3.4 Flashcards
Operational objectives
- Corporate objectives
- HRM objectives
- Financial objectives
- Marketing objectives
- Efficiency and productivity
- Capacity management
What is operational managment
The management of processes activities and decisions relating to the way goods and services are produced and delivered
Key tasks of operations management
- Add value
- Operate efficiently
- Manage resources
- Coordinate supply chain
- Ensure quality
Transformation process
Inputs –> Transformation process –> Outputs
- The transformation process describes what happens inside the business
- This is where value is added to inputs to create outputs
Key types of Operational objectives
- Cost & Volume
- Quality
- Efficiency & flexibility
- Environmental
Cost and volume objectives
- Business needs to ensure that operations are cost-effective
- Traditional measures of cost-effectiveness is “unit cost” (total costs divided by total units)
- Businesses in the same industry face similar cost structures, but each varies in terms of productivity, efficiency and scale of production
- The business with the lowest unit cost is in a strong position to be able to compete by being able to offer the lowest price of make the highest profit margin
Examples:
- Productivity & Efficiency (e.g. units per week or employee
- Unit cost per item
- Contribution per unit
- Number of items produce (per time period or per machine)
Business need for quality
- Quality is one of the most important challenges facing a business
- Markets are more competitive: Customers are more:
> Knowledgeable
> Demanding
> Prepared to complain about poor quality
> Able to share information about poor quality - If a business can develop a reputation for high quality, then it may be able to create an advantage over its competitors
Quality objectives
- Scrap/ defect rates: A measure of poor quality
- Reliability - How often something goes wrong; average lifetime use
- Customer satisfaction
- Number/ incidence of customer complaints
- Customer loyalty
- Percentage of on time delivery
Efficiency & Flexibility objectives
- Closely linked to cost targets
- Look at how effectively the assets of the business are being utilised
- Also measure how responsive the business can be to short-term or unexpected changes in demand
- Efficiency and flexibility are key determinates of unit costs
Examples
- Labour productivity
> Output per employee, units produced per production line and sales per shop
- Capacity utilisation
> The proportion of potential output actually being achieved
- Order lead times
> The time taken between receiving and processing an order
- Output per time period
> Potential output per week on a normal shift basis; potential output assuming certain levels of capacity utilisation
