3.4 Decision making to improve operational performance

Students should consider the following throughout this section of the specification:

  • how developments in technology are affecting decision making and activities in operations (eg more online businesses, better links with customers, suppliers and inventory control)
  • ethical and environmental influences on operations decisions
  • market conditions and competition
  • how decisions in operations improve the competitiveness of a business
  • the interrelationship between operational decisions and other functions.

Setting operational objectives


Additional information

The value of setting operational objectives

Operational objectives include:

  • costs
  • quality
  • speed of response and flexibility
  • dependability
  • environmental objectives
  • added value.

External and internal influences on operational objectives and decisions


Analysing operational performance


Additional information

Interpretation of operations data


Calculation of operations data

Students should be able to calculate:

  • labour productivity
  • unit costs (average costs)
  • capacity
  • capacity utilisation.
The use of data in operational decision making and planning

Making operational decisions to improve performance: increasing efficiency and productivity


Additional information

The importance of capacity


The importance of efficiency and labour productivity


How to increase efficiency and labour productivity


The benefits and difficulties of lean production

Lean production should include 'Just in Time' operations.

Difficulties increasing efficiency and labour productivity


How to choose the optimal mix of resources

The mix of resources should include an understanding of labour and capital intensive processes.

How to utilise capacity efficiently


How to use technology to improve operational efficiency


Making operational decisions to improve performance: improving quality


Additional information

The importance of quality 


Methods of improving quality

Methods of improving quality should include quality assurance.

The benefits and difficulties of improving quality


The consequences of poor quality


Making operational decisions to improve performance: managing inventory and supply chains


Additional information

Ways and value of improving flexibility, speed of response and dependability

An understanding of flexibility should include mass customisation.

How to manage supply to match demand and the value of doing so

Ways of matching supply to demand include:
  • outsourcing
  • use of temporary and part time employees
  • producing to order.

Influences on the amount of inventory held

Inventory control should include:
  • interpreting inventory control charts
  • lead time
  • re-order levels
  • buffer level of inventory
  • re-order quantities.

Influences on the choice of suppliers


How to manage the supply chain effectively and efficiently and the value of this


The value of outsourcing