Decision making to improve operational performance
- Created by: siangrace15
- Created on: 09-12-19 18:43
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Operational objectives
- Operations management is concerned with those aspects of the business which are directly linked to the fulfilment of customer orders
- Operational objectives relate to how efficiently aspects od the prices are achieved
Operational objectives relate to a number of measures of efficiency including:
- Cost
- Quality
- Speed of response and flexibility
- Dependability
- Environmental
- Added value
Internal influences on operational objectives
- FInance
- People
- Effective marketing
- Capital
External influences on operational objectives
- Target market
- Regulatory environment
- Geographical
- Benchmarking
- Environmental targets
- Innovation
- Price elasticity of demand
- Income elasticity of demand
Operational data
- Operational data allows a business to measure the performance of the operations management function
- Performance can then be compared to quantifiable operation objectives
Labour productivity
- Measures output per worker
Total output
Number of employees
- Can be influenced by; Training and skills of the workforce, motivation, complexity of the product
Unit cost
- The average cost producing a single unit of output
Total cost
Output
- Targets will be linked to keeping unit cost as low as possible while not affecting quality
Factors influencing unit costs
- Number of units produced
- Labour productivity
- Suppliers
- Material usage
Capacity
- The maximum amount of output achievable if all resources are fully utilised
- Affects the ability of a firm to match supply to demand
Capacity utilisation
- A measure of the percentage of potential output being achieved
Actual output x 100
Maximum output
Importance of capacity
- Ability to match supply to demand
- Inverse relationship between capacity utilisation and unit costs
- Workforce motivation
Operational data is used to measure performance against predetermined targets
Increasing efficiency
- Operational efficiency involves maximising the output achieved from given inputs including machinery, materials and people
Efficiency can be improved by
- Increasing capacity utilisation
- Increasing labour productivity
- Lean production techniques
- Choosing the optimal resource mix
- Using technology
Labour productivity
- Increasing labour productivity lowers labour cost per unit and hence unit cost
Labour productivity can be increased by
- Training
- Increasing motivation
- Better working practices
Difficulties increasing labour productivity
- May impact negatively on quality and customer satisfaction
- Employees may feel exploited
Lean production
- Lean production techniques are working practices derived from japan that focus on cutting waste whilst maintaining, or improving quality
Lean production techniques
- Just-in-time - a technique used to minimise…
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