Operations management — it could just save your business
Have you ever visited your favourite store or restaurant to find it closed — permanently? This was your go-to place with an excellent reputation, great service and seemingly happy customers. What happened? It’s possible that this establishment mismanaged their resources. The most common cause? No operations management plan.
What is operations management?
Operations management is how successful businesses handle their day-to-day activities, with the goal of managing its resources for maximum efficiency. Unfortunately, many small business owners manage on the fly, never really looking at the process from start to finish.
During the industrial revolution, the assembly line made it possible to manufacture products faster than ever before. By creating efficiency in labour and production, more goods could be built in less time, which increased sales. Businesses across industries have strived for more efficient operations ever since.
You’re in a good spot. You’re already doing operations management. Every day you’re making decisions on the day-to-day activities of your business. But if you look deeper, you’ll find areas where you can manage your operations better to reduce operating costs.
6 signs your small business need an operations strategy
Many small businesses could gain the edge they need by managing their day-to-day activities more efficiently. Not sure if that’s you? Here are 6 signs you’re ready.
- Unproductive employees.
- Outdated technology.
- Inefficient workflows and processes.
- Duplicated communication.
- Excessive inventory expenses.
- Antiquated equipment.
We include instructions on how to create a simple operations management plan at the bottom of the post.
1. Unproductive employees
The first sign you need an operations strategy is when your employees:
- Have trouble prioritising work
- Seem disengaged
- Don’t work effectively together
This is a wake up call to any business owner — time to figure out where the problems are.
2. Outdated technology
Clue No. 2 is if your hardware or software needs to be updated frequently. This is a major time suck for you and your employees. Today’s software programs are more customisable and easier to implement than ever before.
3. Inefficient workflows and processes
Another common sign is a workflow that starts and stops, with workers having to wait to do their jobs. Whether you’re selling a product or an idea, a systematic flow saves time, money and frustration.
4. Duplicated communication
You might be surprised at how much time you’re wasting in the communication process. The daily task of sending emails alone is time-consuming, especially if multiple staff members are sending the same emails.
5. Excessive inventory expenses
For any business that creates products, the money spent on storing raw or finished goods is a significant expense that will quickly eat into your profits.
6. Antiquated equipment
It’s easy to get into the habit of just making do, especially when money is tight. But the real cost of maintaining your existing equipment might be higher than upgrading or replacing it.
How to create a simple operations management plan
If the issues mentioned above sound familiar, let’s look at what you can do next. Your business plan is the best place to start. This might be a section of your strategic plan or a stand-alone operations plan. The answers just might lie within these pages.
Don’t have a plan? Don’t worry, you can start making improvements right away by following these five steps.
1. Identify inefficiencies
Start by making a list of areas where you think you’re losing money, time or other resources. Think about input costs like raw materials, rent, tools and equipment. Analyse labour and inventory costs and what you spend to process your goods or service.
2. Involve the entire staff
Your employees are the best people to ask when trying to identify and fix problem areas. Not only will they offer valuable insight, but it will also boost team morale when they know that their opinion matters. Since they’ll be implementing any new procedures, you’ll need their full backing to guarantee success.
3. Research solutions
Every business has room for improvement. Talk to others in your industry to find out what solutions worked for them. Take your time. If you’re looking for project management software, you’ll find hundreds of choices.
Some are project management tools are inexpensive, which is appealing. But the time you spend learning a new program, to realise later that it’s not the best choice for your business, is time poorly spent.
4. Create SMART goals
SMART goals are goals that are:
An example of a SMART goal is a store owner who wants to reduce shipping costs by 25% in 12 months. The goal addresses one issue, with a set timeframe and specific percentage that can easily be measured.
5. Develop operational strategies
Now that you have a list of goals, it’s time to create an action plan and map out how you will achieve them.
When defining strategies, assign responsibility and establish clear expectations. Consider the employees involved in researching, purchasing and implementing the new system.
Common operational issues
Let’s look at different types of businesses and the common (and costly) operations issues they face.
From the time an order is placed to when it’s delivered to the customer, too many hand-offs can lead to mistakes. Duplicated communication efforts eat up employee time and make the ordering process cumbersome. Shipping and inventory costs can quickly spiral out of control if not watched.
Manufacturing businesses can have numerous issues with their supply chains. The supply chain encompasses:
- Raw materials
- Machinery and equipment
- Employees and suppliers
Inventory storage is a massive expense for manufacturers. The first thing to do is look for ways to cut storage and distribution costs. When was the last time prices were renegotiated? Updating software systems that manage ordering, inventory, accounting and shipping can bring additional savings.
Service providers have a different set of operational problems.
Since the service sector relies heavily upon communication and human resources, your employees likely know where the problems are. Everyday tasks like quoting, liaising with subcontractors, responding to customer queries and internal communication take time. And as they say, time is money.
Service businesses often consider collaboration tools that allow teams to communicate more effectively and be more productive.
A final word about managing your operations
Operations management is being deliberate about how you deal with the day-to-day activities of your business and manage your resources. By looking for gaps or inefficiencies, you’ll be able to control your spending and increase productivity — which leads to more sales and higher profits.
To get started, gather your staff around a whiteboard and brainstorm where there are breakdowns in processes, communication and workflow. You’ll find areas that are easy to fix and others that will require more planning.
From your list, select the areas you want to tackle and create SMART goals. Then map out strategies to reach each goal. Wherever you choose to make improvements, remember to be patient and remain steadfast. Operations management is a long game.