Unit 4 Flashcards
Why does a business set operational targets?
- to act as a focus for decision making and effort
- to provide a benchmark against which success or failure can be measured
- to improve co-ordination, by giving teams and departments a common purpose
- to improve efficiency, by examining the reasons for success and failure in different areas
Operational objectives:
- concerned with those aspects of the business which are directly linked to the fulfilment of customer orders.
- takes inputs
- process them to form an output
- distributes outputs to customers
- related to how efficiently aspects of this process are achieved.
Numbers of measures of efficiency related to operational objectives:
- cost:
→ the cost to the business of each individual product of service supplied - quality:
→ quality of raw materials processes, output and customer service to match customers’ expectations - speed of response and flexibility :
→ speed with which customers’ needs are met & the ability to tailor good to meet individual needs i.e. Matching supply to demand - dependability:
→ getting the right product, with the right quality & quality to the right customer on time. - environmental objectives:
→ meeting targets to minimise any detrimental effects of the operations of the business on the environment. - added value
→ the ability to ensure that the value of the output is higher than the sum of the value of all the value of all the inputs
What are the 4 measures of operational performance?
- labour productivity
- unit costs (average cost)
- capacity
- capacity utilisation
Labour productivity calculation:
Output per period
—————————————————
Number of employees per period
How can an increase in labor productivity benefit a business?
- Increase output without affecting costs
- reduce costs without affecting output
-∴ possible for a business to increase output & cut costs at the same time.
What are the 2 main types of business growth?
1) organic growth: growth that comes from within the business- such as increasing sales or opening new branches
2) inorganic growth: growth that comes from external sources, such as mergers, acquisitions or takeovers
What is a strategic objective?
Long-term goal / target, a business aims to achieve, help fulfill missions & visions. Objectives guide businesses strategy & decision-making
What is the difference between mission & vision statements?
- Mission statement: declaration of company’s purpose & primary objectives
- vision statement: forward-looking statement, outlines where business sees itself in future.
What are some advantages of internal (organic) growth for a business?
- Less risk compared to external growth.
- more control over the process
- can improve efficiency & productivity without need for acquisitions (when a company purchases another company)
What are disadvantages of mergers and acquisitions?
- High costs involved
- integration issues, differences in cultures
- potential job losses
- risk of negative impact on brand reputation.
What is a SWOT analysis?
Strategic planning tool, identities businesses Strengths, Weaknesses, Opportunities, and Threats. Helps businesses understand current position, make informed decisions
What is the definition of operational objectives?
Specific, measurable goals set by a business’s operations function to support overall corporate objectives.
What’s an example of setting operational objectives?
- Improve quality by reducing product defects by 10% over the next 12 months
- increase capacity utilisation to 85% within 6 months
What are some types of operational objectives?
- Cost and volume targets
- quality targets
- efficiency and flexibility
- environmental objectives
- Innovation
- dependability
Why do businesses set operational business?
- improve coordination
- guide decision-making
- motivate staff
- measure performance
What is the formula for labour productivity?
Labour productivity = output per period / number of employees
What is the formula for unit costs?
Unit costs = total costs / total units produced
What is the formula for capacity utilisation?
Capacity utilisation (%) =( actual output / maximum possible output) x100
Why is analysing operational performance important?
- Identifies strengths/weaknesses
- aids benchmarking
- informs strategic decisions
What is the definition of efficiency?
Efficiency is about producing more output from the same or fewer inputs
How can you increase efficiency?
- Invest in technology
- train employees
- improve layout of production
- lean production
What are some lean production techniques?
- Kaizen
- just-in-time (JIT)
- time-based management
What are the benefits of higher productivity?
- lower unit costs
- competitive pricing
- higher profitability
What are the disadvantages of higher productivity?
- Increased costs
- potential quality issues
- environmental impact
- challenge in work force motivation and flexibility
What is the definition of quality?
Quality is about meeting or exceeding customer expectations.
What are the methods of quality?
- Quality Control: Inspection at the end
- Quality Assurance: Checks during production
- Total Quality Management (TQM): Every employee involved
- Continuous Improvement (Kaizen)
What are the benefits of quality?
- Customer satisfaction
- Brand reputation
- Lower waste/returns
What are the potential draw backs of quality?
- Costly to implement
- Time-consuming
- Training requirements
What’s an example of quality?
Using TQM at Toyota led to faster production and fewer defects.
What is the definition of inventory?
Inventory: Raw materials, work-in-progress, finished goods
What is the definition of buffer stock 7
Buffer Stock: Backup stock for uncertainties
What is the definition of lead time?
Lead Time: Time between ordering and delivery
What is the definition of re-order level?
Re-order Level: When new stock should be ordered
What is Just-in-Time (JIT) when managing inventory and supply chains?
Stock arrives exactly when needed — reduces storage costs but increases risk.
What is supply chain management?
- Managing the flow of goods from suppliers to customers
- Focus on efficiency, cost, reliability, and flexibility
What are the benefits of effective SCM?
- Lower costs
- higher quality
- faster delivery
What factors influence operational objectives?
- Corporate objectives
- Finance available
- Technology
- Human resources
- Competitor actions
- Legal and environmental factors
What’s the difference between strategic and tactical operational decisions?
- Strategic: Long-term, affect the whole business (e.g., opening a new factory)
- Tactical: Short-term, support strategy (e.g., scheduling staff shifts)
What are the consequences of under-utilisation of capacity?
- Higher unit costs
- Demotivated staff
- Poor ROI on assets
- Perceived decline in demand
Benefits and drawbacks of high capacity utilisation?
✅ Spreads fixed costs over more units
✅ Increases competitiveness
❌ Can lead to overworked staff
❌ Less flexibility for maintenance or new orders
Define lean production & give 2 examples
Lean production aims to minimise waste and maximise value.
Examples:
- JIT (Just-in-Time)
- Cell production
- Kaizen
What are the benefits of cell production?
- Improves team motivation
- Speeds up problem-solving
- Greater flexibility
Difference between labour productivity & capital productivity?
- Labour: Output per worker
- Capital: Output per unit of capital (e.g. machinery)
What are the costs of poor quality?
- Returns/refunds
- Loss of customer loyalty
- Reworking or scrapping products
- Damage to reputation
Define “zero defects” in quality management
Aiming for no mistakes in production — focus on getting it right the first time.
What is a supply chain?
A network of suppliers, manufacturers, and distributors involved in producing and delivering a product.
Risks of holding too much inventory?
- High storage costs
- Obsolescence/spoilage
- Increased risk of theft
- Cash tied up in stock
How can technology improve inventory control?
- Real-time stock tracking
- Automated reordering
- Improved forecasting
- RFID and barcode scanning
Advantages and disadvantages of just -in -time (JIT) inventory?
✅ Lower storage costs
✅ Reduced waste
✅ More cash flow available
❌ Risk of stockouts
❌ Reliant on reliable suppliers
