Operational Objectives

• Operational objectives

  Driven by the overarching corporate objective or business objectives
• Operational objectives

  • Reduce unit costs
  • Increase quality
  • Response speed and flexibility
• Unit cost

  Total cost divided by total units
• Reducing unit costs

  May lead to higher profit margins if prices are kept the same
• Reducing unit costs in a competitive market

  May help to reduce prices and stay profitable
• Total cost

  Fixed costs plus variable costs
• Ways to reduce unit costs

  Target fixed costs, renegotiate premises or rental costs, renegotiate with suppliers, secure hedging on exchange rates, increase scale of output to achieve economies of scale
• Economies of scale


  Reduction in average cost per unit by increasing the scale of output
• Quality


  Making products with better quality leads to higher customer satisfaction, improved reputation, increased brand loyalty, reduced price sensitivity, potential to increase prices, and increase revenues
• Quality indicators


  • Level of recalls, level of complaints, setting an acceptable percentage for operations department
• Response speed and flexibility

  How quickly orders and customer queries are fulfilled
• Response speed

  1. How quickly you're fulfilling customers' orders

  2. How quickly you're fulfilling customers' queries and questions

  3. Setting a maximum time for customers to be on hold

  4. Meeting delivery agreements
• Factors to consider for response speed

  • Fulfilling customers' orders
  • Fulfilling customers' queries and questions
  • Setting a maximum time for customers to be on hold
  • Meeting delivery agreements
• Response speed

  Important for avoiding negative publicity, especially on social media
• Flexibility

  1. Speed of adaptability to changing customer needs

  2. Ability to up or lower the level of output

  3. Ability to increase product range and choice

  4. Ability to create new products quickly
• Factors to consider for flexibility

  • Adaptability to changing customer needs
  • Ability to adjust output levels
  • Ability to increase product range and choice
  • Ability to create new products quickly
• Dependability

  Ensuring customers get durable and fresh products
• Factors to consider for dependability

  • Product durability
  • Product freshness
• Environmental considerations

  Considering air pollution, noise pollution, light pollution, and other types of pollution in the communities where the business operates
• Environmental considerations

  • Air pollution
  • Noise pollution
  • Light pollution
  • Other types of pollution
• Creating added value

  Increasing the distance between price and unit cost to improve profit margins
• Factors to consider for creating added value

  • Reducing unit costs
  • Improving quality reputation
  • Increasing response speed
  • Increasing flexibility
  • Becoming dependable
  • Being environmentally friendly
  • Meeting CSR requirements