The business operations of your SME is the very nuts and bolts that make it all run like a well oiled machine (or come apart like a poorly tailored suit). The operations department is very much like the boiler room of an old style steamer, helping to convert your business resources into measurable output.
When a company makes efficiency improvements within their operations departments, they are able to better utilize the company assets to improve production at lower costs. Good operations therefore are synonymous with business success, and good management metrics.
What Functions Make Up SME Business Operations?
1. Employees And How They Are Organized. Some SME’s will actually be comprised of just one or two entrepreneurs slaving away under their own guile. For companies with a few employees, there are several questions to answer in order to get the most output from workers. What are the various skill sets that your employees have, and how might they best be organized? How will any patches in required experience or skills be plugged (in house training or hiring externally?). How will you be able to motivate employees to achieve a zen like harmony within the company? Then there are the matters of direct compensation, bonuses and training to be addressed. Employees and their application within the business are a key part of the overall operations business plan.
2. Stocks & Inventory Management. A good operations department will ensure that optimum raw materials and inventory are available at all times. Stock management is almost a science, requiring management to understand and reconcile demand patterns to stock levels. Stock has numerous challenges associated with it, such as potential spoilage and storage costs, which makes the good regulation and management of it highly crucial. Creating dynamic, mutually beneficial relationships with vendors is also part and parcel of a streamlined operations plan.
3. Bottleneck Identification. Good operations managers will forever be on the hunt for process improvements. They do this by identifying business processes and operations that might be holding up productivity and correcting them. For example, a business process that creates tractors might be highly efficient on the whole, but one old piece of machinery reduces the entire output by 25%. Identifying and correcting this bottleneck (in this case by replacing the old piece of kit with something more effective) can vastly improve the output of tractors.
Enlightening Business Operations Metrics
In order to understand how efficient their operations department is, company management often use financial metrics to tap into things like productivity, employee output and more. There are many different types of metrics – an operations manager may wish to tap into the below:
Employee Metrics. Devised to tap into worker productivity (how many units are produced in a day or set timeframe). This can then be contrasted against industry averages or prior ratios from previous years. Additionally, efficiency metrics aim to show how efficiently the worker is able to produce output – usually by factoring in time and cost into the mix.
Inventory Management Metrics. These are metrics devised to understand how effectively the company’s stock is being managed. Ratios such as the inventory turnover look to pinpoint possible over or under stocking, and can also provide insight into risks of stock becoming obsolete.