Operations strategies and performance objectives: design, supply chain, outsourcing, technology, inventory, quality and resistance to change (HSC Business Studies)

What this dot point is asking

The syllabus lists the operations strategies as: performance objectives (quality, speed, dependability, flexibility, customisation, cost); new product or service design and development; supply chain management (logistics, e-commerce, global sourcing); outsourcing (advantages and disadvantages); technology (leading edge, established); inventory management (advantages and disadvantages of holding stock, LIFO, FIFO, JIT); quality management (control, assurance, improvement); overcoming resistance to change (financial costs, purchasing new equipment, redundancy payments, retraining, reorganising plant layout, inertia); and global factors. The "students learn to" points include "discuss the balance between cost and quality in operations strategy" and "recommend possible operations strategies for one hypothetical business", so this dot point drives many Section III business reports.

Two strategies have their own pages: quality management and global factors.

Performance objectives

Performance objectives are the targets operations uses to judge how well it serves customers and supports the business strategy.

Dependability example. Airlines' on-time performance is published monthly by the Bureau of Infrastructure and Transport Research Economics (BITRE), so dependability is measured publicly and compared between carriers.

The balance between cost and quality

The syllabus asks you to "discuss the balance between cost and quality". Higher quality usually needs better inputs, more skilled labour and quality systems, which raise cost; cutting cost can lower quality. But the relationship is not simply a trade-off:

• Poor quality is costly: rework, scrap, returns, warranty claims, recalls and lost customers.
• Quality systems can lower cost in the long run by preventing defects instead of detecting them (see TQM).
• The right balance depends on the competitive strategy. A cost leader aims for acceptable quality at the lowest cost; a differentiator accepts higher costs for superior quality and charges a premium.

New product or service design and development

New product or service design and development is the process of creating new outputs, or improving existing ones, from idea through research, design, testing and launch. Operations must decide how the new product will be made or delivered, so design decisions determine cost, quality and flexibility for years.

Example: Cochlear. In July 2025 Cochlear announced US Food and Drug Administration approval of the Nucleus Nexa System, which it describes as the world's first smart cochlear implant system. The implant's firmware can be updated after surgery to add features and improved algorithms without replacing the implant, and it stores the recipient's hearing information on board. Designing the product to be upgradeable is an operations decision that lengthens its useful life and supports quality and customisation, and is an example of research and development as a global factor.

Supply chain management

The supply chain is the sequence of activities and organisations that move a product from raw materials to the final customer. Supply chain management is coordinating those activities to deliver the right product, in the right quantity, at the right time and place, at the lowest cost. The syllabus names three elements:

• Logistics: the physical movement and storage of goods (transport, warehousing, distribution centres).
• E-commerce: using the internet to buy from suppliers and sell to customers, which increases speed and transparency and supports online ordering and home delivery.
• Global sourcing: buying inputs from the best supplier anywhere in the world (see global factors).

Good supply chain management improves cost (lower freight and stock), dependability (fewer stock-outs) and speed. Its risks include disruption from natural disasters, pandemics and conflict, and dependence on a few key suppliers.

Outsourcing

Outsourcing is contracting an external provider to carry out work previously done inside the business.

Case study: Qantas ground handling. In 2020, during the COVID-19 pandemic, Qantas outsourced the work of about 1,820 ground handling employees. The Federal Court found the decision breached the Fair Work Act because one reason for it was to prevent employees from taking protected industrial action, and the High Court dismissed Qantas's appeal in September 2023. In December 2024 Qantas agreed to a $120 million compensation fund for the affected workers, and in August 2025 the Federal Court ordered a $90 million penalty, described by the Transport Workers Union as the largest employer penalty in Australian corporate history. The case shows that the cost advantages of outsourcing can be wiped out when the decision ignores legal obligations and the effect on employees and reputation.

Technology

Technology decisions are a choice between leading-edge technology (the newest and most advanced, which can create a competitive advantage but is expensive and less proven) and established technology (proven, reliable, cheaper and widely available, but offering less advantage because competitors have it too).

Example: Coles' supply chain automation. Coles has combined two types of leading-edge warehouse technology:

• Automated distribution centres built with the German firm Witron, at Redbank in Queensland (opened 2023) and Kemps Creek in western Sydney (officially opened August 2024), with an $880 million automated ambient centre at Truganina in Victoria announced in October 2024. These replenish supermarkets.
• Customer fulfilment centres built with the UK technology company Ocado, at Truganina and Wetherill Park, opened in 2024 to pick online orders.

Automation lowers the cost per carton handled, improves accuracy (quality and dependability) and supports speed. The disadvantages are very high capital cost, reliance on specialist technology partners, long lead times and the need to manage changes to jobs.

Inventory management

Inventory is stock of raw materials, work in progress and finished goods. Inventory management is deciding how much stock to hold and when to reorder.

LIFO and FIFO

FIFO (first in, first out): the oldest stock is used or sold first. It is the natural method for perishable or dated goods such as food and medicines.

LIFO (last in, first out): the newest stock is used or sold first. As a physical method it can suit bulk goods stored in a pile, such as sand or gravel, where the last load added is the first taken.

The methods also change how stock and cost of goods sold (COGS) are valued, which affects reported profit. Note that Australian accounting standard AASB 102 Inventories does not permit LIFO for valuing inventory in financial statements, so in practice Australian businesses report on a FIFO or weighted-average basis.

Just-in-time (JIT)

JIT means inputs arrive only as they are needed in the production process, and goods are produced only when there is demand for them. It was developed as part of the Toyota Production System.

• Benefits: less cash tied up in stock, lower storage costs, less waste and obsolescence, and problems (such as defective inputs) are exposed quickly.
• Requirements: reliable suppliers (often located nearby), accurate forecasting, short and dependable transport, and high quality inputs.
• Risks: no buffer if supply is disrupted. The COVID-19 pandemic showed how quickly JIT operations stop when parts do not arrive, and many businesses have since held more "just-in-case" stock of critical inputs.

Quality management

The syllabus names three approaches: quality control (inspecting outputs to detect defects), quality assurance (systems that prevent defects and certify that standards are met, such as ISO 9001) and quality improvement (continuous improvement and total quality management). They are covered in depth, with examples, on the quality management page.

Overcoming resistance to change

Operations strategies often change technology, layout, jobs and suppliers. The syllabus lists six sources of resistance:

Strategies to overcome resistance:

• Communicate the reasons for change, the benefits and the timetable early and honestly.
• Consult and involve employees and their representatives in planning; many modern awards and enterprise agreements require consultation about major workplace change.
• Train and support staff for the new skills, and offer redeployment before redundancy.
• Offer incentives and fair redundancy or transition packages.
• Implement in stages (pilot sites, phased rollouts) so problems are fixed early and success builds confidence.
• Lead visibly: managers who model the change reduce inertia.

Global factors

Global factors (global sourcing, economies of scale, scanning and learning, research and development) are covered on global factors of operations.

How this dot point appears in the HSC

• Section I: identify the performance objective in a scenario, the inventory method, or the advantage of outsourcing.
• Section II: outline or explain one strategy (2 to 5 marks), such as the advantages of outsourcing, the risks of JIT or how to overcome resistance to change.
• Section III: the business report often asks you to recommend operations strategies for a hypothetical business; choose strategies that match its objectives (for example cost versus quality) and explain implementation.
• Section IV: evaluate operations strategies of a real business, with a judgement about effectiveness against performance objectives.