The Relationship between Operational Management and

Business ProfitBy: Raquel Graham

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1. The processes by which goods and services are produced

2. The quality of goods or services3. The quantity of goods or services (the capacity of

operations)4. The stock of materials (inventory) needed to

produce goods or services5. The management of human resources

Five Kinds of Decisions involved in Operations Management….

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In a nutshell, the bottom line is your profit or loss: i.e. do you have money in pocket or not?

This is the amount of profit that is realized after all expenses and taxes have been satisfied

What is the Bottom Line?

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In business, the bottom line i.e. profit is actually what keeps businesses afloat. The bottom line or profit allows companies to expand their product assortments and hire new employees.

Profitable businesses that have a healthy bottom line might also invest in new technologies that will ultimate enhance the customer experience.

Example – Cheffette with new digital menu boards, high speed internet from Flow, improve checkouts at supermarkets

Bottom Line – Profit of Loss?

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The operations model of any business is dependent on:

COMPETITION!!!

Competition will determine success or failure If there is low competition, the operations can

be more loose, but high competition means the operations of the business has to be as tight and efficient as possible

Why do some companies make money and others don’t?

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Pizza Man Doc vs. Mama Mia - both sells pizza but quality is different

Souse Factory vs. ordinary local sellers – same product Trimart vs. Popular Discount – same type of products

basically but who are the target markets Courts vs. Standards – same appliances sold typically PriceMart vs. Shopmart – both are using the bulk

buying/ membership model Flow vs. Lime

Can you think of any other examples?

Local Examples

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What Is Operations Strategy? An operations strategy should guide the structural decisions and the

evolution of operational capabilities needed to achieve the desired competitive position of the company as a whole i.e. how are we going achieve the purpose of the business as efficiently as possible to match or beat competition.

Some of the major long-term issues addressed in operations strategy include• How large do we make our facilities?• What type of process(es) do we install to make the products or provide services?• What will our supply chain look like?• What will be the nature of our workforce?• How do we ensure quality?

Beat Competition through Operations Strategy

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“Customers want their money’s worth”

Customers want more than their money’s worth, and the more they receive for their money, the more value they see in the goods and services they are purchasing

The key element in developing a successful operations strategy is for a firm to provide its customers with additional benefits at an increase in cost that is perceived to be less than those benefits.

E.g. Samsung vs. Apple

Operations Strategy Means AddingValue for the Customer

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Perceived customer value = Total benefits

Total costs

Operations Strategy Means AddingValue for the Customer

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The key to developing an effective operations strategy lies in understanding how to create or add value for customers

1. Cost2. Quality3. Delivery4. Flexibility5. Service

5 Competitive Priorities

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Every organisation attempts to improve its productivity i.e. its rate of production output per unit of input in a given time period.

Increasing productivity produces a more competitive cost structure for the organisation and enables the organisation to offer more competitive prices to its customers.

Link between Operations Management, Productivity and Competitiveness

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1. Technological productivity – refers to the use of more efficient equipment, robots, computers etc. to increase output. Companies in their attempt to achieve and then maintain competitive edge must remain at the forefront of technological advances.

2. Employee productivity - employees produce more output in the same time period. Achieved by better training, the re-engineering of work practices, introduction of participative management styles, or the altering of remuneration levels or types.

3. Managerial productivity - managers do a better job of running the business. Management productivity improves when managers emphasise quality over quantity, break down communication barriers and empower employees using a participative decision-making management style

3 Types of Productivity

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Operations Mgmt’s Impact on Net Income and Profit

Increased Sales: Faster to Market Improved Quality Pricing Flexibility Innovation

Lower Total Cost: Acquisition Processing Quality Downtime Risk Cycle Time Conversion Non-value Added Supply Chain Post Ownership

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By managing the cost of running the business, the monies saved can be pumped backed into the organisation

Enhance and redevelop the existing product or service

Enter new markets See what the competition is doing and find a

way to do it better Employ an operations strategy that syncs with

the overall business strategy

Conclusion

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Email: caerusintl@gmail.comCell #: 262 9379LinkedIn: Raquel Graham

Thank You!!!