Summary Unit 4- decision making for operations

Unit 4- Decision making to improve operational performance:
Internal influences on operational objectives:

- Corporate objectives
- Finance
- Human resources
- Marketing issues

External influences on operational objectives:

- Economic environment
- Competitor efficiency flexibility
- Technological change
- Legal and environmental change

Labour productivity = output per time period/ number of employees

Capacity utilisation = (actual output in time period/ maximum possible output per period) x 100

Unit cost = total cost/ units of output

Ways to improve labour productivity:

- Measure performance and set targets
- Streamline production processes
- Invest in employee training
- Improve working conditions

How to increase efficiency and labour productivity:

- Investment in technology
- Improvements in training and motivation
- Job design
- Reduction in the labour force

Economies of scale: economies of scale arise when unit costs fall as output increases

Capacity: a measure of how much output it can achieve in a given period

Capacity utilisation: the proportion of a business’ capacity that is actually being used over a specific
period

Why businesses operate below capacity:

- Lower than expected market demand
- A loss of market share
- Seasonal variations in demand
- Recent increase in capacity
- Maintenance and repair programmes

Dangers of operating at low-capacity utilisation:

- Higher unit costs
- Less likely to reach breakeven output
- Capital tied up in underutilised assets