Operations Management – Understanding operational objectives (L1)

1. Operations Management – Understanding operational objectives (L1) Learning Objective – Explain what is meant by operational targets Learning Outcomes – Describe operational objectives – E Explain when different operational targets are appropriate and how they can be achieved – C Analyse the internal and external factors which will influence whether a business meets its operational targets - A

2. What are operational objectives? • Operations management involves organising and controlling the process by which inputs such as labour, materials and machinery are transformed into products, or by which services are provided to customers. • Management of this process is likely to be more effective if a business sets clear operational objectives. • By setting objectives the business can more easily design operational strategies which will help to achieve these objectives Example – A business may aim to reduce costs by 15% - a cost cutting strategy such as a review of and implementation of cheaper suppliers might be used to achieve this target.

3. Activity Now you have a definition of Operations Management – what sort of decisions do you think the department would need to make?

4. Decisions include… • Where to produce • What scale of facilities are needed i.e. how many rooms should your hotel have, how many tills will be needed in the supermarket etc. • What production methods should be adopted? • How much of the transformation process to undertake yourself and how much should be outsourced to other businesses? • Where to purchase supplies from. Ext Question – what is “outsourcing” and what is “offshoring”?

5. Operational Systems There are many different types of production processes, the difference in operations systems can be categorised using Slack’s 4V’s model: • Volume • Variety • Variation in demand • Visibility Slack’s 4V model highlights the considerable variation in Operations Management – there are many different processes and priorities

6. Visibility refers to the extent to which a business deals with its final customers

7. Activity Business in Focus – Boeing’s Dreamliner case study

8. Operational Objectives Draw a thought shower of all the different operation objectives you can think of – Example – Volume targets Operational Objectives

9. Operational Objectives • Cost • Volume • Innovation • Efficiency • Flexibility • Quality • Environmental • Dependability • Ethical

10. Operational objectives – Cost targets • Keeping costs as low as possible will keep most of the stakeholders in the business happy. Lower costs increase profits and reduce waste. • Targets could be set for the whole organisation, for certain products or individual departments for example. • A number of approaches can be taken to reduce costs such as: • Outsourcing • Using cheap labour • Automation • Cheaper suppliers • The approach a business takes should take into consideration the circumstances.

11. Operational objectives – Volume targets • Businesses are often keen to produce more and increase volumes. By increasing output better use is made of resources. • For example a call centre may aim to take more calls and a factory may aim to produce more units. • Volume targets must be realistic and take into account the capacity of production (otherwise they will be de-motivational) • A business may aim to motivate staff to achieve volume based targets by offering incentives

12. Operational objectives – Innovation targets • Good businesses will always aim to stay ahead of the competition through innovation. Innovation may include improving existing products and developing new ones – consider PlayStation or apple! • Innovation is also about finding new ways of doing things such as developing new processes, systems or services. Innovation may also be used to solve problems. • Setting innovation targets can be quite difficult due to the nature of research and development. A business may be happy to set a time limit on the development of a new product.

13. Operational objectives – Efficiency • If businesses improve efficient – better use will be made of their resources, helping to reduce costs and increase profits. It may also mean a business can operate with fewer resources. • Whenever it is possible to quantify efficiency for example labour productivity – targets will be set. • Examples of efficiency targets include: • Labour productivity • Capacity utilisation – comparing current use with actual use. • Capital productivity – dividing output by the capital employed

14. Operational objectives – The environment • Businesses are under increasing pressure to improve their environmental performance. Some businesses set targets such on: • The amount of recycled materials used in the business • The emissions from the factory • The amount of fuel used in production for example. • Environmental targets will depend on the nature of the business

15. Operational objectives – Quality targets • Increasing the quality of products or services will help to raise sales and develop a good reputation for a business. • Competition and increasing demand for high quality products/services mean quality targets will help a business to raise its quality standards. • Quality targets may include: • Reducing complaints • Aspiring to be the best • Certifications of quality such as ISO’s

16. Operational objectives – Quality targets • Achieving an appropriate level of service and quality. • It involves achieving the set standards consistently.

17. Operational objectives – Dependability targets • Ensuring you do what you say and do not let customers down. For example Dyson!

18. Operational objectives – Flexibility targets • Using production processes that can cater for the range of products that need to be provided.

19. Operational objectives – Ethical targets • For example ensuring that suppliers do not use child labour and that their employees are paid fairly. • Nike and Gap have both been in trouble in the past

20. OBJECTIVES REVIEW Operations Management – Understanding operational objectives Learning Objective – Explain what is meant by operational targets Learning Outcomes – Describe operational objectives – E Explain when different operational targets are appropriate and how they can be achieved – C Analyse the internal and external factors which will influence whether a business meets its operational targets - A

21. Task • Read and complete the worksheet on Papa Johns Ext - What internal and external influences are there on the Papa Johns Operations?

22. Changing Operational Needs Operations aims to deliver appropriate quantities of what customers need at a suitable level of quality and a suitable cost. As customers’ needs and expectations change so must operations. Operations managers need to consider: • Who they are working with • What resources they use and how they use them • The impact of their activities on various groups such as the local community and employees • Customer demands

23. Operations and Competitiveness The Operations function is critical when it comes to determining the competitiveness of a business because it influences: • Costs • Quality • Speed • Reliability • Flexability

24. Activity • Complete the worksheet - Internal and External influences on Operational Objectives

25. TASK Tata: The Nano case study

26. Review of Learning • Why do businesses set operational objectives? • How might quality operational objectives be set? • What is meant by a volume target? • State two ways in which a business might meet efficiency targets? • State two ways in which volume targets can be achieved • What external influences might influence the operational objectives of a supermarket chain? • How might the resources available influence operational objectives