3.4.1 Setting Operational Objectives.

Question 1

Define operations management.

Answer 1

The process that uses the resources of an organisation to provide the right goods or services for the customer.

Question 2

What is the value of setting operational objectives?

Answer 2

To act as a focus for decision making and effort.

To provide a yardstick against which success or failure can be measured.

To improve co-ordination, by giving teams and departments a common purpose.

Improves efficiency - examine reasons for success and failure in different areas.

Question 3

Define an operational objective.

Answer 3

Specific, focused targets of the operations management function within an organisation.

Question 4

Outline some operational objectives that are used to assess operational performance.

Answer 4

Costs.

Quality.

Speed of response.

Flexibility.

Dependability.

Environmental objectives.

Added value.

Question 5

Define unit costs.

Answer 5

The cost of producing one unit of output.

Question 6

What is the unit cost formula?

Answer 6

Unit cost = total cost / units of output.

Question 7

Outline reducing unit costs as a cost related operational objectives.

Answer 7

Likely to be the primary aim of most businesses in terms of cost targets.

Lower unit costs can allow for lower prices or a higher profit margin by keeping prices at their same level.

Question 8

What are two ways of reducing unit costs?

Answer 8

Reducing fixed costs.

Reducing variable costs per unit.

Question 9

Why might we focus on reducing fixed costs rather than unit costs as a whole?

Answer 9

More specific focus and a more manageable target than a broader, unit cost reduction.

Common target for newly merged businesses or businesses that have been taken over.

Question 10

Why might we focus on reducing variable costs per unit rather than unit costs as a whole?

Answer 10

Cutting labour and raw material costs - reduce variable costs per unit - can also be achieved by improving labour productivity - employee’s wages are spread over a higher level of output.

Question 11

Define quality.

Answer 11

The features of a product or service that allow it to satisfy customer expectations.

Question 12

What can quality provide?

Answer 12

A competitive edge over competitors - leads to greater sales volume and the ability to charge higher prices without losing customers.

Repeat purchases - high brand loyalty amongst customers.

Question 13

Outline some measures of quality relating to operational objectives.

Answer 13

Customer satisfaction ratings.

Customer complaints.

Level of product returns.

Scrap rate (items rejected during the production process as a percentage of the number of units produced).

Punctuality (the degree to which a business delivers its products, or provides its services, on time.

Question 14

Outline the punctuality formula.

Answer 14

Punctuality (%) =

deliveries on time
————————– x 100
total deliveries

Question 15

Define speed of response.

Answer 15

Time taken for a customer requirement to be fulfilled.

Question 16

Outline speed of response as an operational objective.

Answer 16

Quick response - leads to customer satisfaction - helps to build customer loyalty.

Quick response - may reduce costs - fewer hours of work have been put in by the labour costs.

Saving in costs associated with storage space - if inventory is moved in and out of the premises more quickly.

Question 17

Define flexibility.

Answer 17

The ability of an organisation to change its operations in some way.

Question 18

What is product flexibility?

Answer 18

Being able to switch production from one product to another.

Question 19

What is volume flexibility?

Answer 19

Being able to change the level of output of a product in accordance with changes in customer demand.

Question 20

What is mix flexibility?

Answer 20

Being able to provide a range of alternative versions of a particular good or service.

Question 21

What is delivery flexibility?

Answer 21

Being able to adapt quickly to changes in the timing and volume of deliveries to customers.

Question 22

What are the benefits of flexibility?

Answer 22

Increase the volume of sales - lead to a decrease in costs.

Question 23

What are the drawbacks of flexibility?

Answer 23

Can add to costs - sophisticated machinery and highly skilled workers add to the cost.

Question 24

How can a change in volume be achieved through flexibility?

Answer 24

If there is spare capacity which means that efficiency cannot be at its highest possible level.

Question 25

How can delivery flexibility add costs?

Answer 25

Scheduling is more difficult and therefore additional costs are likely to be incurred if changes are made at short notice.

Question 26

Define dependability.

Answer 26

Measures whether a business is ‘on time’ in providing for its customers’ needs.

Question 27

Outline dependability for products.

Answer 27

Dependability may be applied to the consistency of quality or the punctuality of delivery.

Question 28

Outline dependability for services.

Answer 28

Dependability can be measured in terms of whether the product is durable, long-lasting and unlikely to break down.

Question 29

Define an environmental objective.

Answer 29

The aims set by a business that indicate its commitment to helping those aspects of the environment where it has an impact.

Question 30

Why are environmental objectives becoming more important?

Answer 30

• Many environmental objectives, such as recycling, will allow the business to save costs.
• Many businesses recognise that they have a duty of care for the environment.
• People are becoming more aware.

Question 31

Outline some environmental objectives. `

Answer 31

- Reducing water pollution 
  by a certain level or 
  percentage. 
- Reducing noise levels.
- Reducing the use of 
  energy.

Question 32

Define adding value.

Answer 32

The process of increasing the worth of resources by modifying them.

Question 33

Define added value (value added).

Answer 33

Sales revenue - the cost of bought in materials components and services.

Question 34

How does e.g., marketing add value?

Answer 34

• Create a USP.

- Identifying an attractive mix of design, function, image and service.