BUSS3 Chapter 11 Understanding Operational Objectives

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Teacher presentation AQA Unit 3

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Chapter 11 Understanding Operational :

Chapter 11 Understanding Operational Learning Objectives At the end of this chapter you will be able to Understand the range of operational objectives typically set by larger businesses Understand how internal and external factors can influence the setting of operational objectives

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Memory Challenge Operations Objectives

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Several key terms will appear They will disappear after 30 seconds (do not write anything in this time) Your task: (1)List the terms + (2) Define them (8 mins to get as many as possible)

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Operation objectives Carbon footprint productivity Environmental target Cost target Quality target Volume target Efficiency target Lean Production Innovation Benchmarking

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Over to you!

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Operations – practice for recommendations (1) You are a consultant and have been invited by the Operations Director of Sainsbury to advise them on the problem below. Using your knowledge of Operations advise them on the following (i) new objective/s (ii) strategy to achieve the objectives (iii) what internal or external factors they will need to take into consideration Make sure you give your rationale for the above. Start by showing them that you understand the consequences of the problem below.

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Introduction All organisations share common operational objectives regardless of size or sector These objectives must be met to Satisfy customer needs Compete effectively All firms will attempt to Produce goods and services that are fit for purpose Deliver quickly and on time Produce the right number of goods as cheaply as possible If you are Ryanair you will shave costs to the minimum If you are Singapore Airlines you may accept that your costs will be higher The crucial thing is that the operational objectives are in line with other functions such as marketing or HR There has to be flexibility to allow activities to be varied or adapted to meet changing demand

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Key operational objectives - Costs All will keep costs down Particularly those that compete on price Costs determine what is charged to the customer It affects the firm’s ability to compete Plus it affects the amount of profit made Costs are determined by efficiency This is measured by productivity The higher the efficiency the lower the costs The higher the productivity the lower the costs

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Key operational objectives - Volume Goods need to be made in the right quantities This seems obvious but it means committing resources based on demand predictions Overestimating will lead to wasted goods Increased stock holding costs Price cutting Underestimating will mean Missed sales opportunities Customer dissatisfaction

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Key operational objectives - Quality The exact meaning of quality will depend on the nature of the operations Quality is about getting things right by meeting or beating customer expectations over and over again They also need to have those products/services ready when customers expect them Failure to do this will mean Losing customers to the competitors Managers have to make sure quality standards are being met and Make sure products move smoothly from one stage to the next This will help reduce production time and costs so that goods are dispatched sooner

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Why did this happen do you think? What should they have done?

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Key operational objectives - Time This is important to both producer and consumer Consumers are time poor Operations that can save time for them are often very successful Tesco online shopping Pizza delivery Time is very important in terms of product development The first to develop a successful pollution free car will probably gain the world’s number one car producer If they get to market first they can charge higher prices Within the business speed is important The faster items pass through the production process the lower the costs of warehousing and work in progress

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Key operational objectives - Flexibility Need to vary volume of production relatively easily to respond to unexpected changes in demand The ability to modify a standard product allows a firm to appear to offer more customised products This will meet the customer needs more precisely If volume is still kept high costs will be kept low This is called lean production Dell is particularly good at this

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Why is this good? What are the downsides do you think?

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The importance of innovation This doesn’t just mean inventing a new product or process It has to turned into a commercial success Innovation in operations is crucial for long term survival, growth and keeping ahead of the competition New products often means new production methods and machinery New processes can mean reduction in costs and improvement in quality and speed of production

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The impact on operations of environmental objectives Business may need to change supplies of materials to those that come from replenishable or recycled sources May need to adopt new processes that are more energy efficient and produce less waste and pollution Transportation may need to change to reduce congestion Staff will need training All of this may cost more In the long run being environmentally friendly may mean more customers and more revenue that will cover the extra cost

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Influences on operational objectives The nature of the product The product is at the heart of any firm’s operations Its nature will dictate operational objectives Car manufactures like BMW and Mercedes have a reputation for high standards of quality This would need to be taken into consideration when developing new models Demand A business must attempt to predict sales volumes and any fluctuations Tastes and fashions bring regular change So customer expectations are met in a cost effective manner

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Influences on operational objectives Availability of resources A lack of availability of the right level and quality of resources (including human resources) will be a major constraint in achieving objectives Health care skills shortages have led to a reliance on workers abroad in the UK A shortage of financial resources will also prevent objectives being achieved. Competitor’s behaviour Rival firms will always be striving to increase their market share This will have a major influence on operational objectives

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