BA 346 Working as an Entrepreneur Week 6

 Ken Cheppaikode 

Operations Support Financial Goals  Revenue comes as the result of…  Operations need to make sense based on plans, and be adjustable  Creating Value through Operations Planning  Managing Costs & Cash Flow  Interfacing with customers  Location, location, location… and then some  Value Chain Analysis

Revenue  Result of marketing activity… but only if operations can support it.  Proper planning is critical How much time per customer? Cost per customer? Hours of operation? Location? Customer experience?

Operations  Operations need to make sense based on plans, and be adjustable Expected case Contingency plans Growth & expansion  Planning for growth  Making growth happen  Discouraging growth

Creating Value through Operations Planning  What are we really aiming for? Maximize revenue? Minimize expense?  How will we measure?  Optimization, adaptability, sustainability

Managing Costs & Cash Flow  Buy vs Lease  Supply chain management  Employees & roles

Buy vs Lease  Purpose Can you do without it? Why exactly do you need it? Could something else successfully do double duty to fill that need?  How much utilization will it have At peak time? (Theory of Constraints) Average 24/7?  Can you buy it cheaper (without wasting money)?  Should you lease it or buy it? Leasing  reduces the initial investment  increases your fixed costs  raises the breakeven  lowers profitability Buying  reduces fixed costs  increases investment needed  lengthens the payback period  reduces the return on investment What are the Relevant Cash Flows?

Supply Chain Management  Purpose & Goals Steady flow Best cost Good asset utilization

Employees & roles  Need  Skill & pay  Schedule

Interfacing with customers  The most important person in any organization is…  The “customer experience.” What happens Previous encounters Future encounters  Payment Cash vs Credit Collection time Aging Receivables  Customer Relationship Management (CRM) CRM is NOT software or a mailing list Generates repeat business Generates referrals Avoids price wars

Physical location  Should you operate in your home town?  Competition clusters. Good or bad?  Three considerations when choosing a location for a business 1) What is the best business climate for you operation? 2) Where is the best location for getting to your customer? 3) Where is the best location to access raw materials, labor and other factors needed to conduct operations (land, labor and lucre)?

Layout of physical location  Needs-based?  Retail vs Manufacturing  Large enough?  Laid out properly for your operation?  What are the amenities?  Is a remodel worthwhile?  Street appeal for your business needs?  Tax breaks? Support?

Manufacturing Layout Examples

Retail Layout Examples

Virtual location (online access)  Layout & functionality of online access  Creating value from your points of access

Value Chain Analysis  Developed by Michael Porter  Value Chain: the collection of processes and activities used to design, produce, market, deliver and support a product.  Use the value chain to focus on delivering customer benefits. By following it through to action, you can achieve excellence in the things that really matter to your customers.  It takes place as a three stage process which examine the ways you deliver value to your customers, and review all of the things you can do to maximize performance: Activity Analysis, where you identify the activities that contribute to the delivery of your product or service. Value Analysis, where you identify the things that your customers value in the way you conduct each activity, and then work out the changes that are needed. Evaluation and Planning, where you decide what changes to make and plan how you will make them.

 Inbound Logistics – Inputs (receiving, warehousing, inventory control, etc.)  Operations – Transformation of input to output (manufacturing, service, etc.)  Outbound Logistics – Getting the product to the customer (warehousing, fulfillment, etc.)  Marketing & Sales – Getting customers to buy  Service (after-the-fact) – Maintain & enhance the product’s value (customer support, repairs, etc.)

Value Chain Analysis – Example  Lakshmi is a software development manager for a software house. She and her team handle short software enhancements for many clients. As part of a team development day, she and her team use Value Chain Analysis to think about how they can deliver excellent service to their clients.  During the Activity Analysis, they identify the following activities that create value for clients: Order taking Enhancement specification Scheduling Software development Programmer testing Secondary testing Delivery Support  Lakshmi also identifies the following non-client-facing activities as being important: Recruitment: Choosing people who will work well with the team Training: Helping new team members become effective as quickly as possible, and helping team members learn about new software, techniques and technologies as they are developed.

Workshop