| • Identify Inefficiencies in the System
Maximize Efficiency: To use the minimal amount of inputs required to achieve the desired results. If your company is spending more time, money, materials, etc. than necessary to produce your products or services, then you are being wasteful (i.e., inefficient). By identifying and eliminating the unnecessary expenditures your company will increase efficiency, and with it, profits.
• Optimize Resource Allocation
Optimize Resource Allocation: To distribute monetary and non-monetary assets (e.g., cash, labor, equipment, materials, etc.) across various activities in such a way that you maximize total company output.
Since resources are costly, your company only has so much to distribute across the various components of its operations. If your company is expending too many resources on unproductive areas, then that leaves too few resources to be used on more productive activities. By identifying your company’s more profitable activities, you can redirect resources toward those areas. In so doing, you will optimize the allocation of resources within your company and increase profits. |
• Optimize Strategic Decisions
Strategic Decision: The determination of a plan, method, or series of actions designed to achieve a specific goal or effect.
Your business is a dynamic, ever-evolving entity. You continually face decisions regarding how to adapt your product or service offerings to meet the evolving needs of your customers. Only by having the requisite information (i.e., costs and benefits of the various alternatives) will you be able to make the decisions that best position your company to meet the developing needs of your customers. In this way, you will maximize your company’s long run profits.
• Increase Leverage in Negotiations
Increase Negotiating Leverage: To increase one's ability to exert influence and obtain favorable terms of purchase or sale with suppliers or customers.
Most businesses regularly negotiate with suppliers and customers. Information relevant to negotiations include the costs and benefits not only of the transaction at hand, but of its alternatives as well. Such information enables you greater flexibility in granting or demanding concessions, which you wouldn’t otherwise be prepared to make, so as to increase the probability of closing the deal. Having the requisite information thus provides you with greater leverage in negotiations.
|
