OPERATIONS STRATEGY IN BUSINESS PLAN

Operations Strategy deals with how you buy, build and prepare your product or service for sale. This  covers a lot of ground, including sourcing raw materials, processes for conversion , hiring labor, acquiring assets,  quality, waste reduction , reliability and shipping the finished goods. These components are different depending on whether you are a manufacturer, a retailer or a service firm.

Excellence is all about delivering all activities of work with High Quality and Speed consistently-Aravindan Raghavan.

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Operations Strategy- A Critical Part of Supply Chain

Hase an integral part of Supply Chain Management. The goal of supply chain is to ensure delivering the right product at the right place at the right time, in the right quantity but at the value perceived by the king of any business (Customer). Operations play a crucial role in delivering that value.

Small Businesses and Supply chain:

The small business or start up business owner need to understand how to integrate their supply chain with the supply chains of their customers. The logistics service provider may enhance or mar the reputation of an e- commerce business. The quality of components in a B-B business will affect the cost, delivery and customer service.

 Value Addition

Supply Chain is also known as value chain. Hence, business plan needs to focus on operational excellence and how value addition is being done in the supply chain.

Commitment to continual improvement of processes and adopting changes to keep them current to the ever changing scenarios is "Operational Excellence"-DILIP D

Quality and Cost Elements 

The simplest equation for Profit is Revenue minus Cost. A business has control over the cost unlike revenue and hence optimizing cost is a critical success factor for any business.

 Major part of the cost is accounted in making the product.  Raw materials (RM) normally account for 50-60% of production cost. The costs incurred in transforming the RM into a finished product are the conversion costs.

Quality- Non -Negotiable

 In a product, company operation is not the front end of the customer. The sales and service personnel face the customer .However in a service industry, operations face customers directly. Courier Service, e- commerce delivery, restaurants, airlines etc. are a few example of service industry.

People play a crucial role in customer satisfaction In service sector business unlike a product where quality is already determined by the effectiveness of the process built in the operations.

Performance Measures in Operations Management:

Operational Excellence

Operational Excellence is the byword in operations and the Japanese have institutionalized operational excellence. Toyota way of production is a must read for all startup businesses to achieve operational excellence.

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Quality is an attitude and application of lean concepts in operations helps in bringing down the cost.

Japanese have proved that inefficient companies incur 50-60% of cost compared to lean organizations, which incur only 5-10% to maintain quality.

Elements of Operations Strategy

The business plan should cover the following elements in the operations section.

  •   Location
  •  Sources and complexity of technology, manufacturing process
  •   Plant, equipment, facilities, infrastructure
  •   Recruitment, training and retaining personnel
  •   Input materials – sources, costs
  •   Production, capacity utilization
  •   Wastages, pilferage
  •   Assumptions on output rates, costs
  •   Order fulfillment, returns and customer service
  •   Quality Control and Quality Assurance
  •   Safety, Health and Environmental concerns
  •   Research and Development
  •   Management Information Systems

Nuggets- Operations Strategy

  1. Cost & Quality key factors
  2. Costs in operations are internal to the organizations
  3. Right from day one, startups should focus on Operational Excellence
  4. Operational decisions are strategic to meet customer expectations
  5. Operational excellence wins customer loyalty