Operational optimisation: How to get the most from your business systems

I was brought up surrounded by entrepreneurs. My father built a jewellery manufacturing business, where he supplied retail chains with mass produced and custom handmade jewellery. He was also an importer and wholesaler and employed around 80 people.

At the same time, I had an uncle that was leading the way in sound reinforcement, designing sound systems for live music events, concerts halls, etc. He too built a business with about 50 staff and, with my love for electronics and technical things, I was smitten by his business.

From the time I was a little boy I would jump at any opportunity to spend as much time as I could with my father or my uncle when they were at work. I loved wandering around their offices, talking to all their staff, asking questions; I probably drove everyone mad with my incessant desire to know things.

I also loved being in their workshops, handling tools, watching and learning and, once again, asking questions. I wanted to know how things worked, what made them tick.

Finishing school I was fortunate enough to work in both of these businesses and I was able to learn first-hand how they both were run. What caught my attention in both businesses was the difference in the way they were run.

My father’s business was a typical sales-driven business. He had a team of salespeople traversing the country, visiting jewellery stores, taking orders and then manufacturing the stock to fulfil these orders. Systems in this business were rudimentary, bookkeeping was done on an IBM PC AT and everything else was done on paper.

On the other hand, my uncle’s business was different. There were memos everywhere. There was also a new device called a fax machine which had been installed. They even had a telex machine to communicate with their foreign suppliers, and computers abounded around the office.

These were the days of the black and green cathode ray tube (CRT) screens. They even had Elaine, a pretty secretary/PA in a swish looking reception area with this awesome electric “golf ball” typewriter from IBM, as opposed to my father’s office, which had Mrs Hall (I never got to know her first name), a middle-aged spinster sitting in her dull grey and beige reception area saddled with a monstrosity of a telephone system with crude dialler and buttons to distribute calls around the office, and a hideous mechanical Olivetti ribbon-driven typewriter on her desk.

I was fascinated by the technology and systems in the one business and the lack of those in the other. In those days eCommerce and the internet didn’t exist, well not commercially anyway. The closest was the ARPAnet, which was the precursor to the internet. A technology developed by the US Department of Defense and used by academic institutions to communicate with each other.

Zoom forward 15 years to another place and time and I found myself working for a small national retail chain. Ten stores, double digit growth and, like my father’s business, hardly any systems; just a focus on sales, reported margins from a disparate sales and inventory system (which was wrong for a variety of reasons) and cash in the bank.

The system was so badly designed that you couldn’t even perform bank reconciliations on it and just had to enter reconciled closing bank balances each month. Bet I’ve just lost you there, right? I couldn’t believe what I was seeing. It was incredulous that a business this size turning over millions of dollars was being run like a garage business. And so began my journey of operational optimisation.

Operational optimisation is the ongoing process and journey to identify and systematise every aspect of a business, utilising technology and best-of-breed thinking to streamline costs, increase productivity and improve profitability. Often the difference between a good business and a great business is the ability to operationally optimise systems and processes which allow a business to grow in scale and benefit from the economies of scale brought about by operational optimisation.

In this blog, I’ll be looking at the ways you can optimise your business systems, with a particular focus on retail and online systems; where you can streamline operations; and how you can operate in the most productive and efficient manner possible with the resources at hand.

If you have any questions or comments, or suggestions about things I could look at, I welcome you to leave comments.

Mark Freidin is an experienced chief operating officer, eCommerce pioneer and consultant to fast-growing companies in Australia. Find him on Twitter: @internetretail; LinkedIn: au.linkedin.com/in/internetretailing; or on email: [email protected]

 

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