Operational Objectives

Operational objectives definition

Operational objectives are specific, measurable targets that a business sets for its day-to-day operations. These objectives are typically focused on improving efficiency, productivity, and quality in order to achieve the company's overall goals.




Types of operational objectives

There are several different types of operational objectives that businesses may set, including:




• Cost objectives: focused on reducing the costs of production, distribution, and other operational expenses. This can be achieved through measures such as improving efficiency, reducing waste, and negotiating better deals with suppliers.



• Quality objectives: focused on improving the quality of a company's products or services. This can be achieved through measures such as implementing quality control processes, conducting regular inspections, and gathering customer feedback.




• Speed objectives (or swiftness of response): focused on improving the speed and responsiveness of a company's operations. This can be achieved through measures such as reducing lead times, improving communication and coordination between departments, and investing in faster technology.




• Dependability objectives: aiming at improving the reliability and consistency of a company's operations. This can be achieved through measures such as implementing backup systems, maintaining equipment and facilities, and ensuring adequate staffing levels.




• Flexibility objectives: seeking to improve the ability of a company to adapt to changing circumstances. This can be achieved through measures such as cross-training employees, diversifying product lines, and implementing flexible work arrangements.

• Environmental objectives focus on reducing the impact of the business on the environment through reducing carbon footprint or using recycled resources.

Let's study these objectives in more detail!

Cost objectives

It is essential that the business makes sure that the operations are cost-effective. The usual measure of cost efficiency is the unit cost (i.e., the average cost incurred to produce a unit of a product). Companies operating in a similar industry will have the same cost structures, however, they will differ depending on the productivity, competence, and level of production. The company which has the lowest cost of producing a product will have a stronger position in comparison to its rivals by offering lower prices, or by making greater profit margins at average market price. Generally used cost targets for organisations involve:

Diminishing unit costs: This is the main cost target. Reducing unit costs allows the organisation to reduce prices or increase profit margins by maintaining the prices at the same level. Decreasing unit costs can be obtained in two ways:

1. Lowering fixed costs: This permits a precise focus and is usually controllable
2. Lowering variable costs per unit: Organisations try to find inexpensive suppliers or inexpensive methods for manufacturing. By slashing labour and raw material costs, organisations can lower their variable costs per unit. One way to target this is to improve labour productivity as this would reduce wages per unit.

Quality objectives

Operational goals concerning cost and quantity targets emphasize productivity and effectiveness, the unit cost of each product, number of products to be produced per time period or for each machine, greater sales and satisfied customers, etc. some of the quality objectives are as follows:

• Satisfaction rating of customers: A survey can disclose the opinions of the customers on a statistical scale. Since the main purpose of any product is the satisfaction of needs of customers, this is a good way to measure if the quality was achieved/not.
• Customer complaints: This will estimate the number of customers who have complaints. It is an excellent way to measure if the organisation has issues that need rectification. It is recognized that a single unhappy customer can affect the reputation of the organisation a lot more than a huge number of satisfied customers can increase it, therefore, it is essential to prevent customer complaints.
• Level of product returns: If the number of returned products is getting high, it means that the customers are not satisfied with the product. This goal can set a target based on the prior data of returns.

Speed (or swift of response) objectives

Flexibility objectives

Flexibility can be of various forms such as:

• The flexibility of the product: capability of switching production from one product to the otherFlexibility in Volume: capability of changing the level of output of any product according to fluctuation in the demand of customers.
• Mixed flexibility: the capability to offer a variety of alternate versions.
• The flexibility of delivery: capability to adjust rapidly to fluctuations in timings and size of delivers to customersEach form of flexibility allows the organisation to adjust to changes in customer needs. This will result in increased sales and reduced costs.

Dependability

Similar to quality and flexibility, dependability can take various forms such as:

• Dependability for any service can be related to consistent quality or the timeliness of delivery.

• Dependability for any product can be related to product durability, longevity, and reliability.

• If an organisation is not able to offer its services on time, then it is highly likely to lose its customers.

Environmental objectives

Nowadays, environmental goals are increasingly becoming significant for operations management for various reasons:

• Organisations have recognised their responsibility towards the environment.

• An organisation can entice more customers if they present a more positive approach towards the improvement of the environment.

• Several environmental goals, for instance, recycling will help in saving costs.

How to set operational goals?

Setting operational goals involves a number of steps to ensure that the goals are specific, measurable, achievable, relevant, and time-bound. Here are the main steps to follow when setting operational goals:

1. Define the objective: Start by clearly defining the objective of the goal. What do you want to achieve with this goal? Be specific and make sure that the goal is aligned with the overall strategic direction of the company.
2. Identify key metrics: Determine the key metrics that you will use to measure progress toward the goal. These should be specific and measurable, such as sales figures, production efficiency, or customer satisfaction scores.
3. Set a timeline: Establish a timeline for achieving the goal. This should be realistic and should take into account any factors that could impact progress, such as seasonal fluctuations in demand or unforeseen challenges.
4. Assign responsibility: Identify who will be responsible for achieving the goal and ensure that they have the resources and support they need to be successful.
5. Develop an action plan: Develop a detailed action plan outlining the specific steps that need to be taken to achieve the goal. This should include timelines, milestones, and any necessary resources or support.
6. Monitor progress: Regularly monitor progress toward the goal and make adjustments as needed. This could involve tracking key metrics, reviewing the action plan, and identifying any roadblocks or challenges that need to be addressed.

By following these steps, businesses can set operational goals that are clear, achievable, and effective in improving their day-to-day operations

Operational objectives examples

Examples of operational objectives include: improve efficiency, enhance quality, or improve customer experience. Let's take a look at more examples of operational objectives based on real-world companies.:

1. Toyotaoperational objectives examples:
   • Improving quality control: This could involve measures such as conducting regular inspections, implementing quality management systems, and using feedback from customers to identify areas for improvement.
   • Reducing waste: To increase efficiency and reduce costs, Toyota may implement lean manufacturing techniques, reduce energy consumption, and recycle materials where possible.
   • Enhancing safety: To protect its workers and customers, Toyota can implement safety protocols and procedures, provide training and education for employees, and conduct regular safety inspections.
2. Starbucksoperational objectives examples:
   • Increasing speed of service: To improve customer satisfaction and reduce wait times, Starbucks may set a goal of increasing the speed of service at its stores. This could involve measures such as optimizing its point-of-sale systems, implementing new technologies, and reorganizing its store layout.
   • Enhancing sustainability: To reduce its environmental impact, Starbucks may implement measures such as using renewable energy sources, reducing water usage, and sourcing ingredients from sustainable and ethical suppliers.
   • Improving employee engagement: To attract and retain talented employees, Starbucks can start providing better training and development opportunities, offering competitive benefits and compensation packages, and creating a supportive and positive workplace culture.

Value of setting operational objectives

Once the corporate strategy is defined, a company will classify the applicable performance goals for measuring and configuring the environment so that strategic objectives can be achieved. It is essential to understand and plan the operational objectives to come closer to the visioned strategic goal.

By setting the company’s operational objectives especially, they will deliver guidance and direction to the workforce. They seem to be specific as well as measurable, with the aim of facilitating the company to reach its long-term goals. It will also help in lowering costs and improving budgets.

The purpose of setting objectives is:

• To act as a centre for decision making

• To provide a gauge with which success or failure can be measured

• To enhance synchronization by working towards the same objective

• To enhance efficiency as the reasons for success and failure can be assessed.

Benefits of setting operational objectives

Benefits of setting operational objectives include:

• Enhancing quality as they aid in increasing sales, boosting a brand, and lower returns.

• Better scheduling, new machinery, and employee training are operational goals that boost productivity and lower costs

• There is nothing better than a greatly satisfied customer, operational objectives exactly ensure this combined with a quality product.

• With increased productivity, quality products, and satisfied customers, the cost that the company incurs on servicing the product is greatly decreased. This will eventually increase revenues.

• With decreasing operational cost, there is also a cut of waste as a precise number of products are produced through appropriate operations management.

Internal and external influences on operational objectives and decisions

It is important for businesses to evaluate both internal and external influences.

Evaluating internal influences

Internal factors are those that are inside the organisation, for instance, workforce, finances, and resources.

• Corporate objectives: The operations department should make sure that its goals and decisions are coherent with the corporate objectives of the organisation.

• Finance: Operations management goals and decisions depend on substantial spending on capital equipment, Research and development, and enough finance for the implementation of decisions.

• Human resource: The skills, training, and determination of an organisation will have a key influence on operational goals and decisions. If there are weaknesses in HR, then fewer aspiring goals should be set.

• Availability of resources: If the organisation has sufficient resources with equipment and popular brands, then it becomes easy to produce cost-effective high-quality products.

Evaluating external influence

External factors are from outside the organisation, for instance, economic situation or the actions of rivals.

• Market factors: If there is a change in demand, the organisation will have to adapt its production levels. If there is a decline in sales, it will have to introduce new products.

• Rival’s actions: If a rival has introduced a successful new product, then the organisation will have to launch its own new product.

• Technological change: Technology can influence the cost of an organisation, the quality of its products, and productivity. These factors are essential performance goals for operations management; hence, technology becomes a significant factor for several organisations when setting their operational objectives.

• Legal factors: Due to the possible health and safety risks, the operations management is strictly regulated by legislation.