December 1, 2022

New business applications increased by more than 20% in 2021. Ecommerce happened to be one of the top types of new business that entrepreneurs started.

What these new entrepreneurs are about to discover is that it’s hard to be profitable in ecommerce. Profit margins are thin. They either need to sell enough to become profitable or find creative ways to lower operations expenses.

That’s where operational management makes a huge difference. It’s the fine art of improving processes so you lower your overall operations costs.

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Lower operations costs equal higher profits. That’s more money to invest in the business which fuels growth.

Read on to learn the top ways you can improve operational management for a more efficient and profitable business.

1. Know Every Aspect of the Operation

You can’t manage and improve what you don’t know. If you want to improve operational efficiency, you have to learn about the operations of your business.

Walk around the warehouse floor with a critical eye. Talk to employees about their challenges and ask them what would make their work easier.

This gives you insights that allow you to understand what works well and what doesn’t within the business.

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2. Remove Obstacles and Bottlenecks

Employees probably told you about issues and challenges they face every day. A manager’s job is to help employees be at their best.

They can’t do that if they can’t perform at a high level.

Remove the challenges and obstacles that get in their way. For instance, a current policy says that employees can’t make a decision to spend $100 without the approval of a supervisor.

This can prevent employees from going overboard, but they have to wait for the approval. Raise the limit to $500 and you’ll remove the obstacles and empower employees.

3. Train and Retain Employees

The cost to replace and train new employees is one of the most expensive parts of your operations. There are hidden costs like creative problem-solving, customer relationships, and institutional memory that get lost when you lose good employees.

Your best option is to do everything you can to retain your employees. Train them to help them grow and give them a clear career path.

Creating a workplace culture that encourages and empowers employees can improve employee retention.

4. Automate Tasks

Some tasks generate income and tasks that don’t. Most entrepreneurs focus on small tasks because they have to get them done.

Get tools that let you automate those tasks so you can turn your attention to income-generating tasks.

5. Get a Handle on Inventory

Shipping and receiving management is a critical part of operational efficiency. It’s difficult to get a handle on because there are so many steps to the process.

The employees at the receiving dock go through the order to confirm the order matches the vendor’s invoice. That gets handed off to warehousing for storage.

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Inventory stays there until an order gets placed. The inventory gets retrieved by fulfillment, packed, and sent to the customer.

A lot can go wrong during that process.

Technology can make a difference in inventory management. Invest in inventory management apps that let you and your employees track and manage each step of the process, from receiving to customer service.

6. Don’t Ignore Customer Service

Operational management has two distinct purposes. The main focus is to improve operations so the company is more profitable.

The other is to improve operations to serve customers better. A 5% improvement in customer retention can increase profits by up to 25%.

Customer expectations are high. They expect agents to know what they purchased and basic information about them.

They also expect agents to resolve their issues. Agents can’t do that if they don’t have the tools to do so.

This is where training, support, and investments in technology can pay off for your business.

7. Use Data for Operational Efficiency

Do you know if operational management works? You won’t know unless it gets measured.

Measure operational efficiency by setting clear business goals and key performance indicators (KPIs).

You can assign KPIs to each department. This gives them clear goals to work towards.

There are tools available for managers to see the health of the business in simple reports. Scoro, Tableau, and SimpleKPI are a few examples of these tools.

8. Outsource When It Makes Sense

There are entrepreneurs that outsource all aspects of their business. They outsource production and fulfillment to dropshipping companies. They outsource marketing, administration, and accounting, too.

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There are some advantages of outsourcing, but you can overdo it. Outsourcing can help you scale the business, but you also lose control over critical processes.

If you do outsource, only do so in areas of the business where you can see a return on investment at first. Outsourcing IT is a good place to start.

IT can create technical processes and improve efficiencies. IT support keeps your business secure, which reduces the risk to your business operations.

9. Continuously Improve Standards

Operational efficiency isn’t a process that you go through one time and expect the results to last for years. Excellent operational management involves raising standards and improving processes.

Run through your operations process each quarter and make improvements. Set higher standards for employees.

You’ll see the continued results in your bottom line.

Tips for Better Operational Management

Whether you have a multi-million dollar operation or you’re still running a business out of your garage, operational efficiency makes a huge difference.

You can improve operational efficiency with better operational management. Learn all of the different processes that occur within the business, remove obstacles, and invest in technology.

Operational management is a continuous process. Keep improving and you’ll see incredible business results.

For more tips to make your business profitable, click on the Business tab at the top.