How to Measure Business Operations

Improving your business operations requires that you measure your performance and compare it to some sort of standard. There are lots of factors to look at and complex relationships between departments can sometimes make it difficult to draw conclusions.

Instructions

1. Measure the personnel growth of your company in the past three business quarters. Breakdown the expansion by department by charting the increase of factory employees, drivers, programmers and the rest. Analyze your business model to be sure that it can be scalable to future growth that is proportionate to your past data.

2. Look at production data from each of your work sites individually. Compare your real production with the optimal manufacturing capacity of the site and see how better business operation management could increase its efficiency. Low production could result from various factors, including employee or equipment problems.

3. Analyze your advertising budget and the returns gained from your publicity. You can measure some of this information by looking at customer feedback cards that indicate where the person heard about your product. Evaluate the effectiveness of the ads versus their total cost.

4. Find out the cause of any production downtime or supply chain interruption. Poor operations management can cause lower production, but lack of consumer demand, worker strikes and mechanical problems are also factors to measure. Assign a financial value to any measurement to represent the monetary loss due to production problems.

5. Speak with the research and development department to see if new products are planned to reach out to the changing market. Compare your new product sales to those of your competitors and figure out which factors account for your profit or loss.

6. Calculate the lowest possible price that you can offer consumers to undercut your competition. This type of operations management requires knowledge of the critical path analysis of your production, which means that you know the fastest way to turn raw materials into your product and move it to store shelves. Remember that uncontrollable factors like fuel costs can have a great influence on this measurement.

Tips & Warnings

• Sometimes a team of consultants can provide a fast and thorough measurement of your business operations, but be sure that they are familiar with your industry before you hire them.

• Transportation time and costs are another aspect of operations that are easy to measure, but sometimes hard to predict.

• Don't let only one person be responsible for measuring operations in order to prevent human errors.