N4 Entrepreneurship & Business Management 5. Operating plan


The operating end of a business is where resources are transformed into goods and services. It is the engine room of the business. All businesses have operations whether they take place on a production floor, in a garage, office, kitchen or on the side of the street. In other words, this is how the business “makes” its money. This is achieved by the buying of raw materials or products and transforming them by means of machinery and equipment into the product that you are selling. All of these operations have the same end namely, “the customer as the next process.” This means that operations are or should be geared towards what the customer wants. In general, customers want to deal with providers who offer high quality, low costs, short lead- times (quick delivery) and flexibility to change (volumes, specifications and products).


Type of business Example Manufacturing T-shirts Retail


Café Service Activity 2


Complete a description of how you are going to produce (manufacture) your product or provide your service. It includes the following: • Description of the process • Equipment needed for the process


5.1 Supplier analysis


Purchasing is an important function in many businesses because it determines the firm’s ability to sell a quality product or service at a reasonable price. A major objective of purchasing is acquiring enough stock to ensure smooth, uninterrupted production or sales and also seeing that the stock is delivered on time. The purchasing plan must address the trade-off between the quality of stock and its price. It must establish the criteria for determining the best supplier, considering such factors as reliability and good service.


Experienced business managers’ shop around to find the right supplier of raw materials, stock and equipment. You will be surprised by the difference in prices, quality and variety once you start to look around. Other aspects that you should also consider are the location if you have collected your stock yourself.


5.2 Factors to consider when selecting a supplier 1


Quality


Quality can be defined as knowing the customer’s requirements and meeting them one hundred percent of the time. You are the customer from a purchasing point of view. This means that you must identify suppliers who are in a position to meet your requirements to the full. It also means that you must limit your suppliers to a few good ones. This will enable you to build a relationship with them, which is beneficial to both. Furthermore, it is your duty to make it easy for the suppliers to make or provide goods and services without defects or mistakes.


2 Quantity


The small business’s largest investment after buying assets is probably in stock. But an investment in stock does not bring profits unless the stock is sold. The objective is to


134 What they do


Buying of the fabric, cotton – using sewing machines, labour, etc. Purchase of products, using shelves, fridges, labour, etc.


Garden service Use of lawnmowers, spades, vehicle, labour, etc.


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