3.4.1 Flashcards
setting operational objectives
what is operation management?
a function of business concerned with the transformation of resources (inputs) into goods and services used by both end consumer and other businesses
- firms need to purchase resources, convert them into outputs and distribute them to end users
what is production?
the process by which inputs (resources) are transformed into outputs in the form of a useful product or service
what are the workforce and operations of large/mass production firms?
- firms that utilise mass-production (flow production) techniques don’t usually require highly skilled staff
- employees working in mass production are cheaper to employ
what are the workforce and operations of smaller firms?
- bespoke items that meet the individual needs of customers require higher skilled staff
- higher skilled staff can be expensive to employ and may need to develop further through training
- firms are able to charge a premium price for the final product or service
what is the size and nature of SME’s (small to medium sized firms)?
- more likely to understand the individual needs of the customer more
- more frequent users of small-scale manufacturing techniques e.g. job and batch production
what is the size and nature of larger firms?
- more finance they have available to invest in capital and mass production techniques
- have a larger customer base that needs products to be readily available
what are operational objectives?
the targets set by the operations function that specifically relate to production
what are the main objectives of operations?
Cost
Quality
Speed of response + flexibility
Dependability
Environmental objectives
Added value
operational objectives : cost
- all firms seek to minimise cost, maximise profit and reduce unnecessary waste and inefficiency
- higher manufacturing costs = higher prices for customers
- if product has lots of substitutes high selling prices make the firm uncompetitive
how do you cut cost?
- restructuring
- switch supplier
- minimise waste
operational objectives: quality
- a business consistently meets or exceeds their key quality targets, ensuring high levels of customer satisfaction
- whether or not the operational procedures have been followed each and every time for a product
operational objectives: speed of response
- how quickly a business produce/develop goods
operational objectives: how to improve flexibility?
- zero hour contracts
- lean production
- multi-skilling
what are zero hour contracts?
extra staff can be quickly added and called in when needed to increase production levels
- can result in a lack of job security and a negative response in employees
what is lean production?
minimal inventory levels are held
what is multi-skilling?
training employees so they can do several tasks
- minimises disruption through absences
- makes staff more responsive
operational objectives: dependability
- businesses tend to operate with limited levels of inventory, therefore are heavily dependant on suppliers to deliver on time every time
- firms are prepared to pay more for a dependable supplier instead of risking empty shelves and lost customers
operational objectives: added value
- the process of increasing the worth of a resource by modifying it in some way
- make sure he actual price charged for a final product is worth more than the cost of its individual parts and assembly
how do you increase added value?
- add extra features
- raise selling prices
- strengthen branding
- increase convenience
raising selling prices
- widens monetary gap between the inputs and outputs
- depends on the price elasticity value of the product or service
- item will see a substantial decline in sales if selling price is raised meaning a fall in sales revenue
branding
- provides businesses with a mean of differentiating their good or service
- premium brands are able to sell their goods for a significantly higher price
what are the pros of added value?
- consumers receive unique products
- increased brand recognition and company image
- higher profits for manufacturer
- increased profits = higher shareholder dividends
what are the cons of added value?
- seen as poor value of money amongst customers
- lower sales
- damage to brand image if customers feel exploited
- falling sales = rising supply costs
what are internal influences on objectives?
- marketing
- finance
- HR (human resources)
