Business Control Systems Help You to be in Charge of Your Business

Monitor Sales Volumes, Costs, Margins and Profits by Installing Well Designed Control Systems

It is business control systems that help you to be in charge of your business. These systems provide specific information to help you decide what to do. As a result, your decisions become informed, instead of being hunch-based.

Before we look at control systems, let us look at the basic elements of control. Control involves three essential elements:

• Setting Targets: If you don't have targets, you won't know whether you have performed well or poorly. Targets come in the forms of plans, schedules, ratios and so on.
• Measuring Performance: Actual performance must be measured along the same lines as targets. Only then will you be able to check whether targets have been achieved or not.
• Review and Action: Actuals must be compared with targets and any differences must be analyzed. These analytical reports must be reviewed in detail and the correct conclusions drawn and appropriate actions must be taken.

When you do these three steps in a timely manner, and on a continuing basis, you will find that you are getting on top of your business (instead of the business getting on top of you). Let us now briefly look at control systems in different functional areas.

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Production Control

Essentially, production control seeks to ensure optimum utilization of capacity (not maximum, because that could prove short-term with your plant wearing down in the absence of maintenance). Production control requires:

• Preparing machine-loading schedules indicating which task is done on which machine, what outputs are estimated and when
• Generating materials requirement lists to initiate procurement actions if necessary and make sure that all materials are available in time and in the correct specifications
• Scheduling labor to work in all operating shifts, with the required complement of skills in each shift
• Recording the outputs of each machine and each shift (or job), and the quality of the output (acceptance/rejection percentage)
• Preparing reports comparing outputs with schedules, and analyzing reasons for any deviations, such as machine breakdown, poor quality materials, unavailability of materials, etc

The reports generated by a system like the above will tell managers exactly how things are going, and why. With this information, they would be able to attend to the problems in a meaningful manner and take control.

Sales Control

Controlling the levels of sales is also similar.

• Develop sales forecasts by region, product, sales channel or sales person, in consultation with those in the field in each area
• Record actual sales by region, product and sales channel/person
• Prepare reports comparing sales against forecasts by region, product and sales channel/person
• Discuss the reasons for any deviations between forecast and performance (and the actions to be taken to achieve better performance) with the channel representative or salesperson.

Cost Control

• Detailed cost estimates are made by assuming standard consumption of materials, machine/labor productivity, normal wastage and charges for overhead
• Costs are accumulated in cost records along the same lines as the estimates
• Comparison reports between estimates and actuals are prepared, along with variance analysis indicating the factors responsible for the variance, such as excessive materials usage, lower productivity of machines/labor and higher overhead expenses

Over time, the problems causing adverse cost variances can be remedied. Additionally, cost estimates can become increasingly accurate, leading to setting remunerative selling prices.

Control Systems Can be Fine Tuned

Once you become familiar with the processes and results, you would be able to extend the approach even to areas which are not easily quantifiable. You would also become accustomed to looking at the basic underlying factors that lead to good or poor performance. The result will be a highly competitive business.

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