Operational efficiency
measure of how many costs are incurred during production
Lower costs = Greater efficiency
Productivity
output per employee in a given time period
Average unit cost
Average cost of producing one item
Production at minimum average cost
- Efficiency maximised when goods produced at the minimum unit cost
- Production aim’s to operate at minimum average cost per unit - business can therefore take advantage of economies of scale
- The more products produced = lower unit cost
Capacity
maximum possible output of the business
- Capacity under-utilisation = not producing maximum possible output
- Capacity over-utilisation = Producing over the maximum possible output
Capacity utilisation
extent to which a business uses it’s maximum production capacitys
Uses of operational data
- Monitor and react to issues in production
- Speed up operations by showing where the problem areas are
- Improve reliability and quality
Effects of under - utilisation
- higher fixed costs per unit
- unmotivated staff
- may lead to redundancies and the sale of asset’s
Pros
- increases flexibility of the business
Effects of over utilisation
- Too much strain on resources
- Staff are overworked = make more mistakes
Productivity bonus
used to boost productivity of employees as it gives them a financial incentive to increase production
- however this will increase costs of the business may result in reduction in efficiency
Productivity deal
Trade union may organise this for the staff of a business - motivates employees to work harder - still uses financial bonuses
Staff training
- better trained = more productive - however training can be expensive and other employees may be involved in the training process = lower productivity
Investing in new machinery and equipment
- makes the business more efficient with more goods being produced - however new machinery is very expensive meaning it may take years before a positive result can be seen
Factors influencing productivity
- Quality if inputs = faulty parts can stop the production line and thus lose the company money
- Having enough staff - stretched employees are demotivated
- Investment into new technology - robots can work 24/7
Link between productivity and competitiveness
- business = more productive = then it is more economically efficient
Operational objectives
- costs
- quality
- Speed of response
- dependability
- environmental
- added value
Quality
How well a product or service does what it was designed to do
Quality assurance
how a businesses minimises the chances of poor quality products being produced
- quality is in every step of the production line - every worker is responsible for quality
- prevents faulty products from getting to the end of the production line
- classed as proactive
Quality control
- Checks the quality of the product at the end of the production line
- classed as reactive
Flexibility
Ability to adapt to gain a competitive advantage over rivals
Pros:
- Helps meet customer expectation
- Stays ahead of competition
Mass Customisation
business can bespoke products on a massive scale with rapid low cost production methods e.g. Nike introduced mass customisation in 1999
Pros:
- More competitive
- Charge premium prices
Cons:
- High initial investment
Speed of response
how well a member of staff responds to a customer or ow quickly an item is shipped etc
Dependability
Cheaper for businesses to keep existing customers compared to attracting new ones
Outsourcing
Part of the business is contracted out to a third party business to complete work - 1/5 of Europe’s cars are assembled in Eastern Europe
