Operational Decisions

Operational objectives

Targets set for production

Quality

Maintaining or improving quality

Costs

Cutting fixed or variable costs , especially if the business competes on price

Flexibility

Business needs to react to customers needs

Varying the amount of goods or services so that volume doesn’t exceed demand

Efficiency

Make better use of resources to reduce costs and increase profits.

Eg. Increasing capacity utilisation or improving labour and capital productivity

Innovation

Research and development work on innovation targets

Hard to achieve as unexpected problems can occur

Environment

Pressure from customers and government lead to environmental objectives

Speed of response

Speed at which a business can operate / related to efficiency

Eg. Decreasing production time, waiting time ( for customers ) and getting products to market faster

Dependability

Reliable businesses can often charge more

Customers depend on business, business depends on suppliers

Added Value

Increasing the difference between the cost of the raw material and the cost that the customer pays

Eg. Wood to a table

Added Value formula

Sales revenue - Cost of bought-in goods and services

Internal factors influencing op objectives

• Nature of product

• Availability of resources

• Other departments

• Overall objectives

External factors influencing op objectives

• Competitors’ performance

• Market conditions

• Demand for product

• Changing consumer needs

• New technology

Capacity

The maximum output with the sources available

Capacity utilisation

( output / capacity ) x 100

Outsourcing

A firm uses another firm to do some of their work on their behalf

Firms outsource to meet unexpected increases in demand

Unit costs

Total costs / Units output

Labour productivity

Output per period / Number of employees

How much each employee produces

Ways to improve labour productivity

• Improve employee motivation

• Training

• New technology

Lean production

efficient production that minimises waste

eg. just-in-time, time based management and kaizen

Just-in-time production

• Reduces waste and costs by having very little stock and processing orders only as they come

Storage costs reduced, cash flow increased, more flexible

Bad for production if suppliers are unreliable

Time based management

reduces wasted time by being fastest to produce in the market.

• Reduces lead time

• customer satisfied so competitive advantage

• lead to innovation as less time spent on reasearch and development

• Quality may drop with faster production

Technology helping efficiency

• easier stock control

• communication

• computer aided design CAD

• computer aided manufacturing CAM

pros and cons of technology

• increased productivity and quality

• reduce waste

• better communincation

• initial costs high

• recquires maintenance

• tech replacing manual work = redundancies

Capital intensive firms

like car manufacturers

• Cheaper than manual labour in long term

• less human error

• machines can be 24/7

• machines easier to manage than ppl

• high set up costs

• machines usualy one task - less flexi

• break down = long delays

• workers fear being replaced

Labour intensive firms

like NHS

• people more flexible

• cheaper and smaller scale

• workers can solve problems that arise

• harder to manage people

• ppl are unreliable

• ppl dont work non stop

benefits of good quality

• quality can be USP

• improve brand image

• more repeat and new customers

• less refunds so time better spent

QUALITY CONTROL

• assumes errors are unavoidable

• detects errors after then fixes

QUALITY ASSURANCE

• errors are avoidable

• prevent errors and get it right first time

• workers responsible for passing on good quality products to next stage in production process

total management management

whole workforce responsible for good quality

• increased motivation

• better brand image

• less faulty products =less waste

• takes long to introduce

• can demotivate staff if its plenty effort

• training is expensive

Quality circles

members from all levels of businessmeet to solve quality issues .

Can increase motivation and productivity but floor staff may not be listened to by management

Kaizen

all employees improve their quality of work slighlty over time

good for small business as its cheap to introduce and will increase motivation . not good if firm wants quick improvement