Business 4
Operational Management
—>Operational objectives
Operations - planning, organising and control of how goods or services are produced
Components:
– Designing and improving processes
– Capacity planning
– Stock management
– Supply chain management
– Quality control
– Continuous improvement
– Scheduling and logistics
-> Find ways to optimise processes
-> Determines the production capacity required to meet customer demand
-> Responsible for managing the stock levels of raw material, work in progress and finished goods
-> Work closely with suppliers to ensure timely delivery
-> Implement quality control measures to ensure products meet quality control
-> Strives for ongoing improvement
-> Develop production schedules
—> Setting operational objectives
– Operational objectives are short term goals to help business run more efficiently and meet
overall aims
– Focus on how products are made or services are delivered
– Often focus on reducing costs or improving quality
Reducing costs objectives:
– Raising capacity utilisation
– Improving labour productivity
– Lowering inventory holding
– Achieving purchasing economies of scale
Improving quality
– Reducing defects
– Gaining an industry quality certificate
– Boosting customer satisfaction scores
– Improving supplier quality
Flexibility and speed of response
– Flexibility matters because customer tastes and order sizes can change without warning
– Speed of response is vital because modern buyers expect rapid delivery
, Objectives to improve flexibility or reduce speed of response:
– Multi skilled workforce
– Modular product design
– Preventative maintenance
Environmental objectives
– Businesses now have to meet stricter environmental maws, rising energy cost, growing
customer concern about sustainability
Added value - process of taking raw materials and using them in such a way that the end product
created is worth more than the costs
—> Operational performance
– Labour productivity measure output per worker during period of time
Labour productivity = output / number of workers
Higher labour productivity -> lower labour unit costs -> improved efficiency -> competitive edge
– Unit cost is the average of producing one unit of output
Unit costs = total costs / total output
Factors that determine capacity
– Buildings and space
– Equipment and technology
– Supplier reliability
– Number and skills of workers
– Available finance
– Expected demand
– Seasonal factors
– Capacity utilisation measures how effectively a business uses its assets to produce output
Capacity utilisation = current output / max possible output x 100
Under utilisation
– Means resources are being underused
– Likely to increase unit costs because fixed cots are spread over fewer units
– Workers are under deployed, leading fears of redundancy
– Provides flexibility
– Workers are freed up to complete maintenance tasks
Operational Management
—>Operational objectives
Operations - planning, organising and control of how goods or services are produced
Components:
– Designing and improving processes
– Capacity planning
– Stock management
– Supply chain management
– Quality control
– Continuous improvement
– Scheduling and logistics
-> Find ways to optimise processes
-> Determines the production capacity required to meet customer demand
-> Responsible for managing the stock levels of raw material, work in progress and finished goods
-> Work closely with suppliers to ensure timely delivery
-> Implement quality control measures to ensure products meet quality control
-> Strives for ongoing improvement
-> Develop production schedules
—> Setting operational objectives
– Operational objectives are short term goals to help business run more efficiently and meet
overall aims
– Focus on how products are made or services are delivered
– Often focus on reducing costs or improving quality
Reducing costs objectives:
– Raising capacity utilisation
– Improving labour productivity
– Lowering inventory holding
– Achieving purchasing economies of scale
Improving quality
– Reducing defects
– Gaining an industry quality certificate
– Boosting customer satisfaction scores
– Improving supplier quality
Flexibility and speed of response
– Flexibility matters because customer tastes and order sizes can change without warning
– Speed of response is vital because modern buyers expect rapid delivery
, Objectives to improve flexibility or reduce speed of response:
– Multi skilled workforce
– Modular product design
– Preventative maintenance
Environmental objectives
– Businesses now have to meet stricter environmental maws, rising energy cost, growing
customer concern about sustainability
Added value - process of taking raw materials and using them in such a way that the end product
created is worth more than the costs
—> Operational performance
– Labour productivity measure output per worker during period of time
Labour productivity = output / number of workers
Higher labour productivity -> lower labour unit costs -> improved efficiency -> competitive edge
– Unit cost is the average of producing one unit of output
Unit costs = total costs / total output
Factors that determine capacity
– Buildings and space
– Equipment and technology
– Supplier reliability
– Number and skills of workers
– Available finance
– Expected demand
– Seasonal factors
– Capacity utilisation measures how effectively a business uses its assets to produce output
Capacity utilisation = current output / max possible output x 100
Under utilisation
– Means resources are being underused
– Likely to increase unit costs because fixed cots are spread over fewer units
– Workers are under deployed, leading fears of redundancy
– Provides flexibility
– Workers are freed up to complete maintenance tasks
