What are the 7 key operational objectives for a business?
- costs
- quality
- speed of response
- flexibility
- dependability
- environmental objectives
- added value.
Define operational performance
a measure of how many costs are incurred during production, where lower costs mean greater efficiency
Define productivity
output per employee in a given time period
How is labour productivity calculated?
output over a period of time / number of employees
Define average unit costs
average cost of producing one item and smooths out fluctuations in the data
How are average unit costs calculated?
total costs / # of units of output
Define capacity
- maximum amount that a business can produce
- assumed to be 100%
Define capacity utilisation
extent to which a business uses its maximum production capacity
eg. a restaurant that can seat 40 people might only want to seat 30 diners every night to reduce staff burnout
What can operational data be used for?
- measuring efficiency
- monitoring and reacting to issues in production - problem-solving
- speeding up operations - show where problem areas are
- improve reliability and quality
Why is capacity important?
- unlikely to have predictable sales - beneficial to have wiggle room to meet unexpectedly high orders
- vital to have sufficient spare capacity to cope with higher demand while keeping max capacity low to keep costs down
How is capacity utilisation calculated?
actual output / max possible output x100
What is the max output level dependent on?
quantity of buildings, machinery, labour availability
