3.4 Operational Management Flashcards
What are operational objectives?
Operational objectives are
S - specific
M - measurable
A - achievable
R - relevant
T - time based
What is the value of setting operational objectives?
Gives clear direction as to how to improve the business.
What are cost objectives?
Can be focused on reducing or maintaining costs, for example fixed and variable costs.
How do you measure a cost objective?
- productivity and efficiency.
- unit costs per item
What was shrinkflation?
The practice of reducing the size or quantity of a product while the price of the product remains the same or slightly increases. (Cost saving method.)
What are quality objectives?
Achieving or exceeding the required level of quality is also essential for a successful business
How to measure quality objective
- reliability of a product - how often does something go wrong
- customer satisfaction
- number of customer complaints
What are flexibility and efficiency targets?
Look at how effectively the assets of the business are being utilised and how responsive the business can be to short term or unexpected changes in demand.
What are environmental targets?
Objectives business sets itself to improve sustainability and environmental performance.
What are examples of environmental targets
- use of energy
- proportion of production materials that are recycled.
What is added value
An economic enhancement a company gives its products or services before offering them to customers.
Example of added value?
Offering a year of free tech support on a new computer.
What is a speed of response objective?
For an e-commerce business they may want to improve customer service and speed of response would be a good objective to set in order to accomplish this.
Example of speed of response objective
Reduce the average amount it takes from receiving an order for it to be dispatched to the customer.
What is capacity?
The maximum output that a business can produce in a given time with the available resources.
In what form is capacity utilisation in?
Percentage
What do you do if a question does not mention what a company’s current capacity is?
Assume it is 100%
What is the importance of capacity?
The ability to produce significant amounts of products is key to long term business success. If the business produces fewer products than the maximum capacity, the company’s revenue may suffer and in the long term profitability may become lower than it could have been otherwise.
How to utilise capacity efficiently?
- Entering new markets
-expanding the range of products - using promotions to increase demand
How to increase efficiency and Labour productivity?
-invest in employee training.
- invest in capital equipment (machinery)
- streamline production processes (lean production)
difficulties increasing efficiency and labour productivity.
- Employees may want higher pay if productivity increases
- higher cost in training
- New technologies may result in redundancies in human labour
What is lean production?
An approach to management that focuses on cutting out waste whilst ensuring quality
What is just in time management?
An inventory management method in which goods are received from suppliers only as they are needed.
Advantages & disadvantages of JIT management?
+ inventory turnover is high
+improves efficiency and productivity as it streamlines the production process (reduces time wasted)
- relies on the suppliers too much. If suppliers are late, production slows down.
-cannot meet sudden spikes in demand.
What is just in case production?
Just-in-case (JIC) is a stock control method that involves producing or purchasing stock with excess, or buffer stock in place. This means that there is always stock available for the business if required.