Unit 9 Seminar

MT209, Small Business Management

Unit 9 Seminar Game Plan Course Check-In

Course Website Check-InCourse Activities & Assignments Check-In

Review Unit 7 & 8 ContentContent ReviewAssignment Review

Unit 9 Check-InLook Ahead to End of Course & Term

Business OperationsYour operations include the physical

location, facilities, equipment, inventory, warehousing, management information systems, people - everything that is required to operate your business. Understanding and managing the operations side of your organization is key to running a successful business.

By detailing what is required from your operations to achieve your overall business objectives, you will keep the business focused on the day to day events that are necessary to keep the business going.

That includes equipment and facilities management and cost; maintenance management and cost; labor force (number of people required for the production and sales goals); the budgets for each of the operations line items; and the planned operating profit margin for each product.

Operations Management Tools and Techniques1. Indicate operating hours (shifts, open for

customers, days of week open, etc.). Indicate the address of your location(s).

2.Describe how your product is made or how your service is provided.

Detail your day-to-day operation, including all the products and/or services you provide, how you provide them and standard operating procedures for each process.

Provide information on the average production time from quote or estimate (if applicable) to shipped order.

Detail any seasonality (e.g. Christmas season) that requires peak staff, peak service, peak performance.

Also detail your inventory requirements (for materials and finished goods) and how you keep track of your inventory (method; system).

3. Provide information on costs to produce (or service cost) by item and project those costs to align with sales plan projections.

4. Identify your labor force requirements (by department) - actual and projected based on sales projections. Also include training and development required to meet the operation's need. Include wages and benefits paid (and future employee compensation costs, e.g. wage increases, benefits increases, insurance increases), employee policies and practices for full time, part time and contract personnel. Part of the role of human resources is to provide this information to management; but some businesses do not have human resources support - that means the business owner must provide this information for planning purposes.

5. Identify your operations challenges to overcome and the costs associated with those challenges. For example, a steep growth curve over the next two years will require a larger physical footprint in the warehouse and additional warehousing equipment (forklifts, etc.) and staff) and will have an impact on your capital expenditures plan, on the operating profit margin, and on your financial ratios.

6. Identify the industry standards and regulations and how you meet them (e.g. safety, environmental, competition, etc.).

7. Identify your suppliers, what they supply, their pricing today and what you expect their pricing to be for the life of the plan.Include how these suppliers rank in terms of

volume and importance to you.Identify any supplier that is critical to your

business (i.e. only they can supply what you need) - if that is the case, make sure you put together a plan for alternative or substitute materials or supplies.

Identify the terms and conditions and annual invoice amounts.

8. Identify your quality standards, how you are doing against those standards and if you plan any changes to your standards. Some associations can provide industry quality standards for comparison (e.g. the type of association that might have this information are industry or trade associations).

9. Use a safety checklist to identify what safety standards you want to measure, how are you doing against those standards and if you plan any changes.

10. If applicable, identify your environmental standards and how you are doing against those standards. Also indicate if you foresee changes in the near (next 5 years) future.

11. Identify any operational risks: for example - changing environmental standards; a key piece of equipment nearing the end of its useful life; etc.

12. Identify the physical storefront or plant or location.The type of structure, the size, the location.If you have them, include the most recent building

drawings or a schematic; property appraisal (if you own the building); lease agreements, including the details on any leasehold improvements (if you lease the space).

Indicate also if the space you own or lease is used to capacity or if there is room for growth. If you feel you have adequate space now, project into the future (based on sales growth) and predict when and how much space you might need 5 or 10 years from now.

Indicate how the location provides access to, and for, customers, suppliers and the marketplace.

13. Prepare a list of all equipment (including what it does), what it cost, what its worth today (market value), financing arrangements, and the remaining estimated useful life of the equipment.

14. Prepare a list of all other assets (you might want to include the equipment list in this list too - even though it's a duplication, it's easier to read if in the two sections). Include land, buildings, equipment, inventory (finished goods as well as materials or supplies and in-process inventory at the time of writing the plan), vehicles, and whatever else you have as assets. Include what you paid for the assets, the worth today, any legal descriptions and/or identifying numbers.

15. Identify any special requirements (emissions, power, ventilation) that the business operations requires and how you deal with it.

Once you've developed your business operations plan, and define operations management strategies, track the actual results to the projected on a monthly and annual basis. See how your business operations are doing compared to your plan: and manage the differences (if any).

Things You Don’t Know about Managing Your Business Operations RisksOperational risks are those that impact the

continuity of your core business functions. Whether the precipitating event is severe weather, a dock strike, an act of internal sabotage, a pandemic outbreak that takes out your supply chain, or an act of terrorism, the interruption of normal functions can have severe, long-term consequences. Left unaddressed even for a brief period, these interruptions can quickly lead to a loss of market share, erosion of a brand’s reputation, noncompliance with regulatory mandates, and ultimately, even business failure.

The following are items that you may find surprising about the true state of your firm’s operational risk exposure.

IT may not have it under control. Your IT department’s plan to restore technology infrastructure, recover network functions, and support your critical applications may not be sufficient. Due to the political and functional silos that exist in many organizations, systems recovery priorities are often not driven by business users, as they should be. In addition, human factor elements are often overlooked.

Do you have a strong emergency/crisis plan? Business continuity deals with sustaining the core operational functions of the company. You can minimize the stress on the organization by establishing front-end emergency/crisis response plans that can prevent or minimize the impact of critical incidents occurring in the first place or can enable your company to respond to them and recover from them faster

Go local. Your city or county health department has well-defined plans, policies, and procedures should an infectious disease pandemic occur, so integrate your emergency/crisis plan with this community plan. But it is the result of the public health emergency—you could lose 40% or more of your personnel for an extended period of time—that poses the real business continuity risk to the organization. You have to determine how your business could continue to function if almost half of the employees can’t come to work.

Assess your insurance situation. Your risk management department (if your firm has one) understands how to buy traditional insurance coverage but may not understand the underlying operational risks for which it is buying insurance. So make sure your insurance broker and underwriter have a really good idea of your exposures so that you’ll have adequate business interruption, contingent business interruption and extra expense coverage.

Get your legal department involved. Emergency plans exist to protect lives, property, and assets. Business continuity plans exist to ensure that the company can quickly resume normal operations in spite of catastrophes. But both can also play an enormous role in helping your legal department defend your company against lawsuits and reduce the size of any settlements. The best way to do this is to ensure that your plans meet regulations, standards and industry best practices. Anything less exposes your company to greater financial risk.

Reevaluate alternate work locations. IT “hot-sites” and pre-arranged temporary facilities may be located within an area that is impacted as negatively as your original location. Make sure that these secondary locations are on a different power grid, are served by different network providers, or are located far enough away that impacted infrastructure does not restrict their practicality. Also, keep in mind that “hot-site” contracts are often “first come/first served.” Since you are not necessarily guaranteed space, be sure to plan accordingly.

“Show me the paper.” Effective operations continuity plans establish procedures for storing hard copy versions of vital records. We were told that the Internet age would render hard copies relics of the past. Instead, every Web page and every version of our documents seem worthy of printing…and storing. For many professions—law firms, for example—access to hard copies is critical. Don’t think you’re safe just because you’ve backed up your computer files.

Business continuity simulations are meant to fail. Make sure that leadership understands that there is no such thing as a passing grade when you are talking about organizational survival. If you passed the simulation, go back and do it again, because you missed something.

Keep it current. A strong annual maintenance process is the proverbial “ounce of prevention” in business continuity. Old plans gather dust and are ineffective unless they are “brushed off” regularly, tested, and updated to accommodate the changing dynamics of your business. Think of them as the company’s “last will and testament” that need to be revised from time to time to reflect new business realities. And, p.s.: make sure every employee has access to the latest version of the plan.

Given the high stakes involved, we would expect that business owners, managers, and board members would place a high priority on devising practical and effective approaches to both recognizing and addressing their firm’s operational risks. But shockingly, many organizations exhibit poor risk management, with a surprising absence of basic controls and oversight

Don’t be caught off guard

The End