An Overview of Business Operations (With 7 Examples)
Updated March 10, 2023
Business procedures define the key activities of personnel in anticipation of a company's offerings. Need for innovations in operations only grows as businesses continue to globalize and business practices diversify . A firm understanding of business procedures can help to identify and solve efficiency problems that slow down production and reduce revenue. In this article, we define business operations, explore models of operations in more detail, then provide some strategies for solving problems common to many businesses.
What are business operations?
Business operations are the methods, resources, and practices that businesses rely on as their models of production. It's important to use reliable and understandable operations so that revenue can grow. Employees, owners, and stakeholders can help optimize aspects of business procedures through innovation and strategy.
Three aspects for close consideration are processes, human resources, and technology. Processes are the necessary methods that result in profitability for a business. Human resources represent the teams and management that run and modify those processes. Tools, equipment, and work sites are the technologies management and teams use.
Models of operations
Operation varies from business to business, but here are three broad categories that cover differences in operations by industry:
Retail is a consumer-facing business model that relies on the sale of stock with a margin of profit for the business. Retail businesses typically maintain an inventory by buying stock from wholesalers or manufacturers with the goal of eventual turnover. Because unsold stock represents a sunk cost, retail needs efficient systems and observant staff to minimize unsold stock. Retailers can also incentivize customers through discounts or sales, which are sometimes referred to as loss leaders.
One of the most popular strategies for maximizing revenue in retail is stocking items that are proven to sell quickly and delight consumers. Unique items or resale licenses might give retail businesses a competitive advantage, but product specialization can result in lost revenue if a product becomes obsolete.
The service industry, like retail, is a consumer-facing business model, but profit results from performing a service rather than stock turnover. Service industry businesses often have a front-end and back-end. While representatives sell the service to a customer, technical experts, cooks, or other specialists perform a service. Independent service industry professionals may find that they can maximize revenue by taking on both roles.
Because businesses that offer a service rely on the quality of the service and careful management of hiring practices might help. Selecting experienced professionals, or offering job-site training, helps assure customers that the service they're receiving is of a high standard. Customers may require agreements for cost quotes before service begins.
Manufacturing relies on engineers, technicians, and general labour to turn raw materials into products and supplies that retailers and service providers can purchase and convert into revenue. A product's viability to retailers increases if the price is high above the cost of production. Service industry businesses also tend to purchase supplies at the cost of production if it means a wider margin of profit.
Businesses based in manufacturing can lower the cost of production by sourcing their materials at lower rates, but they can also cut costs by choosing slower shipping options or even relocating to regions where local regulations allow for lower rates.
Strategies for improvement
A competitive business can still find opportunities to improve. To increase productivity, update hiring practices, or grow revenue, businesses might try one or several of these operational improvement strategies:
1. Track trends
Businesses often adapt to changing markets and trends to ensure they stay current. To manage operations in a way that anticipates and takes advantage of changing trends, managers and stakeholders may need an awareness of local economies, changing laws, and common responses from other businesses in the same market. Staying aware of changes relevant to your business can help arrive at models for best practices.
Example: Sam, of Sam's Bread, started using social media as research for what kind of bread interests millennials. They discovered sourdough was trending. Not only did Sam make more sourdough, but they also brewed kombucha and re-branded Sam's Bread as a fermentation information resource.
2. Review minor issues
Reviewing minor issues quickly can prevent them from turning into bigger problems later. Setting aside intentional time for management and teams to address them could reveal that each person has experience with minor workflow issues. Results from past projects can sometimes inspire solutions for current projects, so frequent brainstorming and check-ins with teams might anticipate and resolve workflow issues and improve productivity.
Example: Promotional videos for electrician's tools supplier, GripFix, routinely had spelling errors. Re-editing videos means GripFix is paying almost twice as much in wages when a video goes live. The company's project manager called a meeting with the media team and asked for a review of their process. They learned that the video editor, not the company's writer, had to write product descriptions and edit the footage. The project manager re-assigned the writing task to the company's writer, eliminating the margin for error, saving time and money.
3. Record performance metrics
Performance metrics are quantifiable results that businesses can use to measure operational success relative to goal-setting. Before a team begins a project, they may work with a project manager to establish goals and milestones. Once a team has set their goals, indicators of performance can generate over time from metrics associated with that goal. Teams can then use the data to gauge their performance and adjust processes accordingly to meet the goal.
Example: A new project manager at Metacore call centre introduced a yearly goal strategy that aims at reducing the number of calls rather than resolving tickets. Now, three years later, management can see how quickly the customer care teams are reducing the total annual calls and are investigating other strategies for reducing calls.
4. Asses risks
Risk assessment is a structured process for evaluating workplace risk and occupational hazards. Risk is costly because failure impacts revenue. Assessing risks, documenting those assessments, and reviewing them when necessary can protect employees and also operational processes. When possible, identifying risks in the workplace creates the opportunity for the elimination of risks, increasing operational productivity. Risk assessment also creates a standard for safe operation.
Example: As Time of the Season, a watch repair shop, became more popular, customers brought more expensive pieces. Thinking long term, the store owner invested in a very visible security system. While he waited for it to arrive, he also upgraded his insurance.
5. Analyze logistics
Business procedures depend on materials and supply chains, so logistics is of high importance, no matter which operational model the business follows. Logistics broadly relates to the flow of goods, the channels of transportation, and the locations involved. Distance, time, and method are three metrics useful for assessing the logistical cost value of your operations. Regulations vary depending on location and might add cost, but opportunities like cutting delivery time from warehouse to customer could help compensate for some expenses.
Example: John's Chemical Processing generated big annual costs shipping Sodium borohydride from Quebec to Georgia. The expense was so great that John was going to lose his business. He decided to keep the business and move to Quebec.
6. Motivate teams
Human resources is one of the major aspects of business procedures. Absenteeism and overtime are the largest factors that managers can influence to increase team productivity. Involving team members with improving productivity, crowd-testing solutions for absenteeism, and developing communication strategies for resolving scheduling needs can reduce stress and improve morale. Further incentivising efforts like overtime along with other strategies, like performance review, may both cut down on the need for overtime while also reducing any negative feelings associated with it.
Example: Jennifer sat at the administration desk that managed shift schedules at Helio-Pisces language school. The problem was inconsistent shift distribution among tutors, resulting in tutors quitting due to too many or too few shifts. When the business opened a new location, management switched to an automated system and advertised a mathematically fair, merit-based shift priority for tutors who want work.
7. Streamline processes
There are many methods to streamline a process, but one such consideration when streamlining is simplification. Experimenting with new tools and technologies might remove steps in manufacturing or customer outreach. Upgrading computer systems and networks to run faster is one possibility, but automation might remove the need for whole steps within a process.
Example: Myrtlewood, a specialty mill, used a physical book to manage its inventory. A new foreman had experience with an automated, cloud-based, inventory management service at their last company. They recommended it to management as an experiment and the online service immediately saved the company 300 dollars in paid labour per week.
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