Setting operational objectives

Welcome to Operational Management!

Hello! Welcome to the heart of any business: Operations. If Marketing is about finding customers and Finance is about the money, Operations is about actually making the product or providing the service. In this chapter, we are looking at Operational Objectives—the specific targets the operations department sets to stay on track. Don't worry if this seems a bit technical at first; it's really just about how a business decides what it wants to achieve in its day-to-day work.

Prerequisite Check: An objective is just a target. A corporate objective is a target for the whole company (like "make more profit"), whereas an operational objective is a target specifically for the production or service delivery team.

What are Operational Objectives?

Operational objectives are the goals set for the operations function of a business. They ensure that the way a product is made (or a service is delivered) helps the business reach its bigger, overall goals.

Quick Review: Why set them?
- They give staff a clear target to aim for.
- they help managers judge if the department is doing a good job.
- They help different departments work together (coordination).

The Six Key Operational Objectives

According to the AQA syllabus, there are six main types of operational objectives you need to know. Think of these as the "menu" of goals a manager can choose from.

1. Costs

Most businesses want to keep their unit costs (the cost of making one item) as low as possible. If a business can make things cheaper than its rivals, it can either sell them for a lower price or keep more profit.
Example: A budget airline like Ryanair sets targets to keep the cost per passenger as low as possible by using smaller airports.

2. Quality

This is about making sure the product is "fit for purpose" and meets customer expectations. Targets might include reducing the number of faulty items or getting better reviews.
Analogy: Imagine you’re at a burger van. If the burger is burnt, the quality is low. The owner might set an objective that "99% of customers are happy with their meal."

3. Speed of Response

This is how quickly a business can fulfill a customer's request. In a world of "next-day delivery," this is more important than ever!
Example: A pizza shop might have an objective to deliver all orders within 30 minutes.

4. Flexibility

This is the ability of a business to change what it does to meet customer needs. This could be volume flexibility (making more items suddenly) or product flexibility (changing the design).
Example: A clothing factory being able to stop making winter coats and start making summer dresses quickly when the weather changes.

5. Environmental Objectives

These are targets based on being "green" and acting ethically. This is becoming a huge focus for modern businesses due to pressure from customers and the government.
Key points: Reducing carbon footprints, using less plastic packaging, or recycling more waste.

6. Added Value

Added value is the difference between the price of the finished product and the cost of the raw materials used to make it. Operations can increase added value by making the product more desirable through better design or quality.
The Formula:
\( \text{Added Value} = \text{Selling Price} - \text{Cost of Raw Materials/Bought-in Goods} \)
Analogy: A baker takes 50p worth of flour and water and turns it into a £4.00 artisan loaf of bread. They have "added" £3.50 of value through their skill and the oven's heat.

Memory Aid: "C-Q-S-F-E-A"
Try to remember: Cats Quietly Sleep For Every Afternoon.
(Costs, Quality, Speed, Flexibility, Environment, Added Value).

Key Takeaway: Operational objectives are varied. A business usually can't be "the best" at all of them at once. For example, being the fastest (Speed) often makes things more expensive (Cost).

The Value of Setting Operational Objectives

Why do businesses bother writing these down? It’s about competitiveness. By setting and meeting these targets, a business becomes better than its rivals.

1. Efficiency: Focusing on costs makes the business leaner and more profitable.
2. Customer Loyalty: Focusing on quality and speed keeps customers coming back.
3. Innovation: Flexibility allows a business to stay ahead of trends and adopt new technology.

Did you know? Technology is a huge driver here. Many businesses use automation and robotics (like Amazon's warehouse robots) to meet their objectives for speed and cost reduction simultaneously.

Influences on Operational Objectives

Objectives don't exist in a vacuum. Various factors determine which targets a manager chooses to focus on.

Internal Influences (Inside the business)

- Corporate Objectives: If the whole company wants to be "the most luxury brand," the operations team will focus on quality, not low costs.
- Finance: If the business has no money, the objective will likely be to slash costs.
- HR (Human Resources): You can't set a flexibility objective if your staff aren't trained to do multiple different jobs.

External Influences (Outside the business)

- Competitors: If a rival starts offering 1-hour delivery, your speed of response objective must change to keep up.
- Market Conditions: In a recession, customers want lower prices, pushing the focus toward cost objectives.
- Environment & Ethics: New laws might force a business to set environmental objectives (e.g., banning single-use plastics).

Common Mistake to Avoid: Don't confuse "Added Value" with "Profit." Added value only looks at the cost of the materials. Profit looks at all costs (including rent, wages, and marketing). You can have high added value but still make a loss if your rent is too high!

Summary and Quick Check

Key Point Checklist:
- Operational objectives are specific targets for the production side of a business.
- The six main types are Costs, Quality, Speed of Response, Flexibility, Environment, and Added Value.
- Setting these targets helps a business stay competitive and coordinate its work.
- Objectives are influenced by internal factors (like finance) and external factors (like competitors and technology).

Final Tip: When answering exam questions, always ask yourself: "Which objective is MOST important for this specific business?" A luxury car maker (Rolls Royce) cares about Quality, while a budget supermarket (Aldi) cares about Costs. Context is everything!