Section 4 - Operational Performance

Question 1

What are the 7 key operational objectives for a business?

Answer 1

• costs
• quality
• speed of response
• flexibility
• dependability
• environmental objectives
• added value.

Question 2

Define operational performance

Answer 2

a measure of how many costs are incurred during production, where lower costs mean greater efficiency

Question 3

Define productivity

Answer 3

output per employee in a given time period

Question 4

How is labour productivity calculated?

Answer 4

output over a period of time / number of employees

Question 5

Define average unit costs

Answer 5

average cost of producing one item and smooths out fluctuations in the data

Question 6

How are average unit costs calculated?

Answer 6

total costs / # of units of output

Question 7

Define capacity

Answer 7

• maximum amount that a business can produce
• assumed to be 100%

Question 8

Define capacity utilisation

Answer 8

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

Question 9

What can operational data be used for?

Answer 9

• measuring efficiency
• monitoring and reacting to issues in production - problem-solving
• speeding up operations - show where problem areas are
• improve reliability and quality

Question 10

Why is capacity important?

Answer 10

• 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

Question 11

How is capacity utilisation calculated?

Answer 11

actual output / max possible output x100

Question 12

What is the max output level dependent on?

Answer 12

quantity of buildings, machinery, labour availability