4.1a - Understanding Operational Objectives Flashcards
Operations management definition
The process that uses the resources of an organisation to provide the right goods for the customer
Examples of operational objectives:
- Costs
- Quality
- Speed of response
- Efficiency
- Added value
Unit cost formula
Total cost / units of output
Quality definition
The features of a product that allow it to satisfy customers
Reasons quality is important:
- Markets are becoming more competitive
- Customers are now more knowledgeable and demanding (they will complain)
- Information about poor quality can be shared easily
Examples of quality targets:
- Low defect rate
- Customer complaints
- Customer loyalty
Speed of response definition
The time taken for a customer requirement to be fulfilled
Flexibility definition
The ability of an organisation to change its operations in some way
Examples of efficiency and flexibility targets:
- Labour productivity
- Output per time period
- Capacity utilisation
- Order lead times
Adding value definition
The process of increasing the worth of resources by modifying them
What are the different ways value can be added?
- Transformation of various components into a finished product
- Distributing and retailing to bring the product within easier reach of the customer
- USP
- Established brand
- Customer service
Added value formula
Sales revenue - cost of goods
What are the internal influences on operational objectives?
- Nature of product (technology company likely to focus on innovation)
- Resources
- Other departments
- Corporate objectives
What are the external influences on operational objectives?
- Competitors performance
- Market conditions
- Demand
- New technology
What are the five common methods of production?
- Job production
- Flow production
- Batch production
- Cell production
- Lean production
Job production definition
Production of one-off items by skilled workers
Flow production definition
Mass production on a continuous production line with division of labour
Batch production definition
Production of small batches of identical items
Cell production definition
Production divided into sets of tasks, each completed by a work group
Advantages of adding value:
- Higher price
- USP
- Protection against competitors offering lower prices
