Unit 4

Created by: Layla.thomas16
Created on: 10-11-19 19:46

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Unit 4
- Setting operational objectives
  - 'A quantifiable target which helps to coordinate activities'
    - Mission statement- about the organisations aims that is designed to motivate
    - Corporate objective- goals for the whole organisation and are usually based on the mission statement
    - Functional objectives- goals for each functional area of a business and are based on corporate objectives
  - Should be Specific, Measurable, Agreed/achievable, Realistic and Timely/time bound
    - They are broad-operational side, general goals-understandblby departments and long/medium term so plans have to be devised
    - External factors- market, competition, economy, politics Internal factors- corporate objectives, finance, HR, product
  - Include- costs, quality, speed of response and flexibility, dependability, environmentally friendly, adding value
    - Sales revenue -(variable cost + fixed cost) = profits
      - To improve profit you can, increase sales or reduce costs
        Reducing costs, means being able to pass on low prices or enjoy higher profit margins
        
        Reducing fixed costs, common aim for mergers as they have double fixed costs i.e.. land
        
        Reducing variable cot per unit, ie. finding cheaper supplies, reducing raw material costs, or cheaper manufacturing costs by reducing labour costs by improving productivity
    - Quality is those features of a product or service that allow it to satisfy customers
      - Customer satisfaction ratings, customer complaints, scrap rate, punctuality
        Punctuality = deliveries on time/total deliveries x 100
    - EF- reduce waste, carbon footprint AV- USP, i.e. additional spending on R+D, innovation
- Analysing operational performance
  - Labour intensive- when labour costs outweigh capital costs of a business
  - Labour productivity- the amount of output that is obtained from each employee
    - LP= output per period/n.o of employees in that period
      - Can be increased by increasing hours worked, training, investment in new tech, changing process, motivatng
    - Influenced by quality, skills and motivation, ability of workforce, methods used, reliability of applies and materials
  - Unit costs (AC/ATC) are the cost of producing one unit of output
    - Total cost/ units of output
    - Influenced by how many units can be made, how efficient workforce is, how efficient machinery is, how easily VC can be controlled
  - Capacity is the max total level output a business can produce in a given period, aim is 90%
    - Capacity utilisation is the % of a firms total possible production level that is being reached
      - Capacity output per annum/ max possible output per annum x 100
      - Spare capacity allows time for maintenance,improvements, less pressure, can cope with sudden most in demand
        Causes include new competitors or new products entering market, fall in demand, unsuccessful marketing, seasonal demand, merger, over investment in fixed assets
        
        However, creates higher proportion of fixed costs per unit, higher unit costs means lower profits, image tarnished, less work leads to demotivated staff
- Increasing efficiency and productivity
  - Increase in labour productivity means that output has increased using the same staff, implying lower labour cost per unit
    - Lower labour cost per unit means can pass on low prices for competitive advantage or higher profit margins
  - Increasing labour productivity is achieved through HR management,i.e. recruiting suitably skilled and trained employees, training to improve workforce, using appropriate financial/non financial motivators
    - Takes time and money to train and employ, financial methods work better short term, non-financial is long-term
      - Mix of resources, labour intensive-specialised roles for employees within the production system
        capital intensive is high investment needed in capital machinery
  - Factors influencing resource mix- type, price, availability, nature of process, technology, ethics
    - Benefits of technology are it reduces costs, improves quality, reduces waste, increases productivity, better working conditions
- Improving quality
  - Intangible- image and brand, reputation, exclusiveness
  - Tangible- appearance, reliability, durability, functions, after-sales service, repair and maintenance needs
  - Quality impacts sales, creates a USP, helps determine selling price, pricing flexibility, costs reductions, and firms reputations
    - Poor quality leads to higher labour costs, lower profits, lower customer satisfaction, higher costs
  - Quality assurance- a system that improves quality by arranging every process to get products right first time
    - Pros- workers take responsibility,motivates, reduced costs, greater consistency
    - Cons- changed culture of business, takes time, could increase costs short-term
    - Kaizen- implementing small changes in order to achieve better quality and greater efficiency
  - Quality control- a system that uses inspections to check the quality of work at stages of the manufacturing process
    - Pros- stops faulty goods reaching customers, inspectors can spot common problems and out them right
    - Cons- Doesn't encourage team responsibility,expensive, reduced motivation as responsibility lies with inspector
- Managing inventory and supple chains
  - Mass customisation is the personalisation or custom tailoring of goods and services to meet customer needs but at near mass-production prices
    - Allows firms to match customer needs exactly, however lead times need to be short as possible.
  - Reducing capacity by selling off fixed assets, changing to shorter working weeks/days, laying off workers. transferring resources to another area
    - Increasing capacity by extending factories, overtime/longer hours, hiring new staff, flexible workforce, sub-contracting
  - Reducing supply, is rationalisation which is a process which improves its efficiency by cutting scale of its operations
    - Subcontracting/outsourcing is when a business asks another business to make all/a part of its product
      - Pros- react to changes in demand, specialisation, can concentrate on 'core' of the business, easier to achieve non-standard orders
        Cons- no direct control over quality, too much can damage a businesses operations base, profit margins may be affected, patents may have to be shared
  - Lean production- short lead times, buffer stock should be almost 0,re-order should be almost 0 and order quantity should only be what is needed
    - Producing to order- +competitive advantage, cuts costs, can increase sales revenue leading to higher profit margins - unreliable suppliers, reduces product range, culture of continuous improvement needed
  - Inventory stock control, lead times, re-order levels, buffer level of inventory, re-order quantities
    - Vertical integration is when businesses buy their supplier/supply chains

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Unit 4

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