Operations management is "the administration of business practices to create the highest level of efficiency possible within an organization for the purposes of converting materials and labor into goods and services as efficiently as possible and maximize the profit of an organization”.
Whether or not an enterprise is a vertically integrated developer, manufacturer and seller of products or simply a re seller of products manufactured by others, the drive for continual improvements to efficiency is just as important regardless of size or type of business.
- Human resources
- Information technology
- Access to, and successful deployment of capital
Smart workers develop better products, develop better processes for manufacturing higher quality products more efficiently (lower cost) and for delivering them to their customers when they want them. Increased efficiency builds a competitive advantage and enterprises that leverage competitive advantages win more business than less efficient competitors. Less efficient organizations stagnate, decline and are eventually sold or liquidated.
Computers can perform certain routine functions infinitely quicker than humans can and are therefore, by definition, more efficient. Intelligent deployment of computer technology results in more efficient decision making, accelerated product development, more efficient manufacturing and assembly, more efficient logistics and improved sales and marketing. In the connected world of the 21st century information can be accessed 24/7 from wherever decision makers are located around the globe and can be acted on without delay. Combining increased efficiency of product development, manufacturing, logistics, finance, sales and marketing and customer service with faster decision making by management is a requirement for survival of a modern business enterprise.
Sources of capital are previous profits, commercial or private lenders or from new investors in the form of equity. Access to capital by small to medium businesses is generally more difficult and more expensive than for larger enterprises. Without access, businesses cannot pay for the human resources required to develop better products, manufacture them to a higher quality at a lower cost and deliver them cost effectively to their customers. Nor, without capital, can a business deploy the information technology required to provide management with real-time information to improve logistics, customer experience and overall decision making efficiency.
Small & Medium Business Enterprises
Investing is risky and small to medium businesses have limited availability to capital so contemplated investments have to be considered especially carefully as failures can lead to severe financial stress and even bankruptcy. The business planning behind any investment decision is vital.
- A realistic and conservative business plan must be developed as the foundation for any investment.
- Although there's no guarantee that even the best thought-out plans will succeed, without a plan, investments should not be made.
- No business can ever afford to stand still;
- Believing it has accomplished its objectives, or;
- Paralyzed by the fear of perceived investment risk
- Every business must figure out how to invest in order to continually improve its operations and stay competitive.
Well considered investments keep a business ahead of its competition and, or enable business transformations required as a result of lack of prior, or previously failed, investments.
Download our free business planning model complete with all the financial statements and return on investment calculations you'll need to support your borrowing or investment plans.
Despite the risks associated with investment decisions, the moment a business stops investing for increased efficiency is the day the “clock starts ticking” for its eventual demise.