Describe the five primary performance objectives of the operations function
Question 2
Describe the five primary performance objectives of the operations function
Operation management objectives refer to specific areas of operational performance that an organization continuously enhance to achieve its corporate strategy. After formulating corporate strategy, the next step a company will take will be to configure appropriate operational performance objectives to evaluate the business environment and its progress. In general, the fundamental objectives of a company are productivity and effectiveness. However, to attain an all-round performance, the company must consider the five primary operational performance objectives: dependability, flexibility, costs, quality, and speed.
Quality is a critical performance objective for any company as it is the visual display of a company’s operations. Quality is a reliable indicator that determines the expectations of customers and staff. The quality of products and services provided by a company determines the satisfaction rate of customers. Usually, quality is a measure of how well a product or service conforms to specific specifications. Furthermore, it describes the desirable features of a product or service, its reliability, its durability, its maintenance cost, the extent to which it performs its intended function, and how the customers rate its value.
Cost refers to the ability to produce at a low cost. Operational cost is fundamentally essential, particularly for companies that compete on charges. A company which can keep low production cost can sell the products to their customers at competitive prices. Furthermore, even if a company does not have a direct competitor on rates, it will want to keep its operational cost at low levels to minimize input and maximize output. However, the company should ensure that reducing production costs does not alter customers’ expectations of quality, speed, flexibility, and dependability.
The third objective of business performance is flexibility. It describes the ability of a company to change its operations to offer delivery time flexibility, volume flexibility, mix flexibility, and product flexibility. In most cases, customers’ demand is what drives flexibility. Change in customers’ demand may require a company to change how it operates, the volume it produces, and the service delivered to achieve increased customer satisfaction. In particular, customers may require changes for four reasons. First, product or service flexibility takes place to present a new or customized product. Secondly, mix flexibility entails making available variations of products to allow customers to choose what suits them best. Customers may also require the company to change its production volume, perhaps due to an increased customer base. The final reason is delivery flexibility: the customers may need a company to change the time they take to deliver the product.
Speed refers to the ability of a company to respond to customers’ requests. Speed measures how fast a business can deliver the products and services to its customers and develops sales quotes. The business objective in this regard may focus on how quickly a product is produced or the time a company takes to search for new products and develop them. A company’s ability to deliver products or services on time increases the satisfaction rate among the customers. Besides, in a competitive market, customers are more inclined to companies that can provide products and services faster. However, to achieve a fast response to customers’ requests, it is crucial first to enhance its operation cycles to match the requests of its clients.
The final operation management objective is dependability. It measures the ability of a business to deliver the products or services as per the promises made to the customers, such as volume, price, and delivery time. Dependability also concerns the product’s ability to operate consistently in an intended manner for a reasonable period. Even though dependability may not influence the probability of a client selecting a service as they have already been attended for; nonetheless, it affects customer retention. A customer who is not pleased with a product or service is less likely to purchase from the company in the future. Besides, they are less likely to recommend the product or service to other people. For example, irrespective of the quality or speed a takeaway company makes its pizzas, if a customer is unable to depend on it to deliver the pizza on time, the customer is highly likely to go elsewhere.
Explain how these performance objectives influence the cost of producing products and services. Give suitable examples in support of your answer.
Quality creates an opportunity to create improved services and products, which, in the long run, will reduce operational costs due to more satisfied customers. Furthermore, quality reduces cost in that a business that makes a mistake in its production process might deliver an altered product. The firm will thus have to incur extra charges in correcting the error. For example, if it is a company like Amazon, clients who receive faulty products will be able to return them under the Free Material Authorization, in which the company will incur shipment costs and replace the product. Quality also enhances speed. A company that produces high-quality products will spend less time resolving quality issues. Hence more attention can be given to other areas of operations. On the contrary, if the quality of the products is compromised, more time will be spent resolving the issue, hence delaying production and minimizing the time that could have otherwise been spent on increasing sales.
High speed enables faster delivery, hence minimizing operational cost. It reduces costs by reducing the total inventory of overall operations. A company with a swift operation cycle reduces the period between customers’ requests and delivery of the product or service, thus improving the business’s revenue. For example, a company whose customers pay on delivery may suffer if the delivery process delays, as it will lead to delayed receipt. Consequently, this will impact the general profitability of a company. Besides, since speed also encompasses the production rate, a company that produces its goods at a fast speed ensures that customers do not run out of products, not only retaining customers but also improving overall business revenue.
Dependability is essential in offering reliable service and product delivery, hence reducing cost while increasing speed. If a company fails to receive an item that is part of the production on time, the production process will be delayed, and more time will be wasted in adjusting to the mishap. In terms of operational cost, a firm may incur additional expenses when it fails to receive the item on the item. It will either force the company to request the product from other sources at a higher price or wait for the item, which will slow down production, thus affecting revenue. For example, a company such as Coca-Cola that relies on flavorings may have its production process slowed down when the delivery of the flavorings is delayed, ultimately delaying revenue as well.
Flexibility gives a company a competitive advantage of offering a wide variety of products, at different volumes, and appropriate delivery dates. In general, being flexible increases speed and maintains dependability. Flexible resources make a company’s operations seamless as no time is lost while waiting for a system or an individual to initiate change requests. This will, in turn, improve the rate of production. Flexibility also enhances dependability in that flexible internal operations will help in faster response when unexpected emergencies occur; hence there will be minimal disruption of the operation process. Consequently, this will improve the general dependability of the business. A company such as Cisco has high flexibility. Customers can decide when the shipment should be delivered, either within the specified period or urgently.
Cost increases the productivity and profitability of a company. In cases where price competition is negligible, a company producing its products at reduced cost earns more revenue from selling the products at market price. Besides, cost enhances productivity by maximizing the use of input to the operation to optimize output by utilizing waste to deliver other products that will minimize the general cost of production. For example, Coca-Cola Company, in an attempt to reduce environmental pollution and also reduce operational cost, uses recyclable bottles, particularly the glass bottles, in packaging its products. The company thus saves on the cost of purchasing new bottles by recycling the existing ones.