Administration, Selling, Distribution, Research and Development Functional Analysis

Administration Overhead

The term administration refers to the formulation of policy, direction, control and management of affairs. The general functional expenses are included in the administration overhead. In other words, administrative services are necessary for the effective operation of any business. Hence, such service expenses are treated as administration overhead. The printing and stationary for administration, rent, rates, insurance of general office, bank charges, telephone, postage, and the like are the examples of administration overhead.

• Analysis:

Evaluate the workflow of administrative tasks, identify bottlenecks, and assess staffing adequacy. Review document management systems, IT infrastructure, and internal communication protocols.

• Key Areas for Improvement:

Automation of routine tasks, training for administrative staff, and consolidation of redundant activities.

Selling Overhead

selling overhead refers to the cost of selling function ie the cost of activities relating to create and stimulate demand for company products and to secure orders. Salaries, Commission and traveling expenses of sales representatives and executives, advertising and publicity expenses, samples, printing of price lists, discounts, rebates, bad debts and the like are the examples of selling overhead.

• Analysis:

Analyze the sales process from lead generation to closing deals. Evaluate the effectiveness of sales pitches, customer relationship management systems, and follow-up procedures.

• Key Areas for Improvement:

Sales training programs, development of a structured sales pipeline, enhancement of sales tools and technology, and targeted marketing strategies.

Distribution Overhead

The term distribution refers to the activities relating to the sequence of operation starts from making the packed product available for dispatch and ends with making reconditioned returned empty package available for reuse.

Distribution is also one of the functions like manufacturing, administration and selling. Running expenses of delivery van, wages of packers, carriage and freight outwards, rent, rates and insurance of warehouses and the like are some of the examples of distribution overhead.

• Analysis:

Examine the logistics of how products are stored, handled, and transported. Identify inefficiencies in the supply chain, from warehousing to transportation and last-mile delivery.

• Key Areas for Improvement:

Implementation of an efficient inventory management system, route optimization, partnerships with reliable logistics companies, and technology upgrades.

Research and Development Overhead

Research Overhead is the cost of searching for new products, new techniques for production or finding new equipment. The development overhead is the cost of implementation of research result on commercial basis. Cost of raw materials used for research, salaries and wages of R and D department staff, subscription to books and journals, subscription to research association, patent feeds and the like are examples of research and development overhead.

• Analysis:

Assess the current projects in the pipeline, resource allocation, and the process of turning research into viable products or services. Examine collaboration between R&D and other departments like marketing and production.

• Key Areas for Improvement:

Streamlining project management processes, fostering a culture of innovation, prioritizing projects based on strategic fit and potential ROI, and enhancing collaboration with external research institutions.

Conducting Functional Analysis:

• Data Collection:

Gather quantitative and qualitative data through observations, interviews, and performance metrics.

• Process Mapping:

Create detailed maps of existing processes to visualize workflows and identify redundancy or unnecessary complexity.

• Gap Analysis:

Compare current processes against best practices or desired outcomes to identify gaps.

• Implementation of Changes:

Develop a plan to address identified issues, which may involve process redesign, training, or new technology.

• Monitoring and Evaluation:

Continuously monitor the changes and evaluate their impact to ensure continuous improvement.