Operations Management – Understanding operational objectives (L1) Learning Objective – Explain what is meant by operational targets Learning Outcomes – Describe operational objectives – E Explain when different operational targets are appropriate and how they can be achieved – C Analyse the internal and external factors which will influence whether a business meets its operational targets - A

What are operational objectives? Operations management involves organising and controlling the process by which inputs such as labour, materials and machinery are transformed into products, or by which services are provided to customers. Management of this process is likely to be more effective if a business sets clear operational objectives. By setting objectives the business can more easily design operational strategies which will help to achieve these objectives Example – A business may aim to reduce costs by 15% - a cost cutting strategy such as a review of and implementation of cheaper suppliers might be used to achieve this target.

Activity Now you have a definition of Operations Management – what sort of decisions do you think the department would need to make?

Decisions include… Where to produce What scale of facilities are needed i.e. how many rooms should your hotel have, how many tills will be needed in the supermarket etc. What production methods should be adopted? How much of the transformation process to undertake yourself and how much should be outsourced to other businesses? Where to purchase supplies from. Ext Question – what is “outsourcing” and what is “offshoring”?

Operational Systems There are many different types of production processes, the difference in operations systems can be categorised using Slack’s 4V’s model: Volume Variety Variation in demand Visibility Slack’s 4V model highlights the considerable variation in Operations Management – there are many different processes and priorities

Visibility refers to the extent to which a business deals with its final customers

Activity Business in Focus – Boeing’s Dreamliner case study

Operational Objectives Draw a thought shower of all the different operation objectives you can think of – Example – Volume targets Operational Objectives

Cost Volume Innovation Efficiency Flexibility Quality Environmental Dependability Ethical

Operational objectives – Cost targets Keeping costs as low as possible will keep most of the stakeholders in the business happy. Lower costs increase profits and reduce waste. Targets could be set for the whole organisation, for certain products or individual departments for example. A number of approaches can be taken to reduce costs such as: 1.Outsourcing 2.Using cheap labour 3.Automation 4.Cheaper suppliers The approach a business takes should take into consideration the circumstances.

Operational objectives – Volume targets Businesses are often keen to produce more and increase volumes. By increasing output better use is made of resources. For example a call centre may aim to take more calls and a factory may aim to produce more units. Volume targets must be realistic and take into account the capacity of production (otherwise they will be de-motivational) A business may aim to motivate staff to achieve volume based targets by offering incentives

Operational objectives – Innovation targets Good businesses will always aim to stay ahead of the competition through innovation. Innovation may include improving existing products and developing new ones – consider PlayStation or apple! Innovation is also about finding new ways of doing things such as developing new processes, systems or services. Innovation may also be used to solve problems. Setting innovation targets can be quite difficult due to the nature of research and development. A business may be happy to set a time limit on the development of a new product.

Operational objectives – Efficiency If businesses improve efficient – better use will be made of their resources, helping to reduce costs and increase profits. It may also mean a business can operate with fewer resources. Whenever it is possible to quantify efficiency for example labour productivity – targets will be set. Examples of efficiency targets include: 1.Labour productivity 2.Capacity utilisation – comparing current use with actual use. 3.Capital productivity – dividing output by the capital employed

Operational objectives – The environment Businesses are under increasing pressure to improve their environmental performance. Some businesses set targets such on: 1.The amount of recycled materials used in the business 2.The emissions from the factory 3.The amount of fuel used in production for example. Environmental targets will depend on the nature of the business

Operational objectives – Quality targets Increasing the quality of products or services will help to raise sales and develop a good reputation for a business. Competition and increasing demand for high quality products/services mean quality targets will help a business to raise its quality standards. Quality targets may include: 1.Reducing complaints 2.Aspiring to be the best 3.Certifications of quality such as ISO’s

Operational objectives – Quality targets Achieving an appropriate level of service and quality. It involves achieving the set standards consistently.

Operational objectives – Dependability targets Ensuring you do what you say and do not let customers down. For example Dyson!

Operational objectives – Flexibility targets Using production processes that can cater for the range of products that need to be provided.

Operational objectives – Ethical targets For example ensuring that suppliers do not use child labour and that their employees are paid fairly. Nike and Gap have both been in trouble in the past

Operations Management – Understanding operational objectives Learning Objective – Explain what is meant by operational targets Learning Outcomes – Describe operational objectives – E Explain when different operational targets are appropriate and how they can be achieved – C Analyse the internal and external factors which will influence whether a business meets its operational targets - A OBJECTIVES REVIEW

Task Read and complete the worksheet on Papa Johns Ext - What internal and external influences are there on the Papa Johns Operations?

Changing Operational Needs Operations aims to deliver appropriate quantities of what customers need at a suitable level of quality and a suitable cost. As customers’ needs and expectations change so must operations. Operations managers need to consider:  Who they are working with  What resources they use and how they use them  The impact of their activities on various groups such as the local community and employees  Customer demands

Operations and Competitiveness The Operations function is critical when it comes to determining the competitiveness of a business because it influences:  Costs  Quality  Speed  Reliability  Flexability

Activity Complete the worksheet - Internal and External influences on Operational Objectives

TASK Tata: The Nano case study

Review of Learning 1.Why do businesses set operational objectives? 2.How might quality operational objectives be set? 3.What is meant by a volume target? 4.State two ways in which a business might meet efficiency targets? 5.State two ways in which volume targets can be achieved 6.What external influences might influence the operational objectives of a supermarket chain? 7.How might the resources available influence operational objectives