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E1 > 9. Finance function and operations > Flashcards

9. Finance function and operations Flashcards

1
Q

What are the core business funcitons

A

Operations: fulfilling customer orders through production of goods, devliery to customer

Marketing and sales: identify customer needs and commmunicate products

Product and service development: design new products to meet customer needs

other functions: Finance, IT

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2
Q

Define Operations management

A

Transformation of inputs into outputs that meet needs of customer
- ensure organisation is run efficiently, effectively and cusotmer centric

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3
Q

What is the transformation process model

A
  • Input resources transformed through processes into an output which meets customer needs
  • Transforming inputs: Labour, Facilities
  • Transformed Inputs: Materials, information, customers
  • Transformation processes
  • Outputs: products + services
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4
Q

What method is used to analyse differences between transformational processes

A

Using Four Vs

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5
Q

What is meant by the Four Vs of operation

A

Volume: high volume= capital intensive, low volume= labour intensive

Variety: ranges of inputs or outputs or whether it’s uniform

Variation in demand: demand might be seasonal, peaks and dips

Visibility: the degree to which operations are visible to the customer

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6
Q

What are the benefits of a efficient operational process

A
  • More products and services, given level of input - increasing profit
  • Reduced wastage which improves profitability and is favourable to corporate social responsibility
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7
Q

What is the prism of the value chain

A

Sequence of business activities by which value is added to the products produced by an entity
- from perspective of end user

  • business is profitable if the realised value to customer is > cost of performing transforming activities
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8
Q

How is Porter’s value chain structured

A
  • Primary Activities: inbound logistics, operations, outbound logistics, marketing & sales, services
  • Support activities: Firm infrastructure, HR, Technology development, Procurement
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9
Q

Define the primary activiites in Porter’s value chain

A

Inbound logistics: activities involved with receiving, handling and storing inputs into a production system

Operations: convert resources into the final product

Output logistics: storing product and distribution

Marketing and sales: informing customers about product

After sales service: installing products, repairing and providing spare parts

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10
Q

Define the support activities in Porter’s value chain structure

A

Firm infrastructure: Systems of planning, finance quality control- responsible for strategic capability

HR: Recruiting, training, developing and rewarding staff

Tech Development: Activities related to product design and improving processes/ resource utilisation

Procurement: acquiring resource inputs for primary activities

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11
Q

What is a value system according to Porter

A

Value added beyond the organisation’s boundaries - which are connected to the value chain eg. supplier, distributor etc\

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12
Q

What are the two ways to create value in the value chain

A

High volume + low margins or

Low volume + high margins

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13
Q

What is meant by process and process design

A

Process: a bounded set of activities undertaken in response to an event to generate output

Process design: concerned with understanding activities that are undertaken in a business process to enhance efficiency and effectiveness

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14
Q

What is the purpose of process design

A
  • Reduce cost
  • Provide a scalable platform
  • Offer better products to be competitive
  • Exploit opportunities of better tech
  • Execute new strategy
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15
Q

What are the steps in a simple process map

A

1: Approval from board
2. Notify and invite interested suppliers
3. Review tenders submitted
4. Invite selected suppliers
5. Select the best supplier offering

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16
Q

What are the advantages of process maps

A
  • Better understanding of steps
  • Role understanding and allocation of tasks
  • Opportunities: highlight areas for improvement
  • Support organisational schemes
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17
Q

What are the five stages of product and service development

A
  1. Consider Customer needs: quality, design, value
  2. Concept Screening: vetted against criteria
  3. Design process: prototypes, value engineering
  4. Time to market: final design, marketing
  5. Product testing
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18
Q

How does finance team support procurement

A
  • Credit terms: negotiate favourable terms
  • Price: identify maximum price
  • Payment: processed by finance
  • Data capture
  • Inventory: monitor levels to order correct amount
  • Budgets
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19
Q

How does the finance team support Production/Operations

A
  • Cost measurement, Allocation and absorption: calculate the monetary value of the cost of labour and material
  • Budgets: calculate the cost of the level of outputs
  • Cost and quality: Decide whether the cost is justified by added quality
  • Inventory: ensure sufficient levels of inventory for production
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20
Q

What are the characteristics of organisations that provide services instead of products

A
  • Intangibility: no physical aspects
  • Inseparability: of business or employee and service
  • Perishability: service cannot be stored
  • Variability: services are unique and hard to standardise
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21
Q

What things does finance team calculate to help service provision

A
  • Charge out rates: hourly rate charged to clients for service to cover overheads and profits
  • Cost estimates: Levels of overheads to include in service charge
  • Measuring benefits: of continued service provision
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22
Q

Define supply chain management

A

Concerned with flow of goods nad services through supply chain - goal is to contribute to customer satisfaction

  • Source of competitive advantage
  • Supply chain should be responsive and reliable
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23
Q

How did traditional supply chains operate

A

Traditional supply chains: operate independently, independence was maintained through holding buffer stock and managing lead times
- no control over other channel members
- no wider perspective of the whole system

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24
Q

What is the aim of an integrated supply chain network

A

Co-ordination from raw material suppliers to end customers
- Network of vendors supporting network of customers

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25
Q

What are the implications of integrated supply chains

A
  • Price and inventory coordination: to avoid bottlenecks caused by short-term surges in demand
  • Linked computer systems: use of electronic data interchange allowing paperless communication
  • Earlier supplier involvement in product development and design
  • Logistics design
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26
Q

What is Cousin’s stratigic supply chain

A

Corporate and supply strategy is linked to
- Organisation structure (centralised or decentralised control)
-Portfolio of relationships ( adversarial or collaborative)
- Cost/benefit analysis ( intangible and tangible)
- Skills and competencies ( negotiation skills)
- Performance measures (cost per kg vs customer complaints)

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27
Q

What is meant by the portfolio of relationships or Partnership sourcing

A

Can be either Adversaraial or collaborative

Adversarial/Contractual: low level of cooperation, suppliers are selected on the basis of price and threat of buyer power

Collaborative/Relational: high level of cooperation, working together to meet market needs

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28
Q

What are other methods of efficient production and delivery of goods/services

A
  • Demand Networks
  • Supply portfolios
  • Supply Strategies
  • Benchmarking
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29
Q

What is meant by demand networks

A

-‘pulled system’ - Organisations in demand networks share information to collaborate on products to produce the correct amount of goods for operational efficiency

  • By managing three factors of :
    Alignment of shared incentives
    Agility to respond to demand
    Adaptability to adjust the structure of the supply chain to meet demand
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30
Q

What is meant by supply portfolio

A

Organisations use a number of suppliers for raw materials and there is a range of strategies to determine who to purchase from
- eg some might be better in quality whilst others in price and others in managing risk
- eg. some suppliers might be suited for large orders, some might have better expertise in specific things

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31
Q

What are the four Supply Strategies

A
  1. Single Supply strategy: buyer chooses one source of supply
  2. Multiple supply strategy: The buyer chooses several sources of supply
  3. Delegated supply strategy: A supplier is given responsibility for the delivery of sub-assembly rather than dealing with multiple suppliers for different parts
  4. Parallel supply strategy: combining other three approaches to maximise the benefits of each
32
Q

What is meant by benchmarking analysis and what are the different types

A
  • Comparing the efficiency of production and delivery to the analysis of performance with similar activity elsewhere

Type of benchmarking:
- Internal Benchmark: comparison against elsewhere in the organisation
- Competitive benchmarking: comparison against the best elsewhere in the industry
- Inter-industry benchmarking: comparison against the best functional area in any industry

33
Q

What are the traditional and contemporary methods of supply chain relationship management

A

Traditional: Contractual approach

Contemporary: Relational approach

34
Q

What is MRP I

A

Material requirements planning : a technique for deciding the volume and timing of materials in the manufacturing process
- Calculates quantity of materials required
- Determines when they will be required
- Only appropriate when sales can be forecasted

35
Q

What is MRP II

A

Manufacturing resource planning: evolved from MRP I - planning and monitoring all the resources of a manufacturing company
- Of marketing, finance and engineering
- Computerised system with single database

36
Q

What is OPT

A

Optimised production technology: computer-based method to schedule production focusing on capacity constraints or bottlenecks of the operation

  • Identify bottlenecks
  • Identify ways to overcome capacity constraints
37
Q

What is ERP

A

Enterprise resource planning
- Developed from MRP II
- Wider basis on integrating and using databases from all parts of the organisation

38
Q

Quality assurance

A

Ensuring defects are eliminated or minimised during the development of the production process
- Pre building - minimise waste and defects

39
Q

Quality Control

A

Checking and reviewing work that has been done
- Post building or retrospective

40
Q

What does Deming write on quality

A
  • Managers should prompt continuous improvement
  • Managers should seek feedback from workers
  • Workers should be trained on what needs changin
41
Q

What does Juran say about quality

A
  • Pareto Principle: 85% of the quality issues are due to systems of weakness rather than workers
  • Organisational focus should be on system improvement
  • Customer should be focus of quality
42
Q

What does Crosby write about quality

A
  • Zero Defects concept
  • Prevention is Key: cost of prevention is lower than cost to fix
  • Workers should be involved in quality projects
43
Q

What is meant by quality planning and management

A

Activities that ensure products are fit for purpose and meet specifications

44
Q

What are aspects of quality planning

A
  1. Plan: standards of quality
  2. Devise: suitable instruments to monitor quality
  3. Compare: actual vs planned
  4. Control: take action when quality is below
  5. Review: the plan and standards for continuous improvement
45
Q

What is quality circles

A
  • Employees meet regularly to discuss quality issues to suggest improvements
46
Q

What is statistical process control

A

Application of statistics to quality control

47
Q

What is six sigma

A

A process designed to help organisations focus on developing and delivering perfect products and services to reduce the number of faults below the accepted tolerance limit

48
Q

Who developed six sigma and what does it imply for quality

A

Motorola in 1980s
A score of 6 x Sigma in specification means 99.999% of items are within specification
- Identifies root causes of error
- Confirms critical root causes
-Implement corrective action
- Customer focused

49
Q

What is TQM

A

Total quality management
- Continuous improvement of quality, productivity and effectiveness by establishing management responsibility for processes and outputs

50
Q

What 7 principles are total quality management based on

A
  • Prevention
  • Right first time
  • Eliminate waste
  • Continuous improvement
  • Everyone’s concern
  • Participation
  • Teamwork and empowerment
51
Q

What practical aspects should be considered for Total quality management approach

A
  • Service level agreements
  • Quality culture
  • Empowerment
  • Quality costs
52
Q

What are the four types of quality costs

A

conformance costs:
- Prevention costs: cost of designing in quality, training and equipment testing for quality standards
- Appraisal costs: inspecting finished goods or raw materials

Non conformance costs:
- Internal failure costs: cost of scrapping or re-working poor quality work or selling goods at lower price
- External failure costs: costs of recalling poor quality goods and losing customer goodwill

53
Q

What is meant by Kaizan

A

Continuous improvement: the principle that quality management is not a one-off process but a continuous examination and improvement of processes

54
Q

What are the principles of Kaizan

A
  • People are organisation’s most important asset
  • Progress isn’t radical but gradual
  • Improvement is based on stats
  • Resources incentives and rewards should be aligned
  • customer needs should be taken into account
  • Continous improvement allows new technology to be introduced
55
Q

What are the 4 aspects of Kaizan process

A
  • The five why process
  • Fishbone diagrams
  • Plan do check act (PDCA)
  • Pareto analysis
56
Q

What is the five why process

A

Identify root cause of the problem by asking why to generates symptom

57
Q

What is meant by fishbone diagram

A

Cuase and efffect diagrams used to analyse all causes that result in a single output

58
Q

What is PDCA

A

Plant do check act
- Plan the process
- Do: execute the process
-Check: check the outcome
-Act: feedback to improve process

59
Q

What is Pareto analysis

A

80/20 RULE
- 80% of an outcome is dependent on 20% of the process

60
Q

What is lean thinking

A

Minimise the amoutn of resources including time used in all activities by eliminating non value adding activities

61
Q

What waste does lean thinking reduce

A
  • Overproduction
  • Waiting, time delays
  • Transportation
  • Unnecessary inventory
  • Decrease in motions
  • Over-processing
  • Defective units
62
Q

What are the two tenets of lean thinking

A

Continuous improvement and respect for people

63
Q

What is meant by lean synchronisation

A

Application of many operational management techniques and ideas
- Delivering the right quantity of the right product at the right time in the right location for the right price

64
Q

What are teh barriers of lean synchronisation

A
  • Failure of organisaiton to eliminate waste
  • Failure to involve relevant people in operation
  • Failure to adopt principles of continuous improvement
65
Q

What is JIT

A

Just in time: organisation produces goods as they are required

66
Q

What are teh requirements for a successful JIT System

A
  • Quality and reliability
  • Focus on value-adding activities
  • Speed
  • Flexibility
  • Focus on reducing cost
67
Q

What are the 5 Ss

A
  • Seiri or structure: segregate or discard introduce order where possible
  • Selton or systemise: arrange and identify for ease of use and tasks systematically
  • Seiso or sanitise: Clean daily, be tidy and avoid clutter
  • Seiketsu or Standardise: Revisit each S frequently and consistency
  • Shitsuke or self-disciple: sustain via motivation
68
Q

What is reverse logistics and how do organisations handle this

A

Process of receiving products back from customer
- faulty or unwanted goods
- Enterprise resource planning systems can support plans to handle reverse logistics

69
Q

What KPIs do finance functions use to support operations

A
  • OPEX: operating expense ration
    -Capacity utilisation rate
  • Process downtime level
  • machine downtime level
  • Order Fulfillment cycle time
  • Inventory Shrinkage rate
  • Rework level
70
Q

What is OPEX KPI

A

Operating expense ratio
(Opex in period t/ sales revenue in period t) x 100

  • ability to manage cost in relation to revenue
71
Q

What is Capacity utlisation rate

A

(Actual capacity in period T/ Possible capacity in period T) x 100

  • Actual capacity of operation function compared to full potential
72
Q

What is the process downtime level

A

( Ta t /PPT) X100
TA t= actual productive time of a process in period t
PPT = planned productive time of the process in period t

  • Measures the proportion of time the process was actually running compared to what was planned
73
Q

What is machine downtime levels

A

(MTA t /MPPT) x 100
- MTAt= actual productive time of machine in period t
-MPPT= Planned productive time of machine availability in t

74
Q

What is order fulfillment cycle time

A

Source cycle time + make cycle time + delivery cycle time

  • measures total time taken from customer ordering to goods being delivered
75
Q

What is inventory shrinkaage rate

A

(Recorded inventory level - Actual inventory level) / Recorded inventory level
- measures percent of inventory lost

76
Q

What is the rework level

A
  • Number or percentage of items that required reworking

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