Your Small Business's Silent Partner: Understanding the True Value of Operations
From vendor relations to supplies procurement, proper office management can keep a company on track. Learn how to build a solid foundation for your small business' operations.
With so many clients to acquire and deals to make, small business owners tend to focus more attention on growth drivers than day-to-day operations.
But neglecting operations can limit that growth quickly, leaving you with inefficient processes, unhappy suppliers and a budget-draining logistics situation. The good news is that you can develop a strong operations strategy, and, armed with the right tactics and tools, your business will be more efficient than ever.
In this column, we cover some of the essentials of small business operations. We begin by discussing the basics of office management, move into strategies for better logistics and finish with some tips on strengthening vendor and supplier relationships.
Many companies grow their operations on an as-needed basis increasing trips to the office supplies store as employees are added, for example, or doing inventory when product volume seems to be running low. But this creates a firefighter situation, where you're constantly reacting to situations and putting out fires instead of developing and maintaining efficient systems.
Tip: Here are three ways to streamline your efforts:
Procurement involves obtaining the supplies and services you need to run your company effectively ideally in a way that doesn't take too much time away from your day-to-day business.
In a one-person company, procurement often means a quick trip to the office supply store. But adding even one more person to the mix creates the need for more structure and consistency.
Determining patterns of usage can be helpful make note if youre running out of paper every three weeks or seeing employees using the conference room because they find their desks uncomfortable. For true procurement savvy, however, you need to devise a larger plan for purchasing.
Tip: Be sure to ask these important questions.
Thanks to cloud-based applications, mobile devices and other technology innovations, inventory management has become more streamlined and efficient for small businesses.
Several software tools, such as Fishbowl, NetSuite and Zoovy, are designed specifically for small and midsize businesses, allowing you to track inventory by the piece, case or carton. Many include capability for adding barcodes, adjusting stock counts, changing product pricing and sending invoices. Look for software that lets you reorder stock easily and generate purchase orders automatically.
Evaluate different software systems based on the type of business intelligence each offers. Although it's valuable to determine inventory levels, a robust application will take you far beyond those numbers into customized sales reports and useful cost-and-profit graphs.
Other important factors to consider when determining which system works for you:
Tip: Several free inventory-control applications are available, but be cautious about choosing low cost over high performance. The inventory software you put in place should grow with the company, not represent a just-for-now system.
Every process in the logistics chain from buying raw materials to delivering finished products to customers has its potential weaknesses.
Products may get stored incorrectly, leading to spoilage or damage. Shipping costs may skyrocket as gas prices surge. Production may get delayed through manufacturer error. Understanding each link, and how each fits together, can help you anticipate potential issues and prevent problems throughout your logistics management.
Tip: Check out these tactics to improve logistics in your operational strategy.
Logistics is one area of a business where consultants or logistics companies can make a difference. For companies with extensive logistics needs, a reputable specialist can provide strong cost returns in the long run.
Because they consolidate operations bringing together products from multiple customers into one warehouse, for instance vendors can provide more efficiency than a company might achieve on its own.
According to industry publication Supply Chain Digest, logistics outsourcing has been steadily gaining popularity with small businesses because it allows them to compete with larger, more automated competitors. Companies can avoid labor issues and reduce capital expenditures through this type of outsourcing.
In a 2010 article, the magazine's material handling editor suggested companies ask several questions when choosing a third-party logistics provider, such as:
Tip: Similar to any major consulting or outsourced relationship, details will make the difference. When evaluating vendors, do your research (including asking for referrals) and determine what you'd like to gain beyond lowered logistics costs.
Questions that crop up in a discussion with potential third-party logistics providers will likely apply to other types of vendors as well. The number of suppliers that focus on small businesses is growing, as IT providers and consultants tap into this market.
The U.S. Small Business Administration notes there are 27.9 million small firms in the country, and about half of all new enterprises survive at least five years. So it's not surprising that many vendors and suppliers are focusing on these potential customers in their sales efforts.
To navigate all the possibilities, here are three ways to choose vendors and suppliers that will work with your company to achieve growth goals:
Tip: Every vendor relationship is unique, but they all serve the same purpose: driving your company toward growth. Use that mission as a starting point and view their strategies through that lens.
With proper vendor selection, streamlined logistics and cost-effective procurement, your company's operations can become more lean and efficient. And that can help set up your small business for long-term success.