Understanding Operational Objectives

Understanding Operational Objectives

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Operational Objectives

Operational Objectives: targets set in relation to the production process or provision of a service within a given financial year.

Normally look to improve performance with a view to improving competitiveness.

Competitive priorities can range from quality, lead time, cost and flexibility to innovation and reliability.

Increasing CSR issues are being included within operational objectives to achieve competitive advantage.

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Quality Targets

Quality targets aka ‘fitness for purpose’ or ‘meeting customer expectations’

There are many guises of quality:

1.       1) Performance, i.e. The core function of the product/ service

2.      2)  Advanced performance i.e. the actual and augmented functionality of the product or service, which may include aesthetics and serviceability

3.       3) Predicted life; this can be from a viewpoint of reliability/ resilience, i.e. how long will it continue to function, or from a durability perspective, i.e. at what point will it become obsolete

4.       4) Conformance with standards and specification requirements

5.       5 )The perceived quality; often a USO achieved through reputation and brand loyalty. 

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Cost Targets

Focus on keeping costs to a minimum in order to allow for competitive pricing without having a detrimental effect on quality or volume targets.

Almost inevitably have an effect on selling price, added value and ultimately profit

Can include the costs involved in the manufacturing of the product or provision of the service, as well as those involved in keeping the product/ service running and serviced.

Often achieved through the reduction of waste- through the adoption of lean production techniques.  

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Volume Targets

Relate to the number of units a firm is able to process and its flexibility (its ability to respond to varying demand volumes)

If volume targets are high, this will help a business achieve cost targets through economies of scale which result in a fall of average costs.

Resource mix will influence the degree of flexibility possible. 

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Innovation: the launch of a new product or process, an invention onto the market for commercial gain.  

Can help to achieve competitive advantage

It may lead to a more efficient method of production

Therefore may reduce costs in the long run and increase the volume and quantity of outputs. 

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Efficiency and Environmental Targets

Efficiency targets: operational objectives which set a minimum acceptable standard of provision in relation to efficiency.  

Large businesses will measure their efficiency by the added value gap between the input, process and output.

Efficient firm will be able to maximise output whilst minimising the input and process costs.

This will involve setting targets for machinery usage, stock wastage and labour productivity.

It may be achieved through lean production.

Environmental targets: operational objectives which set a minimum acceptable standard of provision in relation to the environment.

Businesses should be aware of the impact of their actions on the environment.

Targets can focus on issues such as carbon footprint, sustainability of resources and food miles.

Setting and achieving these targets can gain a business competitive advantage, particularly as members of society become more aware of, and are likely to act upon, their concern for environmental issues. 

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Benchmarking: a management tool which aims to increase performance by identifying, investigating and adopting aspects of best practise from other firms.

Can be linked to any operation objectives.

Involves identifying best practise and then adopting aspects of this to improve your own performance.

Identifies strengths and internal process until areas of potential change have been identified, the learning organisation can then look at how these can be applied to its own activities

The process requires time, money and commitment as well as open relationship between the two organisations.

Can be difficult to achieve if the organisations are in direct competition with each other. 

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Internal and External Influences

Competitors’ performance- whether it is to benchmark against their superior performance, increase environmental targets to maintain competitiveness or focus more on innovation.

Resources available- may need to increase its operational efficiency or review its cost and volume targets. This may, however, be a direct result of internal resources such as expertise and budgets or external influences such as non sustainable supply or raw materials.

Nature of the product/ market it is aimed at- e.g. a technologically advanced product aimed at a niche market will focus more on the setting of high quality targets, but accept that a target of cost minimisation may be unrealistic given the limited volume targets (cannot achieve economies of scale). The setting of some operational objectives may be enforced by national objectives or standard regulations.

Demographics of a region, country or wider geographical target market- e.g. Waitrose who brand themselves as the ‘upmarket supermarket’ locate stores based upon average income levels within a town or city.  

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