With the constant focus on marketing and your value proposition, it was to lose sight of the fundamentals within your business that not only keep your operation sustainable but supports growth.
Operations management is a crucial aspect of any business, and without the right management functions, you are going to struggle with cash flow.
Good management has a direct effect on the productivity and morale of the business and adds to the culture of the company.
Further, saving made here contribute directly to your bottom line, and investment can deliver a retune measured in multiples if well planned and executed.
Let’s dive into operations management functions and operational management best practices you can utilize for your business.
Operations Management Functions and Best Practices
Here are the significant operations management functions without which the business will not survive. These are the same throughout almost all industries. However, the way these functions are executed may vary.
As a business, you need to be able to adapt and plan for the future so you can change with time, customer requirements, and technological advancements.
Forecasting is a critical element in the production process because no business wants to build an inventory of stock that might not sell in the future.
Just in time, manufacturing is well established, and management is well established, and the Toyota model is still the benchmark, but as part of your business risk mitigation strategy, do make sure you have flexibility build into the system in the event of a supply chain interruption.
This is why it is important to analyze the demands of the consumer beforehand to adapt to the current market conditions.
Proper utilization of finances is important because finance is always limited in an operations environment.
Costs are constantly driven down to facilitate investment in sales and marketing, but you must be careful that the concept of lean management isn’t stripping your process to the point that minor interruption becomes critical operational issues because fundamentals like maintenance and calibration were overlooked.
Apart from investing to ensure smooth operations remember that markets change and your need to invest to meet that change.
Further, an investment can so regardless of whether you are using a contractor or own your own operation, do you keep a plan and review the investments made and the R.O.I. associated with them?
Every successful business has a strategy they execute. This is what makes them successful. You need to have a strategy for every business function.
For operations, every aspect from obtaining raw materials to creating and selling a product comes under this scope, and all of these processes need to be optimized.
Established companies have lots of resources to accomplish this, but for Start-ups and smaller companies, I personally recommend focusing on Unit Economics:
- What is the cost of serving one customer, delivering an order, funding an employee hour?
- How much does it cost to acquire new customers? (aka C.A.C. or customer acquisition costs)
- What does a single order contribute to our bottom line? (aka CM or contribution margin)
- How frequently do customers return as repeat buyers? (aka retention rates)
- What is their order frequency? How frequently do they order? Why is this important?
- What are customers worth to business over their lifetime? (aka L.T.V. or customer lifetime value).
Operations Management Best Practices
Here are some operations management best practices that you can utilize for the success of your business:
- Creation of S.M.A.R.T goals
- Allocate resources in an efficient manner
- Improve communication within the organization
- Updated training
- Updated technology
- Manage supply chains effectively
- Standardize the complete process within an organization
With these practices, you can effectively manage all operations within your business.
Just remember to be smart about it and always set realistic goals. Operations management is the glue that holds the business together, so make sure you utilize these operations management best practices!
If you need any help with operations consulting, then please contact me to schedule a free consultation.
The survival of your business is dependent on a good operations management team. They need to be co-ordinated and should have effective communication so your business can run smoothly.
Hire good people, train them, and allow them the freedom to optimize these processes. More so than most departments, there will often be a struggle for funding, particularly for CAPEX but if it’s linked directly to sales and the R.O.I. is fully justified, then the right decision should be clear.