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Decision Making to Improve Operational Performance - Coggle Diagram
Decision Making to Improve Operational Performance
Setting personal objectives
4 main functions: marketing, operations, HR and finance
objectives of each department must contribute to the businesses overall objective
Cost Objectives: focussed on reducing or maintaining costs e.g. fixed/variable costs
Dependability Objectives: if a business is dependable, customers trust the business as they value reliability and this allows the business to attract customers and increase selling price
Environmental Objectives: focuses on the environment e.g. Amazon created a software for reducing waste packages
Adding Value: occurs when a business converts raw materials into a finished product, creates a product that can be sold at a higher price.
Analysing Operational Performance
Operations Data: data is collected about the production of products, data collected is used to support different calculations
Labour Productivity:
Output per period of time/No. of employees in the time period
calculates how much an employee produces, useful for labour-intensive businesses
Unit Cost:
total costs/units produced
used to compare the production cost per unit against other departments, competitors or previous years
Capacity:
total output/total capacity x 100
a business understands its maximum output level, it also allows them to work out the percentage of its maximum output being used.
Increasing Efficiency & Productivity
Capacity: the maximum level of production possible using the resources available within the business
A business must understand its capacity to make sure that to does not commit to more orders than it can fulfil within a certain time period
Productivity: increasing numbers of productivity levels of staff and investing into technology can help a business to increase its total capacity
However, 100% capacity utilisation means that a business cannot respond to additional orders at short notice as they do not have the further capacity to produce these products
Outsourcing: allows a business to increase its total capacity which may allow the business to meet increasing demands, it can also lead to quality issues if outsourcers do not take quality as seriously as the business.
This increases capacity at short notice to take an advantage of an increase in demand
Productivity, Efficiency and Lean Production
Productivity: the number of units produced by an employee in a certain period of time
Efficiency: the ability of employees to increase their output from a fixed amount of inputs e.g. raw materials
Lean Production: minimises waste to increase efficiency
Just In Time, a form of lean production, means that a business will have no spare stock to respond to an unexpected customer order which may affect customer satisfaction.
The process of a business only ordering supplies when they are needed, and therefore reduces waste.
Technology and Efficiency
Computer Aided Design (CAD): used to increase efficiency as businesses can use technology to create and amend designs instead of doing these manually, increases efficiency
Improving Quality
What determines quality?
Quality of materials used
Quality of the production process
Style of a product
Durability, speed and quality of service
Measuring quality
Customer feedback
Customer survey
Total Quality Management: a culture that ensures quality in production, sales and after-sales customer service
beneficial for an organisation, but is very expensive, customer feedback is valued highly in order to keep improving the product, gives customers the best experience
Can lead to additional sales and can allow businesses to charge higher prices
Inspection costs are needed throughout the production process, staff training costs to embrace TQM
Managing Inventory & Supply Chains
Improving the supply chain
Flexibility: allows the business to respond to changes in demand with little notice
Mass customisation: allows the business to respond to customer needs through customising products requested by customers
Speed: increased efficiency, allows the production and distribution of products quickly
Dependability: using trustable suppliers and earns customer trust
Outsourcing
Increases output, therefore increases supply
Flexible workers
when demand increases, employees are easily brought in
Minimising waste
produce to order approach, ensures the availability of raw materials to create products in demand
Inventory: a list of all stock that is held by a business
Inventory stock Diagram
Shows the maximum stock level that a business is willing to operate at
Shows the re-order level which is the point at which further stock is ordered
shows the buffer stock which is the spare stock a business holds in case there is an unexpected increase in demand
An inventory control chart shows the lead time which is the time taken for stock to arrive after it is ordered
Outsourcing
Advantages: cost-saving, a third party may be able to create or produce a product/service at a lower cost than the OG business
Disadvantages: can lead to quALITY PRO
