Larger isn’t always better when it comes to how well a company runs, but there are always lessons big operations can teach the smaller guys. Operational efficiency is something every business should strive for, no matter its size, and bigger companies often excel at it. There’s a reason we talk about “economies of scale.”
As an entrepreneur, efficiency will be your best friend. Just ask your mentors: The more efficient you are, the less stressed you’ll be. You’ll move faster, make better decisions, and deliver a better product to your customers.
Sounds good, right? Here are eight approaches to operational efficiency you can learn from the big dogs:
1. Group Purchasing
When you buy in bulk, you often receive a discount. Unfortunately, it takes a massive purchase to qualify for any substantial price cut. Big companies may qualify, but alone, smaller ones rarely do.
For this reason, small shops band together in group purchasing organizations. GPOs negotiate similar pricing as enterprises, allowing them to pass on volume discounts to their members. Plus, GPOs’ scale gives them access to not just discounts, but wider networks of suppliers.
2. Energy Efficiency
Many large-scale companies implement energy efficiency programs, whether from a sincere desire to improve the health of the planet or to score PR points. But the purity of their motives is beside the point. Making efforts to improve energy efficiency isn’t just environmentally conscious; it’s wallet-friendly as well.
While the initial cost is usually a little higher, installing solar panels, LED lights, or even a smart thermostat can significantly reduce electric bills. Newer equipment also tends to be easier to use and less prone to failure. Both of these advantages play into operational efficiency.
3. Supply Chain Management
Large companies streamline their supply chains to keep their operations running smoothly. Supply chains bring in materials that are converted into products, which are then distributed through various channels to customers.
When supply chains are optimized, materials arrive just in time, avoiding either production bottlenecks or inventory pileups. When they’re not, it’s like treading through mud. Major companies have manpower and resources smaller ones do not, but even startups can emulate the models they see in larger organizations.
You don’t need to be a Fortune 500 company, for example, to adopt inventory management and forecasting software. These tools will help you stay on top of both materials and finished product inventory, and optimize your fulfillment rate.
4. Accounts Receivable
Accounts receivable is the money that customers owe your business. The more efficiently you manage these accounts, the healthier your finances will be. Anything beyond 10-15% of accounts receivable being past due is a problem.
By reviewing your accounts receivable weekly, you’ll be able to spot past-due accounts quickly and intervene before they become major problems. You’ll bring in more revenue, but you’ll also spend less time chasing down customers months after the fact.
There are a number of ways you can improve your accounts receivable process by mirroring major companies. Corporations rely on software to carry out effective billing procedures, especially when balancing numerous accounts of varying sizes. They automate invoicing and establish clear collections policies.
5. Automation
Speaking of automation, major companies are at the forefront of innovation, partially due to their ability to invest in new task-automating tech. Whether it’s robots on production lines or CRM systems to automate marketing campaigns, big companies know that automation boosts efficiency and reduces human error.
Smaller companies probably won’t be able to afford a fleet of robots to do their bidding. However, automation is possible in small doses. Even the smallest startups can implement project management software to automate task scheduling, progress tracking, and follow-up. Anything entrepreneurs can do to free up their time is a good thing.
6. Communication
Large corporations typically have what’s known as a “tall” organizational structure. This means that there are many layers of management from the CEO down to the hourly employee. While a tall structure can make communication more difficult, mammoth companies still find a way to carry out this vital function effectively.
For starters, they realize that communications will need to take place at all levels. Company-wide announcements may appear on the corporate website, while departments use a corporate wiki, and teams employ Slack.
Large companies also realize there’s no substitute for the occasional one-on-one. Elon Musk, for example, encouraged Tesla employees to go straight to the person who can solve their problem, bypassing the standard communications ladder. At small companies, this is even easier.
7. Customer Service
Major companies got to where they are because they were able to provide value to customers and respond to their needs promptly. This is something any organization needs to do to be successful. Customers, after all, are the individuals who ultimately keep a company in business.
There are ways to make your customer service more efficient like the big boys do. This will not only benefit your bottom line, but your customers will be pleased with the improved response time.
Startups don’t need to outsource their entire customer service team, as large companies rarely do. Instead, they can make smart use of CRM tools and well-deployed chatbots to deliver first-class customer service like the market leaders.
8. Analytics
Many of the above operational efficiencies can be boiled down to the proper use of analytics. Data can tell you everything you need to know about your operations, customer base, and financial status. Learn how to use data for forecasting, marketing, and operational improvements, and your company will be well off.
All major companies in today’s world rely heavily on analytics. This allows them to spot growing trends and make calculated market decisions that steer them in the right direction. To follow in their footsteps, use data to guide your decision-making.
It often seems that major companies rule the world. Whether that’s true or not, they have a lot to teach small business owners. By following their lead in these eight areas, it won’t be long before you’re a market player yourself.
