3.4.2 Analysing operational performance

Measured in 3 ways:
 - what's total unit cost to get right product to meet customer's requirement? How does it compare w/ rivals
 - does quality of product + service create customer delight/satisfaction/mild disappointment?
 - does price charged create enough of premium over unit cost make business sustainable + profitable in long term?

Involves labour productivity, capacity utilisation + issues surrounding company's total available capacity

Measures amount produced per worker over given time.

Eg Nissan factory, Switzerland, productivity rate of 100 cars per worker per year. First achieved this productivity level in 1998. By 2014 hardly changed. Successful operational performance about profitable sales, not obsession w/productivity. 

Definition of productivity seems unsatisfactory. Eg Nissan's Sunderland car factory makes 100 cars per worker per year - may do more than assembling sections of cars made at other factories. May be car factory operating 50 cars per worker per year more productive. May be making some of parts on-site + doing more assembly + paint work. Comparing productivity of different factories difficult.

Ideal measure for comparison - added valye per work eg value of all finished cars minus cost of all bought-in components + services divided by number of workers. Could be problems then as well.

Situation can be harder in service businesses where no concrete way to measure output. 1 reason why working at call centres can be frustrating. 'Metrics' eg calls answered per hour can obstruct employee who wants to help caller, but needs time to be able to do so. Caring approach - poor productivity. 

Tricky to deal w/. Problem comes from nature of fixed costs. Total fixed costs don't change when output changes, do change per unit.

Relates directly to fixed + total costs per unit. If poor sales push CU rates down to 50%, fixed costs per unit twice as high as need to be - will push unit costs higher than should be.

When CU starts to move above 90%, may be time to increase capacity. Eg 2014, Renault added 60% to capacity of car factory of Morocco to cope w/ booming demand for low-cost Dacia car model.

Operational decision making has to be based on accurate sales forecasts. Rely on combination of good analysis of actual sales figures + effective use of market research to anticipate when shifts going to take place. 

Eg until end of 2013 executives at Apple believed iPad sales would keep growing for several years. Especially as Apple had made important sales breakthroughs in China. Rising sales would spread fixed costs of running brand. Research into customers' future purchasing plans should have known cult of iPad was wearing thing.