operations notes buss3

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Cost targets
Reducing unit costs:
o Likely to be the primary aim of most businesses in terms of cast targets
o Low unit costs enable a business either to keep prices low or to enjoy a higher profit margin by
keeping prices at their same level
Reducing fixed costs
o This allows a more specific focus and is often a more manageable target than a roader, unit cost
o Common to businesses that have recently merged or been taken over
Reducing variable costs per unit.
o By cutting labour and raw material costs, a business can reduce its variable costs per unit.
o This target can also be achieved by improving labour productivity because this mean that employees'
wages are spread over a higher level of output.
Volume targets
Number of items to be produced
Targets in individual markets
Percentage growth targets
Volume in comparison to other branches or organisations.
Spending a certain amount on research and development
Targeting research and development expenditure as a percentage of sales.
Achieving a certain number of patents
Developing a particular innovation
Innovation to extend product ranges
Labour productivity
o Output/number of workers employed
Output per hour (or a measure of production over a given time period)
Reducing stockholding
Just-in-time delivery
Speed of response and action objectives
Environmental targets
Increasing the ethical imaging of the business
Reasons for setting operations management objectives
To act as a focus for decision making and effort
To provide a yardstick against which success or failure can be measured
To improve coordination, by giving teams and departments a common purpose
To improve efficiency, by examining the reasons for success and failure in different areas.
Assessing internal influences on operational objectives
Corporate objectives

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The operations department must ensure that its objectives are consistent with the corporate objectives of
the business.
Operations management objectives rely on considerable expenditure on capital equipment or research and
The skills, training and motivation of a business' human resources will be a major impact on operational
objectives. If there are weaknesses in human resources, less ambitious objectives will need to be set.…read more

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Political factors
Operations management departments are often responsible for targets related to minimising production
This can bring them into conflict with politicians, who may disagree with the methods used to reducer costs,
especially if this involves potential exploitation of workers or unsafe working conditions in factories.
Legal factors
Because of the potential for health and safety risks, the operations management function is heavily
controlled by legislation.…read more

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The purchase of computer systems can improve efficiency in both production and
Improvements in communication systems using new technology can enhance customer
service and the working environment, improving the company's operations and its
o Specialisation economies
Large firms can afford to employ specialist with particular skills. In smaller organisation, staff
tend to take on a wider variety of tasks, and specialist skills, when needed, are bought from
outside at a relatively high price.…read more

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Large firms often have more rigid and inflexible policies. These are imposed to limit the loss of
control described above but reduce the ability to respond quickly to changing customer needs
Communication diseconomies.
o Too many levels of hierarchy in a business can reduce the effectiveness of communication
o Difficulties also occur as loans of control widen.…read more

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Innovation: The successful exploitation of new ideas. Innovation enables businesses to compete effectively in an
increasingly competitive global environment.
Research and development: the scientific investigation necessary to discover new products or manufacturing
processes, and the procedures necessary to ensure that these new products and processes are suited to the needs
of the market.
Benefits and purposes of innovation and R&D
Improve quality
Enter new markets
Increase value added
Increase product range
Reduce costs
Improve flexibility
Increase capacity
Meet regulations
Reduce environmental impact.…read more

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Company finance
Company culture
Chances of success
Efficiency of innovation
The main factors influencing business location
o Allows business to be more flexible, operating from much wider choice of location
o Encouraged the use of teleworking, where employees work from home.
Costs of factors of production
o In order to improve their competiveness, business will take into consideration any costs affected by
o The main costs involved are land costs (rent), transport costs and labour costs (wages).…read more

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The concentration of firms in an area increases travelling times and expenses. Where
delivery times are an essential factor, this may reduce the competitiveness of an
organisation because transport costs will increase and delivery may become unreliable.
o Pollution
The social costs created but these areas nay be considered excessive by firms that place a
high value on their impact on society. Local councils may impose additional costs on firms in
order to alleviate this problem.…read more

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Time-based management : an approach that recognises the importance of time and seeks to reduce the level of
`unproductive' time within an organisation. This leads to quicker response times, faster new product development
and reductions in waste, culminating in greater efficiency.
Network analysis: a method of planning business operations in order to identify the most efficient way of completing
an integrated task or project. The main form of network analysis is critical path analysis.…read more

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Benefits of critical path analysis
Allows a business to improve the efficiency of its resources. If a business can reduce the time taken to
complete a project, it can translate these savings in time into cost savings. In turn, this will increase the
competitiveness of the business, particularly if cost or speed of completion is a vital factor in the eyes of the
The process lets a business know precisely when activities are scheduled to take place.…read more


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