Operations Objectives

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Lucia Incerti
Operations Objectives
The operations function of a business is responsible for obtaining and using resources in order to
provide the right goods and services for the consumer.
A wide range of operational objectives are set by businesses in order to achieve the corporate
Cost and Volume Targets
A business needs to ensure that operations are cost effective
The traditional measure of cost effectiveness is "unit cost"
- Unit cost = total costs / total units
Businesses in the same industry face similar cost structures, but each varies in terms of
productivity, efficiency and scale of production
The business with the lowest unit cost is in a strong position to be able to compete by being
able to:
- Offer the lowest price
- Make the highest profit margin at the average industry price
Productivity and efficiency
- E.g. units per week or employee
Unit costs per item
Contribution per unit
Number of items to produce
- Per time period
- Per machine etc.
Quality is one of the most important challenges facing a business
Markets are more competitive: customers are more:
- Knowledgeable
- Demanding
- Prepared to complain about poor quality
- Able to share information about poor quality
If a business can develop a reputation for high quality, then it may be able to create an
advantage over its competitors
Possible targets
Scrap/ defect rates
- A measure of poor quality
- How often something goes wrong
- Average lifetime use etc.
Customer satisfaction
- measured by customer research
Customer complaints

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Customer loyalty
- e.g.…read more

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factor in affecting operational objectives
- Targets for productivity, for example, will be affected by the investment in training and
the effectiveness of workforce planning
Marketing issues
- The nature of the product determines the operational set-up
- Regular changes to the marketing mix- particularly product- may place strains on
operations, especially if production is relatively inflexible
External influences
Economic environment
- Crucial for operations
- Sudden or short term changes in demand impact on capacity utilisation, productivity etc.…read more


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