Welcome to Operational Management!
Ever wondered how a company like Apple manages to get millions of iPhones ready for launch day, or how your local pizza shop ensures your food is hot and delivered in 30 minutes? That is what Operational Management is all about! It’s the "doing" part of a business—turning ideas and raw materials into products or services that customers want to buy.
In this chapter, we are looking at Setting Operational Objectives. Think of these as the "mission goals" for the production team. Without these targets, the business wouldn't know if it's working efficiently or just wasting money. Don't worry if it seems like a lot of terms at first; we’ll break them down one by one!
What are Operational Objectives?
An objective is simply a target or a goal. Operational objectives are specific targets set for the operations function of a business (the part of the business that actually makes the product or provides the service).
Quick Review: Why do we set them?
1. They provide direction: Everyone knows what they are working toward.
2. They allow for coordination: Different departments can work together smoothly.
3. They provide a measure of success: At the end of the year, the manager can see if the team actually hit the target.
The "Big Six" Operational Objectives
According to your AQA syllabus, there are six main types of operational objectives you need to know. Let's look at each one with a simple example.
1. Cost Objectives
Most businesses want to keep their unit costs (the cost of making one single item) as low as possible without ruining the quality. If a business can lower its costs, it can either make more profit or lower its prices to beat the competition.
Example: A bakery might set a goal to reduce the cost of flour by 5% by finding a new supplier.
2. Quality Objectives
Quality is about meeting or exceeding customer expectations. This could mean the product lasts a long time, looks great, or performs its job perfectly every time.
Example: A car manufacturer might set a target that "99% of cars must pass the first safety inspection without any repairs needed."
3. Speed of Response
This is all about time. It’s the period between a customer asking for a product and them actually receiving it. In the modern world, customers are impatient! We want things now.
Example: An online retailer like Amazon setting a goal to ship all orders within 2 hours of the purchase being made.
4. Flexibility
This is the business's ability to change what it’s doing. There are two types:
- Volume flexibility: Being able to suddenly make a lot more of a product (e.g., selling more ice cream during a sudden heatwave).
- Product flexibility: Being able to switch from making one product to another quickly (e.g., a clothing factory switching from making summer shirts to winter coats).
5. Environmental Objectives
Modern businesses have to care about the planet. These objectives focus on being "green" and ethical. This is often driven by the government or by customers who want to shop sustainably.
Example: A coffee shop chain aiming to ensure 100% of its cups are recyclable by 2025.
6. Added Value
Added value is the difference between the price of the finished product and the cost of the materials used to make it. Operations can "add value" by making a product more desirable through better design, branding, or extra features.
The Formula for Added Value:
\( \text{Added Value} = \text{Selling Price} - \text{Cost of Raw Materials} \)
Example: A designer takes \$10 worth of plain denim and turns it into a pair of jeans sold for \$100. The added value is \$90!
Key Takeaway: Businesses rarely focus on just one objective. They usually try to balance several at once, though sometimes they clash (like trying to have high quality while also having the lowest costs!).
What Influences These Objectives?
Objectives don't just appear out of thin air. Managers have to look at what's happening inside and outside the business before they set their targets.
Internal Influences (Inside the business)
- Corporate Objectives: If the whole company wants to be the "most luxurious brand," the operations team must set high quality objectives.
- Finance: Does the business have enough money to buy new machines to improve speed?
- Human Resources (HR): Are the workers skilled enough to meet quality targets?
External Influences (Outside the business)
- Market Conditions: If the economy is in a slump and people have less money, the business might focus on cost objectives to keep prices low.
- Competitors: If a rival starts delivering in 24 hours, you might have to set a speed of response objective to keep up.
- Technology: New robotics might make it possible to set much higher flexibility or quality targets.
- Ethics and Environment: New laws about plastic waste might force a business to set environmental objectives.
Did you know?
Technology is the biggest "game-changer" in operations. Automation and AI allow factories to work 24/7, meaning speed and cost objectives that were impossible 20 years ago are now standard!
Common Mistakes to Avoid
Confusing "Production" with "Operations": While they are similar, production is just the making of goods. Operations includes everything—making goods, providing services, and the entire process from supplier to customer.
Ignoring the "Trade-off": Students often forget that you can't always have everything. If you increase speed, quality might drop. If you want better environmental objectives, your costs might go up. In your exams, always mention these "trade-offs"!
Summary Checklist
Before you move on, make sure you can answer these:
- Can I list the six main operational objectives? (Costs, Quality, Speed, Flexibility, Environment, Added Value)
- Do I understand that Added Value isn't just profit? (It's about making the product worth more to the customer).
- Can I explain how an external factor like Competition might change a business's objectives?
Don't worry if this seems tricky at first—just remember that operations is the "heartbeat" of the business. Everything starts with making a great product efficiently!