Operations Performance Objectives

Operations Performance Objectives

In this lesson, you’re expected to learn about the five basic performance objectives that apply to all types of operations.

Performance Objectives

The five basic performance objectives are:

– Quality
– Speed
– Dependability
– Flexibility
– Cost

Internal & External Influences of Performance Objectives

Performance objectives have both internal and externalinfluences. Internally, cost is influenced by the other performance objectives.

• Running an organization’s operations requires a well-defined set of performance objectives.

• There are five basic performance objectives that apply to all types of operations. They are: cost, dependability, flexibility, quality, and speed.

• These five objectives have internal and external implications, which are usually matched.

• Each of the various performance objectives has several internal effects, but all of them affect cost.
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[Optional] Objectives of Operational Performance
Read this article for a brief summary of the five performance objectives:
Performance Objectives
1) Quality

Quality refers to consistent conformance to the customers’ expectations and has a major influence on their satisfaction or dissatisfaction.

The meaning of quality varies across businesses, as we can see from the four examples below (a hospital, a bus company, an automobile plant, and a supermarket).

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• Quality exerts a major influence on customer satisfaction and, in some ways, it is the most visible part of what an organization does.

• When quality means consistency in product and service production, it makes life inside the company easier, reducing the need for re-work.

• Thus, quality can work for cost-reduction and increased dependability.

[Optional] Performance Objectives: Quality
Watch this 4-minute video to learn more about this objective:
2) Speed

Speed means the elapsed time between customers requesting products or services and their receipt of them. 

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• The main benefit to the operation’s (external) customers of speedy delivery of goods / services is that the faster they can get the product or service, the more likely they are to buy it, the more they will pay for it, or the greater the benefit they receive.

• Within the operation, speed is also important. Fast response to external customers is greatly helped by speedy decision-making and speedy movement of materials and information inside the operation. 
3) Dependability

Dependability means doing things on time for customers – exactly when they are needed or at least when they were promised.
Customers might only judge the dependability of an operation after the product or service has been delivered.

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• Over time, dependability can override all other criteria. No matter how cheap or fast a bus service is, if it is constantly late (or unpredictably early) or the buses are always full, then potential passengers will be better off calling a taxi.

• Operations where internal dependability is high are more effective than those which are not, because dependability saves time, money, and gives stability to the operations.
4) Flexibility

Flexibility means being able to change what operations does, how it is doing it, or when it is doing it.
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Customers usually demand four types of operations flexibility: 

– Product / service flexibility: introduce new or customized products and services
– Mix flexibility: a wide range or mix of products and services
– Volume flexibility: ability to change the output level to produce different quantities of products and services over time
– Delivery flexibility: ability to change the timing of delivery

The figure below shows examples of the four types of flexibility applied to four different businesses:
5) Cost

The lower the cost of producing their goods and services, the lower can be the price to their customers. 
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• Even those companies which do not compete on price will be interested in keeping costs low. Every euro or dollar removed from an operation’s cost base is a further euro or dollar added to its profits.

• The ways in which operations management can influence cost will depend largely on where the operation costs are incurred.

[Optional] Operations Management
Check out this 10-minute video to see how students from University of Warwick analyze their nursery operations using the tools that we have learned so far:
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