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www.PlanningShop.com CHAPTER 11 Operations www.PlanningShop.com The biggest part of becoming a winner is developing standards of performance. Know how you go about doing things; know your process. Constantly develop the application of your knowledge and skills.

Having standards means many, many people function within a framework.” – Bill Walsh, Former Coach, S.F. 49ers “ How You Run Your Business • Operations cover day -to -day functions • Seems mundane (e.g., tracking inventory) but it’s vital to success • Evaluate each step • Consider developing a manual • Plan thoroughly, but keep details brief in business plan Limit Operations to Issues • Essential to the nature and success of your company • That provide you with a distinct competitive edge • That overcome a frequent problem in businesses of your type Operations Include • Facilities • Production planning • Inventory control • Supply and distribution • Order fulfillment and customer service • Research & development • Financial control • Contingency planning www.PlanningShop.com As part of a Business Plan, this section is not intended to be an operations manual! Facilities Facilities Location(s) • Type • Square footage • Access to parking, transportation • Shipping access • Access to other necessary facilities Lease • Terms • Length • Concessions • Restrictions Facilities Improvements • Who pays ? Utilities /maintenance • Water, gas, electricity, phone, Internet costs • Janitorial, trash removal costs • Emphasize energy efficient measures Key factors affecting success • examples: Proximity to target market, prestigious/convenient location, favorable lease terms, potential to grow in facilities Production Planning • Labor/variable labor • Team approach or production line approach • Permanent employees and/or contract workers • Number and types of employees necessary to produce product or service • How are decisions reached in workforce? Production Planning • Productivity • Measures how long and how many people required to produce product /service • Producing more goods in less time generates higher profits • Look for ways to improve productivity without reducing quality Capacity • Measures how much work current facilities, labor force, and equipment can handle • Excess capacity is the ability to produce more than currently selling • Represents a waste of earning potential • If operating at full capacity, plan how to handle future growth Quality Control • Measures you take to ensure same standards for each product/service • Regular inspection throughout production process • Occasional testing/sampling of randomly selected goods • Employee involvement and training • Rewards programs for quality assurance • Solicitation of customer comments Equipment & Furniture • Include: • manufacturing equipment • transportation vehicles • store fixtures • office equipment • furniture • List any payment obligations or leases • Describe state of the equipment Inventory Control • Increase flow of information from sales to production and purchasing teams • Work with suppliers • To reduce time needed to receive goods • To reduce minimum order • Just -in -time inventory management • LIFO – last in, first out • FIFO – first in, first out Supply & Distribution • Don’t depend on just one supplier or distributor • Develop excellent relationships with suppliers and distributors • Work out payment plans and communication methods to reduce pressure on them • Select suppliers and distributors that understand your needs Supply/Materials Considerations • Cost of goods • Reliability of suppliers • More than one supplier • Additional costs • Terms Distribution Considerations • How product gets to consumer • Names and numbers of several distributors • Effectiveness and reputation of distributors • Terms • Use more than one distributor if possible • Alternative distribution methods Order Fulfillment & Customer Service • Establish good internal communications between sales and processing departments • Plan how to ship rush orders • Develop ongoing relationship with customers • Establish good repair, service, warranty, and return policies Global Operational Issues Outsourcing: Another company or contractor provides a business service or component product Offshoring : Some of your company’s operations are performed in another country Global Operational Issues Research & Development • All companies need ongoing R & D • Larger R & D components • Industries with rapidly changing technology • Industries with rapidly changing consumer preferences • Smaller R & D components • Old fashioned (e.g., cookie company that develops low -sugar cookies) Financial Control • Set up procedures to handle financial information promptly • Send invoices out quickly • Establish follow -up system • Design financial systems as source of regular information • Don’t depend on monthly reports only • Establish systems to prevent employee embezzlement Contingency Planning • Plan for emergencies • Fire, flood, earthquake • Power interruption, burglary, slowdown from supplier, product failure • Safeguard records and data • Backup schedule, data storage offsite • Devise disaster plan • Insure adequately Other Operational Issues • Regulation • Insurance • Legal • Health and safety • Environmental issues Start - Up Costs • Not included in Income Statement but affect the amount of money required to start your business • IRS treatment – Some costs must be depreciated over a number of years rather than expensed in the first year of business Prepare the Start - Up Costs Statement • Enter the actual or projected costs to get your business underway • If using the Business Plan Financials, some of these expenses will automatically be transferred to the Balance Sheet