Business plan
Business Planning: Operations Management
Claire Sinclair
1
NEXT WEEK: 11th Feb: Business Fair – Ron Cooke Hub, Atrium – 12:30-14:00
Display information about your business
You can use post-its to stick peer review and tutor feedback / questions to the board
Plan your team’s schedule so that everyone has chance to pitch as well as look around other stalls to provide feedback to other team’s on their pitches.
Explore Enterprise Course
If you want to know more about starting your own business but don’t know where to start, the Explore Enterprise course will help you try some ideas, network with other entrepreneurs and compete for a cash prize.
Applications close 9th February
See student gateway or email enterprise@York.ac.uk for more information
You & your business idea
Market segments & value proposition
Marketing Strategy
Operations plan
Risk &
strategic options
Financial plan
Resources available
Resources needed
New Venture Creation
Framework
(Burns, 2014)
Last weeks lecture and the first seminar – market segments, value proposition and marketing strategy
This week: operations plan and strategy
4
What is operations management?
Operations management can make or break an organisation…..
Managing resources in an efficient and effective manner – to produce goods and services that delight the customer.
Think of the last time you were really pleased with a purchase. Why?
And the last time you were disappointed. Why?
Operations management is critical to the success of a business regardless of an organisation’s size, from multi-national corporations down to independent coffee shops. Whether they are concerned with manufacturing or the service sector, if they are a profit-making enterprise or a not for profit organisation, and if they exist as a public or private organisation, operations will be a fundamental part of running the organisation.
5
Scope of operations management
Design of products and services
Design of processes
Planning and control
Management of the supply chain
Managing quality
Managing performance
Improvement
6
Have a clear “operations strategy”
Alex Polizzi – Rocco Forte family, hotel business.
Gordon Ramsay – Hell’s kitchen
Mary Portas – shopping experience, customer service
These programmes are entertaining but they highlight where the business is failing, and it usually comes down to their operations
7
Accept the fact that you can’t be good at everything…..
8
Good – Cheap - Fast
9
Accept the fact that you can’t be good at everything…..and
Understand your value proposition and be clear about what is important…
We need to be clear about our value proposition – what is important to our organisation – deliver value by focusing on performance objectives
10
What do customers value at these hotels?
The Grand hotel, York
Travelodge
The Grand Hotel – someone will open the door for you, be smartly dressed. Spa, restaurant, experience. Quality
Travelodge – price, purely accommodation focused.
11
What do customers value from these airlines?
First Class
Economy
Singapore airlines first class
Ryanair, budget airline
Consider the difference in experience for both and how this fundamentally alters how the operation needs to perform.
12
What do customers value at these “coffee shops”?
Afternoon Tea at Betty’s
McDonald’s Cafe
Bettys – service, experience, quality, don’t want to be rushed.
MacDonalds – quick, cheap
13
What will your customers value?
Need to be consistent:
With Your Values
With Marketing
With Strategy
Consider the implications for your operations plan.
External Effects of the Five Performance Objectives
Consider the 5 operational performance objectives: which is the most important for your business?
There are 5 main operational performance objectives
If cost is the big factor, our resources need to be managed efficiently, and we need to focus on managing cost.
If it’s about quality and service, we need to be sharp on processes to make sure the experience is as you want it.
15
Operations concepts to consider in your business plan…..
Initial design of products and services
Design of processes
Planning and control
Management of the supply chain
Managing quality
We will talk about each of these in turn now.
Another area which would typically come under operations management would be risk management, including legal obligations – we will cover this area in more detail in a later lecture.
16
Initial design of products or services
Prototypes?
Testing?
Feedback from customers
Investors might want to see it
Plan in LEAD TIME
Market research will help you test your product. But you can also prototype your product to show investors what you’ll be offering.
Lead time – Remember to consider how long will it take to design the product, where you’re paying staff rent etc before you get your first sale
17
Example
This company is testing out prototypes of its travel luggage. This research allows you to get feedback from customers to allow you to refine or improve the design before launching it to market.
18
Recoil Kneepads
This company is selling kneepads for carpenters. Exhibiting at trades fairs is a great opportunity to trial your product and get feedback from potential customers as well as getting your name / brand into the marketplace.
19
This artisan cheese company cites that entering competitions was fundamental to getting it’s first commercial contracts. Public recognition and awards puts your product in demand and is great marketing.
20
Questions for your business plans:
Have you got the best design of product/service?
How long will it take to produce?
What tests do you need to check it works?
How long will testing take?
Designing processes that deliver the products or services
Processes support the product / service. Often unseen by customer.
Subway – clear process for sandwich making – choose your bread, salad, filling etc as you work your way down the counter.
Dell factory – clear processes and procedures to build laptops as quickly and as efficiently as possible.
22
The cost of failure can be huge
If the processes don’t work or aren’t aligned with your business strategy, performance will be impacted.
Telco example
23
For your Business Plans: Process Mapping
Process maps – ensure things happen in the right order and by the right people. Consider interdependencies, timeframes and decision points.
24
Planning & control - capacity
Capacity decisions determine the number of:
customers who can be seen in a day at a spa
mobile phones that can be produced in a week by a factory
How many pizzas can be delivered in one hour
Website or app traffic
Capacity is usually measured in convenient units, such as a:
bus carrying 53 passengers
fast food restaurant with 600 seats
a warehouse with 10,000 m3 of storage space
Capacity – how many pizzas can you deliver in an hour in York traffic,
25
Richard Hughes: capacity planning is critical
Richard Hughes: entrepreneur, investor and founder of boohoo.com visited TYMS last week
Podcasts specific to business planning can be found here.
He raised some thought provoking ideas. You can discuss them here
34 secs – 1m10 – capacity planning – ensuring you have appropriate infrastructure in place to cope with anticipated demand is crucial.
26
Capacity Management - Adjustments
Capacity can be altered by:
introducing new approaches and materials
increasing service providers or machines
increasing the number of operational hours
acquiring additional facilities
Altering capacity can be difficult, time consuming and incur costs
Numbers, even if estimates, are important here.
Berits and Brown
Increased capacity by putting out extra tables.
BUT – consider constraints on capacity:
Capacity constraint = restriction on the running of an operation with respect to available resources (of any kind)
The resource mix, (i.e. inputs) can potentially constrain an operation:
Staff - skill levels and number of staff
IT facilities/technology – throughput and the way the process works
Materials availability: A change in the supply of raw materials
Product or service mix: a change may result in a change in capacity as resources are consumed differently
Storage: swings and fluctuations in demand can be mitigated by the ability to store products and allow the full capacity of an operation to flow
Working schedules and access to facilities: A lecture theatre that can accommodate 100 students at a time and could operate 24hrs per day!
28
The Meghan effect!
Line the Label's website CRASHES after Miss Markle wears a £450 coat from the Canadian brand for her official engagement announcement
Source: Mail Online
The Meghan Effect
29
Stance and Rihanna
Stance = small brand with good infrastructure
Signed Rihanna, expected unprecedented rise in visitors
“We needed a consistently high service level because we were selling limited edition socks.”
Rihanna has over 80 million followers - ‘The Rihanna Army’, huge interest in every post she makes.
“We knew how to handle our normal traffic and spikes, but not scale like this.”
Solution = Load Testing on a massive scale
See: Blazemeter.com
Capacity Planning - Strategies
1. Capacity leads demand - provide capacity ahead of the forecast, so that it is ready to respond immediately
Advantage: ready to satisfy customer demand and meet short-term opportunities
Disadvantage: risk of demand not rising, in which case the operation is left with unnecessary costs and excess unused capacity
2. Capacity matches demand - provide capacity as demand changes, expanding and contracting capacity to follow demand
Relies heavily on forecasting and accurate information
Often used in services - a restaurant expanding and contracting its staffing capacity in line with anticipated peaks and troughs
3. Capacity lags demand - wait to see what demand is, then respond after
Advantage: this is less risky than providing investment ahead of demand
Disadvantage: customers may not be prepared to wait for the product or service, and opportunities can therefore be lost
31
Questions for your business plans:
What checks and controls will you need at different stages of the process?
How will you respond to changes in demand?
Managing the Supply Chain
Wheat seed producer
Wheat producer
Grain merchant
Flour mill
Catering wholesaler
Sugar cain grower
Sugar manufacture
Sugar distributor
Butter producer
Butter distributor
Local bakeries
CONSUMERS
LEAH’S CUPCAKES
Local egg farmer
Hen supplier
Feed supplier
Cake case manufacture
Cake case retailer
3rd party logistics
Post office
A simple supply network for a small catering company. Source: Slack, Brandon-Jones and Johnston: Operations Management
Consider interdependencies between ops and finance here eg: lead times and payment terms. You may have to pay suppliers before you have sales revenue.
‘Overtrading’ where you have a good order book but not enough cash to supply the product/service to those customers
33
Sources of supply
Consider cost of supply but also time zone, ethics, tax – how do all these things affect your value proposition.
34
Questions for your business plans: 2
What do you need?
When do you need it?
Who will supply it?
Managing quality
Quality is all about conformance to expectations
Quality control
Process control
Regulation
Legal Obligations
Optional Certification
Quality control and quality assurance. What is an acceptable level of quality? Eg airline industry vs retailers will have different expectations in terms of acceptable failure rates around safety.
Gov.uk websites have a huge amount of information there in terms of licensing, regulations and other legal responsibilities. Eg: safety around childrens toys, allergy laws for food companies and structure requirements for social enterprises.
You will all be directors of your company and there are some legal obligations you need to follow.
36
Reading
Burns, P. (2014). New Venture Creation – A framework for entrepreneurial start-ups. Basingstoke: UK. Palgrave Macmillan
Chapter 10: Organizing Operations