Operational management in the company and Avivi's experience in setting it up

10 May 2023

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Ivan Bocharov


Ivan Bocharov
Operational management in the company and Avivi's experience in setting it up

Avivi continues to share useful information about business organization with the readers of our blog from the experience of developing and configuring various IT solutions in this area. The previous article on business processes quickly gained popularity among our blog readers, which helped to increase the conversion of customers from our site. Therefore, we decided to move on and now we will delve into business processes, namely the operational part. As you understand, management works well when competent specialists are involved in it, and perfect tools are placed in their hands. We will talk about the technical part at the end, but first let's consider what operational management is and how it affects the profitability of the company.

Unmanaged processes are the path to the collapse of the company

In the article about business processes, we talked about their role and essence for each individual company. The main thing that should be quoted in this article:

"Business processes occur in every business, regardless of whether you are aware of their existence or whether they are documented at the company level."

That is why everything related to production falls under this statement. Operational management deals with the study and development of production business processes, necessary for effective management, cost reduction and profit increase. At the heart of operational management are logistical connections that involve absolutely everything: from the acquisition of materials and their transformation into a finished product to the delivery of this product to the final consumer.

In the broadest sense, the basic logistic model looks something like this:

scheme 1.png

It is clear that a number of related processes take place inside the drawn blocks, each of which can be calculated and expressed in terms of time and money. Therefore, the first task of operational management is the maximum simplification of the logistics connection, the reduction of intermediate stages and the reduction of the time for its implementation without affecting the final result. Without such painstaking work, any process can grow to unprecedented proportions, where the costs of maintaining its operation will outweigh the profit from the value it creates.

Creating value

No process is necessary for a process — it must create a result. Here, one of the main indicators is value for customers. In addition, each subsequent step in the process should add value, not waste the previous one. This is a fundamental difference from auxiliary business processes, which are required only for the operation of the main processes.

From the practice of Avivi, when we worked on the development of software for companies from various fields of business, we managed to systematize a list of component processes that clearly negatively affect value:

  1. Waiting is simple due to the lack of goods or individual components;

  2. Unnecessary transportation — any movement or transportation of goods that can be dispensed with;

  3. Additional processing - actions with the goods that are not mandatory;

  4. Extra movements - physical or mechanical actions of employees that waste time;

  5. Defects — elimination of defects, correction of errors or re-production of defective components;

  6. Large stocks — the amount of goods that exceeds the minimum necessary for the execution of the process;

  7. Overproduction — production exceeding the norm or before the deadline;

  8. Human resource constraints are obstacles that prevent employees from making full use of their capabilities or talents.

There are many more negative factors, but considering even this list can significantly improve your business processes. The creation of value occurs continuously throughout the entire operation of the company and disappears only in case of complete cessation of activity.

scheme 2.png

Therefore, it is easy to guess what happens during the time when value is not being created. That's right — your business is losing out on potential revenue. And when the wasted time outweighs the useful, the company receives losses, which can lead to bankruptcy in the future. In this case, the task of operational management is an in-depth analysis and optimization of the process, when redundant sections are simplified or eliminated altogether.

The simplest possible example here may be the introduction of the assembly line at Henry Ford's factory. The principle of such a device has been known since the time of Ancient Egypt, but only a brilliant engineer managed to create a successful conveyor production in 1908. Here we immediately see the solution to the problems of displacement, redundant movements, redundant processing and waiting. As a result, we have a landmark event in the industrial revolution, the results of which are used in the world to this day.

Operational management tools

Operations management research has been around for a long time and has many useful assets. However, the main method for understanding the processes was and remains mapping — a graphical representation of the successive stages of the process. For a deeper analysis, the decomposition method is used, when the entire large process is divided into smaller ones and examined separately. 

To begin with, you should create a map of the value creation process: from consumer needs to the company's net profit. At this stage, it becomes clear how many stages the process consists of, for example: purchase of materials, transportation of materials to the workshop, reception and storage, transfer of materials to the workshop, sewing, packaging, sending goods to the retail network or directly to the customer. This is a rather rough map, as a whole layer of component processes is hidden under each of these points. However, you can now drill down into each one and create a detailed map. It should be noted that the "map" of value creation (VMS) differs from the "scheme" by the addition of statistical information:

●     Be sure to note the time spent on each stage;

●     We indicate the amount of moved goods, spent materials and manufactured products,

●     we add the formulas according to which the calculations are carried out.

For example, consider a typical map of the process of processing an order from a client through an online store by a manager without using special software:

scheme 3.png

In fact, the result is simply amazing. And, unfortunately, not in the best way. Already during mapping, you will see that some operations performed by the manager take much more time than it might have seemed before. The worst thing is when there are moments that a company employee cannot influence. In the example, this is waiting for confirmation of payment from the client, which may last for hours or may not happen at all. It also takes a lot of time to check the goods in the warehouse, for which the manager needs to go to the racks and look at the goods stored there. Ordering a delivery involves transferring the customer's data into the appropriate fields of the delivery service form. And even the usual "copy paste" will not save from mechanical errors in this case.

IT solutions for operational management

We have covered the main points of business process analysis, so now it's time to answer the question, how to improve it all? An experienced operations manager can make corrections in weak links, simplify difficult points or even get rid of unnecessary areas. But all this will remain on paper without effective implementation in the company's work. For many years in a row, Aviva has helped entrepreneurs from all over the world in the development of software solutions that allow solving difficult moments. After implementing some of them, the efficiency increases by 25%-50%, and in some cases, the time spent is reduced hundreds of times.

The great set of almost ready-made tools is Bitrix24 — a business platform for the work of the entire company online. Since 2012, Avivi specialists have been engaged in the implementation of this product, as well as the custom development of components not provided for by the standard functionality. Bitrix24 allows you to model business processes, involve participants in them, and monitor the timely execution of necessary operations. In addition, the system is able to integrate with almost all possible IT solutions for business and include them in the coordinated work of the company. Payment systems and delivery services, warehouse programs, time trackers and cargo locations — all this is combined in a single business process and practically minimizes the human factor. Avivi has expertise in international logistics, insurance, manufacturing, retail and trade, jewelry and IT business. Solutions to improve operations management based on Bitrix24 help hundreds of customers from all over the world to work successfully and get more profit.

Each individual business is unique, so custom software development is always the best solution to specific problems. Avivi implements projects of any complexity for eCommerce based on Magento 2 and develops individual modules for the most accurate execution of business processes. Advanced tools for communicating with customers, tracking goods in transit, accepting payment and ordering delivery many times simplify complex processes and save wasted company resources.

For internal use, we offer Python-based solutions that can meet any of your business needs. Custom CRMs from Avivi provide effective work with customers and interaction with all software products used by the customer's company to create the values of the final product. Recently, an extremely large number of customers are seeking the implementation of blockchain in various business processes. Avivi is ready to offer ready-made scenarios of typical solutions for operational management and to discuss all the individual needs of our customers. The experience gained from previous projects contributes to the development of the most effective IT solutions for the prosperity of your business and management of the most complex processes.

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