Influences on Operational Objectives

What are the key types of operational objectives?

• Costs

• Quality

• Speed/Flexibility

• Dependability

• Environmental

• Added Value

What are the features of the key types of operational objectives?

• Costs

  • Unit costs

  • Fixed costs (break-even)

  • Productivity/efficiency

• Quality

  • Scrap/Defective output

  • Customer service

  • Customer returns

• Speed/Flexibility

  • Labour productivity

  • Capacity utilisation

  • Order lead times

• Dependability

  • Downtime (Production)

  • Maintenance costs

  • Reputation for quality

• Environmental

  • Waste management

  • Recycling

  • Carbon emissions

• Added value

  • Gross profit

  • Gross profit margin

  • Unit costs

What are the internal influences on operational objectives?

• Corporate objectives:

  • The most important internal influence. An operation objective (e.g. higher production capacity) should not conflict with a corporate objective (e.g. lowest unit costs)

• Finance:

  • Operations decisions involve investment and cost. The financial position of the business (profitability, cash flow, liquidity) directly affects the choices available

• Human resources:

  • For a services business in particular, the quality and capacity of the workforce is a key factor in affecting operational objectives. Targets for productivity, for example, will be affected by the investment in training and automation

• Marketing:

  • The nature of the product determines the operational set-up. Regular changes to the marketing mix- particularly product- may place strains on operations, particularly if production is relatively inflexible

What are the external influences on operational objectives?

• Economic environment:

  • Crucial for operations. Sudden or short-term changes in demand impact on capacity utilisation, productivity etc. Changes in interest rates impact the cost

• Competitor efficiency flexibility:

  • Quicker, more efficient or better-quality competitors will place pressure on operations to deliver at least comparable performance

• Technological change:

  • Also significant- especially in markets where product life cycles are short, innovation is rife and production processes are costly

• Legal and environmental change:

  • Greater regulation and legislation of the environment places new challenges for operations objectives