Module 4.1 - Operation management The SENSES project co-funded by the European Union funds (ERDF and IPA) For more information check the official website: http://www.interreg-danube.eu/senses

1. Module 4.1.
OPERATIONS MANAGEMENT
IN SOCIAL ENTERPRISES
NESsT
2018
Project co-funded by the European
Union funds (ERDF and IPA)

2. 2
 The Operational plan shows the reader how your product or service moves
from raw materials to a delivery at your customer’s door.
 It is important to explain this process in detail so your reader understands the
process behind the venture.
 Profitability depends heavily on this section, so it must be well developed!
Operational Plan

3. 3
Business strategy
Marketing
strategy
Operations
strategy
Financial strategy Other strategies
Structural decisions
•Process selection and technology
•Facility, location and layout
•Make or buy (supply chain)
Organizational decisions
•Org. structure and relationships
•Standards, performance management
•Physical resources, information systems
Innovation decisions
•Product development
•Technology development

4. 4
Sections of Operational Plan
 Production process
 Supply chain management
 Infrastructure
 Inventory management
 Innovation
 Legal and regulatory environment
 Administrative systems
 Organizational structure
 Decision-making procedures
 Human Resources management

5. 5
Production Porcess Description
A process chart helps identifying:
 What are the steps in producing the product/service?
 How do we transform raw materials into end products?
 Where are the decision-points?
 How much time it takes to deliver a product/service?
 Where are the quality control steps in the process?
 What are the existing constraints and possible problem areas?

6. 6
Supply Chain
 Refers to the system and organization for product sourcing;
 Make or buy decision;
 The Business Plan has to address who your suppliers and sub-contractors
are:
• Way of delivery;
• Contractual agreements, terms of delivery;
• Payment terms;
• Strategy for supplier management.
 Evaluate your suppliers!

7. 7
Infrastucture
 You should identify both start-up and expansion infrastructure needs.
 Resources determine the capacity of the organization!

8. 8
Infrastructure – Facility and Location
Factors affecting the decision:
 Quantitative, e.g. cost, transportation, capacity of building, distance from public
transportation, number of residents;
 Give details on any special requirements, such as water or power needs,
ventilation, drainage;
 Qualitative, e.g.: convenience, arrangement, outlook, premises, location, rent or
buy.

9. 9
Infrasturcture – Equipment Needs
 Equipment needs of the venture;
 Special equipment;
 Size of equipment;
 What do you have so far, what has to be obtained?
 Rent or buy? Used or new?
 How often do you have to change them?
 Equipment will affect exit strategy!

10. 10
What do you
need?
What do you
already have?
How will you
get the rest?
What more do
you need to
know about
this issue?
How will you
get further
information?
Plant
Property
Equipment
Administ-
rative
systems
The Infrastructure Needs of your SE

11. 11
Inventory Management
If the venture is product intensive, you will probably have to keep both unfinished
and finished goods in your inventory:
 Explain, how you will keep track of inventory;
 Turnover rate of inventory – industry standards;
 Inventory management system;
 Optimal size of inventory;
 Costs associated with inventory (refrigeration, rent, insurance, etc.);
 Minimum inventory size – reordering point.

12. 12
Innovation
 Speed and complexity of research and development in your industry.
 You may need to do further research on product development and possible
product lines.
 Your product will need to adopt to changing markets or new competition.
 Include descriptions of key technologies employed as well as current and
future innovation.
 Management and equipment needs of innovation.

13. 13
Legal and Regulatory Environment
 Details of any licenses, copyrights, trademarks and patents registered (or in
the process of being registered);
 Details of any legislation and regulations governing the industry, product and
production processes;
 Proof of compliance with tax and labor legislation where applicable;
 Details of duties and tariffs to which inputs or products are subject if the
business is a regular importer or exporter.

14. 14
Administrative Systems
 Accounting;
 Information technology system;
 Administration
• Contracts;
• Correspondence;
• Filing system;
• Financial management;
 Management information system, CRM;
 Performance management system;
 Environmental management.

15. 15
Potential Internal Regulations
 Accounting;
 Petty cash management;
 Stock-taking and disposal;
 Organizational and operational rules;
 Document management;
 Regulation in official travelling;
 Health and safety regulation.

16. 16
Financial Management System
 Managing cash-flow, financial planning;
 Financial planning ≠ accounting;
 Software;
 Internal controls;
 Allows to check profitability, cost-cutting opportunities, approach financial
difficulties;
 Payment schemes (keeping track of web payment, partial payment, etc.);
 Separation of different projects;
 Risks (e.g. in lack of proper internal control and alarm system, thefts may
occur);
 Discuss shortcomings of current system, short and long term plan to
overcome them.

17. 17
Financial Management System
Guidelines for setting up a financial system:
 Trackable;
 Searchable;
 Double-checks;
 Result-oriented;
 Timesheets;
 Clear;
 In harmony with accounting system.

18. 18
Entrepreneurial
Entrepreneur
Research and
development
Finance
Accounting
Marketing
and sales
IT
Administration
Customer service
Human resources
Organizational Structure – 4 Categories
 Definition: There are
one or two people at
the top of decision
making, who have
direct control over all
employees.
 Advantages:
Appropriate when
quick decision-
making is needed.
 Disadvantages: May
be obstacle to growth.

19. 19
Functional Managing Director
Operations
Manager
Staff
Manager
Staff Staff
Manager
Staff
Manager
Marketing Finance Admin
 Definition: Roles are
aligned by responsibilities
such as Finance,
Marketing, Sales,
Operations.
 Advantages: Allows for
specialized learning and
scale (more cost
effective).
 Disadvantages: Difficult
to facilitate coordination
across functions.
Organizational Structure – 4 Categories

20. 20
Market-based Managing Director
Manager
Staff Staff
Manager
FinanceOperations
Product B Product C Product DProduct A
Manager
Staff
Marketing
 Definition: Roles are
aligned by products,
programs, and/or
geographies.
 Advantages: Supports
better coordination
across functions.
Facilitates adaptability to
localities.
 Disadvantages: Less
cost effective; duplication
of responsibilities. It is a
challenge to share best
practices
Organizational Structure – 4 Categories

21. 21
Hybrid
 Definition: Roles are aligned both
functionally and by products,
programs and/or geography.
 Advantages: Can take advantage
of the benefits of specialized
learning, coordination and
adaptability.
 Disadvantages: Duplication of
responsibilities; reporting lines can
be a challenge.
e.g.:
NESsT’s
organization
Organizational Structure – 4 Categories

22. 22
Decision Making
 Decision making is affected by the structure of the organization;
 Explain the rules of decision making in your venture;
 Responsibilities;
 Level of autonomy;
 Strategic, operational decisions;
 Written internal regulations;
 Organizational chart.

23. 23
HR Management
Definition
The formal structure within an organization responsible for all the decisions,
strategies, factors, principles, operations, practices, functions, activities and
methods related to the management of people. This section of the toolkit includes
recruiting and hiring, training and development, and performance evaluation
and compensation.
Why is it important?
Every great organization requires three things to achieve their mission: a sound
strategy, capital to get the organization going, and talent to lead and implement
organizational activities. Human resources management is the driver of bringing in
talent, retaining talent and motivating talent to bring their best work to the
organization.
(More in the HR module)