Unit 4

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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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