For growing companies who are starting to realize real revenue growth, it’s important to analyze operations. This allows you to review key areas of your company, find weaknesses and strengths, and improve on your processes.
Here are three areas that should be analyzed to help improve operations:
An analysis should be made up of the following:
- Sales mix
- Product demand
- Order quantities
- Product obsolescence
- Creation schedules
- Storage space
Look at sales generated by different types of selling efforts:
- Direct mail
- Through partners
Determine the variability in volume, price, and cost of each major product or service.
Ask this question:
Should products or services be more personalized?
Direct cost ratios should be used in analyzing operating costs, which include:
- Direct labor/sales
- Direct travel/sales
- Direct marketing/sales
Determine if costs are excessive relative to production volume. The ratio of selling expenses to net sales reflects the cost of selling the products.
As a Cost Analysis is implemented or revised, approach it from a cost/benefit perspective. Each offering’s costs should be compared to the direct income generated form that offering. Then you can decide whether your company should continue offering that product or service.
If you have a product that contributes a very small margin (<5% margin), it may not make sense to keep that product unless there is a strategic advantage gained by offering it.
A business process is an operation, function, or activity that may cross departments of a company to create the product or render the service.
By concentrating on the entire process, you can improve operations and product/service quality, realize cost savings, and reduce processing time.
In appraising processes, consider the following questions:
- What does the process cost and how long does it take?
- Are there unneeded steps or can some steps be consolidated?
- What is the quality associated with the process?
- Where do bottlenecks exist?
By taking the time to review operations in the areas of revenue generation, operating costs, and processes, you can find ways to make improvements, consolidate redundancies, and increase efficiencies.
What have you found to be effective ways of improving your operations? What areas are you struggling to make improvements? I would appreciate your input and feedback!