing especially to new entrants into project profession and practice. There are same projectized companies while others are functional based. Now the real confused is where a company has both inter mingled. In real world some situations are complex, for me who has been in Telecom for over ten years its common to run a project without a budget...sounds strange, but common. In this case you borrow staff from operations depart to deploy/ excute the project.
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1 reply by Muthukrishnan Ramakrishnan
Feb 12, 2018 8:35 PM
Muthukrishnan Ramakrishnan
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I am a new entrant. And, I could understand that it depends on type of organization.
In my previous company, we only deal with projects and not any operations. We are basically a PMC who manages projects and consults clients. Now, in this case, only the company is project based rather than functional based. However, all our staffs are functional based (specialized).
Saving Changes...
Sergio Luis ConteHelping to create solutions for everyone| Worldwide based OrganizationsBuenos Aires, Argentina
Inside the same project you could have amounts that belongs to Capex and amounts that belongs to Opex.
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1 reply by Muthukrishnan Ramakrishnan
Feb 12, 2018 8:39 PM
Muthukrishnan Ramakrishnan
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Yes, it is obvious. For eg, projects like 6sigma, lean, QMS has both CAPEX and OPEX. Correct me if I am wrong?
Ideally it would be the case, however in the situation where cost cutting takes precedence you may occasionally find yourself compromising by using the same resources (staff, tools and vechicles) to implement the project. Saving Changes...
Pradeepsai LokanadhamAssistant Manager -Proposal preparation| FLSmidth Private LimitedChennai, Tamilnadu, India
Feb 12, 2018 5:06 AM
Replying to Muthukrishnan Ramakrishnan
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Thanks Kevin Drake, Noted but, I don't know to apply this practically to understand it particularly in the industry I am working in. For instance, my industry is Pharmaceuticals. In this, we have production, maintenance, QA, QC, Finance, Administration and finally Projects. Does that mean, all departments fall into Operations and my department fall into Projects?
Dear Muthu ,
In your case ...you are into Projects which means you need to look into your factory/Manf.Units expansions according to the organization business visions.
In my view , Generally the hierarchy starts with the Business head who can decide on the expansion units and generate multiple projects either at PMO or at manufacturing unit specific.
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1 reply by Muthukrishnan Ramakrishnan
Feb 12, 2018 8:36 PM
Muthukrishnan Ramakrishnan
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Yes, in my case, it is the BOD who decides for expansion project ( multiple) at a manufacturing unit.
I guess you are not looking for just the difference in definition because that can be found easily but I guess I agree with Sergio that in one project you can have both type of CAPEX and OPEX The cash flow would continue for operational expenses even your project is done no more capital expenses but until you secure the pay-back period your balance sheet keep active behind the scene, your project might have been funded by free cash flow. Your fix charges and optimization of resources plays can impact your total cost with variable charges due to project activities then after you have your running cost which include MRO through out the life cycle of the product.
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