Short answer: Operations objectives and KPIs tell a business what its operations should achieve and whether they are achieving it. Operations means making the product or delivering the service. AQA 7138 names five objectives: efficiency, quality, volume, flexibility and environmental impact [1]. KPIs (key performance indicators) such as delivery times, defects and complaints measure progress against them.
What the 7138 specification asks
This topic sits in 3.2.2, Operations, and is examined on Paper 2 [1]. The specification asks you to understand:
- operations objectives: efficiency, quality, volume, flexibility and environmental impact
- KPIs: wait times, returns, defects, complaints, speed of response, delivery times, and customer service or satisfaction ratings
- measures of environmental impact and sustainability
- ways to reduce environmental impact: waste reduction, resource efficiency, reducing emissions, carbon footprint, sustainable sourcing and circularity
- the challenges: costs, supply chain limitations and operational disruption
- supply chain transparency and supplier third-party accreditations [1]
The new course spells out operations KPIs, environmental impact, circularity and supply chain transparency. These terms are not in the old 7132 specification. Supplier accreditation was. Three calculations also carry over: labour productivity, unit costs and capacity utilisation.
Operations objectives and KPIs: the five objectives
Each objective needs at least one KPI, or the firm cannot tell if it is working.
| Objective | What it means | Example KPI |
|---|---|---|
| Efficiency | Producing output with as few inputs, and as little cost, as possible | Unit cost, labour productivity |
| Quality | Meeting customer needs consistently, with few faults | Defects, returns, complaints, satisfaction ratings |
| Volume | Producing the amount customers want | Capacity utilisation, wait times |
| Flexibility | Changing output, products or timing quickly | Speed of response, delivery times |
| Environmental impact | Reducing harm to the planet from operations | Emissions, waste per unit, % recyclable packaging |
The objectives can conflict. Faster delivery can mean half-empty vans, which raises costs and emissions.
Operations KPIs in action: Royal Mail
Ofcom, the UK's communications regulator, sets Royal Mail's delivery targets and checks the results.
| Delivery KPI | Target | 2024/25 | 2025/26 |
|---|---|---|---|
| First Class: delivered next working day | 93% | 77% | 75.7% |
| Second Class: delivered within three working days | 98.5% | 92.5% | 90.2% |
Sources: Ofcom [2], [3]. On 15 October 2025, Ofcom fined Royal Mail £21 million for missing its 2024/25 targets [2]. That followed fines of £5.6 million in November 2023 and £10.5 million in December 2024 [2]. Ofcom said people "aren't getting what they pay for" [2].
Ofcom then changed the rules. From 1 April 2026, the targets are 90% for First Class and 95% for Second Class [3]. A new backstop target says 99% of mail must arrive no more than two days late [2].
The exam point: a KPI changes behaviour only if missing it has a cost. A lower target may be more realistic, but customers get a lower standard.
Three calculations: labour productivity, unit costs and capacity utilisation
- Labour productivity = output per period ÷ number of employees
- Unit cost (average cost) = total costs ÷ units of output
- Capacity utilisation = (actual output ÷ maximum possible output) × 100
A bakery can make up to 10,000 loaves a week. It employs 20 staff. Its fixed costs are £3,200 a week and each loaf costs £0.35 in ingredients and energy.
This week it makes 8,000 loaves. Capacity utilisation = 8,000 ÷ 10,000 × 100 = 80%. Labour productivity = 8,000 ÷ 20 = 400 loaves per worker. Total cost = £3,200 + (8,000 × £0.35) = £6,000, so unit cost = £6,000 ÷ 8,000 = £0.75.
Next week it makes 9,500 loaves with the same staff. Capacity utilisation = 95%. Labour productivity = 475. Total cost = £3,200 + £3,325 = £6,525, so unit cost = £0.69 (to the nearest penny).
Unit cost fell because fixed costs were spread over more loaves. But at 95% there is little spare capacity, so one broken oven could mean late deliveries.
Measuring and reducing environmental impact
Common measures are emissions in tonnes, waste per unit, energy and water use, and recyclable packaging. The spec names six ways to reduce impact [1]:
- Waste reduction: less scrap, unsold stock and packaging.
- Resource efficiency: less energy, water and material per unit.
- Reducing emissions: for example, electric vans or renewable power.
- Carbon footprint: the total greenhouse gases caused by the firm or a product.
- Sustainable sourcing: buying inputs produced without lasting harm to people or nature.
- Circularity: keeping materials in use through reuse, repair and recycling, rather than "make, use, throw away".
Tesco's figures. In its 2025/26 Sustainability Report, Tesco said it had cut scope 1 and 2 emissions by 68% against 2015/16 [5]. These come from its own sites, vehicles and bought energy. That beat its 60% target for December 2025 [5]. It said 99% of its Own Brand packaging is recyclable in the UK, with 87% recyclable at kerbside [5]. Surplus food provided over 123 million meals to charities, community groups and colleagues [5].
Food waste was harder. In 2024/25, Tesco had cut food waste from its own operations by 14% against a 2016/17 baseline, against a target of 50% [4]. It said meeting the target by December 2025 was "highly unlikely" [4]. It then confirmed the target was missed and set a new one: a 50% cut before 2030 [5].
The challenges: cost, supply chains and disruption
The spec names three challenges [1]. Costs: new equipment and certified inputs cost more now; savings come later. Supply chain limitations: much of a firm's impact sits with suppliers it does not control. Tesco missed a paper and board sourcing target because of "limitations with transparency" in that supply chain [5]. Operational disruption: new processes can slow output while staff adjust.
Supply chain transparency and third-party accreditations
Supply chain transparency means a business knows, and can show, where its inputs come from and how they are made. A third-party accreditation is a check by an independent body, so claims are more believable.
Fairtrade. Fairtrade producers get a Fairtrade Minimum Price as a safety net, plus a Fairtrade Premium to invest in projects they choose [6]. Compliance is checked by regular audits from FLOCERT, an independent certifier [6].
B Corp. A whole company, not a product, is certified. Its B Impact Assessment score is verified by B Lab, and it must recertify every three years [7].
Tesco says 100% of the coffee in its Own Brand products is Rainforest Alliance or Fairtrade certified [5].
Practice question, in our own words: Assess whether a large UK supermarket should make reducing food waste its main operations objective.
Analysis: Wasted food is stock the supermarket has already paid for. So cutting waste lowers unit costs, because costs are spread over more food that is sold. Therefore one objective meets two others: efficiency and environmental impact. It can also protect the brand, because waste figures are now published.
Evaluation: However, cutting waste too hard can mean empty shelves, which hurts quality and sales. Tesco's 14% cut against a 50% target in 2024/25 shows how hard it is when much waste depends on suppliers and shoppers. On balance, it should be a main objective only if availability KPIs, such as complaints and stock levels, are tracked alongside it.
Notice the structure. The analysis links waste to cost with "so", "because" and "therefore". The evaluation uses dated evidence and names what the judgement depends on.
Practise this topic
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Sources
- AQA (2025). AS and A-level Business 7137/7138 specification, version 1.0, October 2025.
- Ofcom (2025). Ofcom fines Royal Mail £21m for missing its 2024/25 delivery targets, 15 October 2025.
- Ofcom (2026). Ofcom investigates Royal Mail’s 2025/26 delivery performance, 1 June 2026.
- Tesco PLC (2025). Sustainability Report 2024/25.
- Tesco PLC (2026). Sustainability Report 2025/26.
- Fairtrade International. Fairtrade Standards (UK page).
- B Lab UK. After you certify: B Corp certification.