Definition
An operational plan is a detailed outline of the actions a company needs to undertake to reach its operational goals. It lays out the specific projects and resources necessary to implement the organization’s strategic plan. This includes setting timelines, allocating budgets, and assigning responsibilities to specific teams or individuals.
Key Takeaways
- An Operational Plan is a detailed layout that describes the day-to-day operations of a company and how it functions to achieve organizational short-term goals and objectives. It is a valuable tool for communicating the company’s direction and decisions to its employees and stakeholders.
- This plan neatens down the strategic plan into measurable, tangible, and quantifiable operations to simplify the execution process. It covers the company’s entire operational aspects, including production, distribution, marketing, finance, human resources, and so forth, covering everything necessary for the smooth functioning of the company.
- It’s vital because it aligns the organization’s strategic plans with the actual operations. It also helps in identifying necessary resources, personnel duties, budgets, and timelines, which facilitate better decision-making, effective resource allocation, cost control, and risk management.
Importance
The finance term ‘Operational Plan’ is critical because it outlines the specific, day-to-day activities necessary for running a business effectively.
It specifies how a company will allocate its resources to meet its objectives, handles forecasts of expected revenues and expenditures, and greatly assists in the budgeting process.
This detailed framework provides guidance on production, staffing, supply chain management, equipment, and inventory requirements that directly impact the company’s bottom-line.
An effective operational plan can lead to optimal operational efficiency, cost management, and profitability, making it an essential part of any business’s financial planning strategy.
Explanation
The main purpose of an Operational Plan, also known as an operating plan or action plan, in the realm of finance, is to outline the specific, detailed procedures and processes that a company needs to implement in order to effectively execute its strategic plan. These procedures and processes primarily involve the daily operations of the business, including production, sales, marketing, and financial activities.
By clearly defining these steps, an Operational Plan provides a roadmap for businesses to follow to achieve their short-term operational objectives whilst contributing towards the overall corporate strategy. The Operational Plan is used as an essential tool to facilitate in decision-making processes and setting benchmarks to measure progress towards the organization’s targets.
It serves as a comprehensive guide for staff in undertaking their duties, ensuring that everyone understands their roles, responsibilities and timelines, thereby facilitating better coordination of efforts across different departments. Also, it aids in resource allocation, showing what resources (such as capital, labor, or technology) are required at what time, hence enhancing operational efficiency and effectiveness.
Moreover, by providing a clear operational framework, it enables managers to monitor and control operational activities, enabling them to quickly address any issues and make adjustments as necessary.
Examples of Operational Plan
Starbucks Operational Plan: Starbucks operational plan involves improving the customer experience, increasing revenue, and expanding locations. Starbucks is continuously coming up with new strategies such as mobile order & pay and delivery services. Starbucks plans also include opening more stores globally and enhancing the loyalty program.
McDonald’s Operational Plan: McDonald’s operational plan comprises daily operations, making quality food, quick service, clean restaurants, and value prices. They invest heavily in training staff and use technology to streamline processes. Furthermore, they have a strategic supply chain management plan to ensure fresh produce reaches its restaurants on time.
Walmart Operational Plan: Walmart’s operational plan includes maintaining low prices by reducing costs, continuously innovating logistical processes to streamline delivery and restock timings, and investing in e-commerce operations. They also aim to enhance customer satisfaction with the help of technology, for example, through self-checkout lanes and online order pickups in store locations. Walmart shares these operational plans yearly through official annual reports and management strategic planning.
FAQs about Operational Plan
What is an Operational Plan?
An operational plan is a detailed plan that outlines how an organization’s strategic goals will be achieved in practice. It provides a comprehensive view of the day-to-day activities necessary to run a business.
What are the key components of an Operational Plan?
The key components of an operational plan include goals, activities, resources, timelines, and personnel. The plan should also include key performance indicators to measure success.
Why is an Operational Plan important?
An operational plan is important as it provides a clear picture of the tasks to be completed, resources required, and timelines for completion. It allows businesses to optimize operations, manage resources efficiently, and prepare for potential challenges.
How is an Operational Plan created?
An operational plan is created by clearly defining the organization’s objectives. The next step involves detailed planning of activities to achieve these goals, outlining requirements and setting timetables. It’s important to involve the relevant department or team members in this planning process.
What’s the difference between a Strategic Plan and an Operational Plan?
A strategic plan outlines the long-term view of what the organization aims to achieve, while the operational plan focuses on the day-to-day activities that will help fulfill the strategic objectives. Strategic planning sets the direction, and operational planning gets the work done.
Related Entrepreneurship Terms
- Strategic Planning
- Budgeting
- Financial Forecasting
- Performance Metrics
- Resource Allocation
Sources for More Information
- Investopedia: A comprehensive financial education website that provides definitions and in-depth information on various finance terms including ‘Operational Plan’.
- Entrepreneur: A popular resource for different aspects of entrepreneurship and business planning, including operational planning.
- Business.com: A comprehensive source providing articles and tools focused on various aspects of business and financial management, including operational planning.
- Harvard Business Publishing: A subsidiary of Harvard University that provides articles, cases, and online resources in various fields including finance and operational planning.
