9 - Finance Function & Operations Flashcards
2 roles of Ops
- Fulfil customer orders through production of goods/services
- Delivery to the customer
2 roles of marketing & sales
- Identify customer needs
2. Communicate info about org’s products/services to customers to procure sales orders.
1 role of product & service development
- design new products/services that will meet customer needs and generate sales orders.
3 core functions in any org
- Operations
- Marketing & sales
- Product & service development
3 support functions in any org
- Finance
- HR
- IT
Operations mgmt =
transformation of inputs into outputs that meet the needs of the customer + try to ensure efficiency.
Describe transformation process model
Inputs –> transformation processes –> outputs
2 types of inputs in transformation process model
- Transforming inputs e.g. labour, facilities
2. Transformed inputs e.g. Materials, info, customers
5 types of transformations we could have
- Physical
- Change in nature/form
- Change in location
- Change in ownership
- A psychological change (in customers)
What’s the output of a solicitor providing advice to a client?
Output = informed client = change in nature
What’s the output of rail industry?
Output = customer moves from one location to another = change in location.
What’s the output of a comedy show?
Output = entertained customer = psychological change
What are the four Vs of operations for?
Analysing differences between transformational processes.
State 4 V’s of ops & one-line description
- Volume: volume of units produced
- Variety: whether number diff inputs/range of output
- Variation in demand: seasonal/regular peaks/smooth & predictable
- Visibility: degree to which bis ops visible to customer
What does ops volume of units produced mean for input intensity?
High volume = capital intensive
Low volume = labour intensive
2 benefits of an efficient transformation process
- More product/service from given lvl of input = higher profit
- Reduced wastage favourable from CSR pov.
How are finance involve in ensuring operational efficiency?
Mgmt accounts monitor and report on operational efficiency + variance analysis
Value chain =
a sequence of business activities by which, in the perspective of the end user, value is added to the products/services produced by an entity.
Orgs create value for their customers by… + how is this measured?
performing transforming activities.
Measure by customer WTP above cost of activities.
Porter’s value chain is a model of what?
A model of value activities: procure inputs, process them & add value –> generate outputs. Shows the relationship between them.
State Porter’s 5 PRIMARY activities
- Inbound logistics
- Operations
- Outbound logistics
- Marketing & sales
- Service
Porter: what are primary activities?
Those activities directly related to production, sales, marketing, delivery and services.
Inbound logistics =
activities involving receiving, handling and storing inputs to the production system.
Operations = (Porter value chain)
activities which convert resource inputs into final product
Outbound logistics =
Storing of product and distribution to customers.
Marketing and sales = (Porter value chain)
Informing customers about product, persuading them to buy, enabling them to do so.
after-sales service =
Installing products, repairing them, providing spare parts.
Porter: what are support activities?
Provide purchased inputs, HR, tech and infrastructural functions to support the primary activities.
State Porter’s 4 SUPPORT activities
- Firm infrastructure
- HR mgmt
- Technology development
- Procurement
Porter: firm infrastructure =
the systems of planning, finance, quality control and mgmt - crucially important to org’s strategic capability in ALL primary activities.
Porter: HR mgmt =
Recruiting, training, developing and rewarding people.
Porter: Tech dev =
Apparatus, techniques and work organisation. Related to both product design & improving processes and/or resource utilisation.
Porter: procurement
Activities which acquire the resource inputs to the primary activities e.g. purchase of materials, subcomponents, equipment.
Describe components & shape of Porter’s value chain
Primary activities vertical at the bottom
Support activities at the top horizontal across primary
Arrow = margin (aim is profit).
Porter: a company’s value chain is connected to… + why
Value system - value doesn’t stop at org’s boundaries e.g. quality of your inputs produced by another org also determines value.
2 ways an org can operate its value chain
- Huge volumes @ min cost = high volume, low margin
2. Max value - low volume, high margins.
Briefly describe what value system diagram looks like (4 components)
Multiple supplier value chains –> org’s value chain –> distributor/retailer value chain –> customer value chain
How can an org create competitive adv wrt value chain?
It can manage it own value chain AND manage linkages with its suppliers and customers and make them more efficient.
Process =
a bounded set of activities that are undertaken in response to some event in order to generate an output.
Process design is concerned with…
understanding the activities that are undertaken in a business process with the aim of enhancing efficiency and effectiveness.
5 reasons an org may seek to improve their processes
- Reduce costs (esp. if econ downturn)
- Provide scalable platform for expanding prod or entering new markets
- Offer better products to be more competitive
- Exploit ops offered by tech e.g. cheaper comms
- Execute new strategic direction
Process design is closely linked to…
the design of new products and service.
What should an org do before looking to change its processes?
Understand how existing processes work = create process map
Process map =
visual representation of the steps involved in creating a product, delivering a service or performing a business operation.
Process map example: purchasing new machinery: step 1
Get board approval to put out a tender - provide compelling BC
Process map example: purchasing new machinery: step 2
Notify and invite potentially interest suppliers
Process map example: purchasing new machinery: step 3
Review tenders submitted from suppliers and eliminate unsuitable ones.
Process map example: purchasing new machinery: step 4
Invite selected suppliers to give a presentation show casing the benefits of their machinery.
Process map example: purchasing new machinery: step 5
Select best supplier offering taking into account cost and other factors.
5 pros of process maps
- enhanced understanding of main steps of process from beginning to end
- role understand: mgrs understand how to make best use of workers by allocating to specific tasks
- Opportunities: highlight areas for streamlining/standardising
- Identify inefficiencies e.g. duplications
- Support org schemes e.g. specific corporate objs such as enhancing the process for managing customer interactions.
Product & service development: stage 1
Consider customer needs - must meet needs ito quality, design and value.
Product & service development: stage 2
concept screening = idea of product/service vetted against certain criteria before progressing to design & dev.
Product & service development: stage 3
Design = build prototypes and ensure all components and features add value to the customer = value engineering
Product & service development: stage 4
Time to market = time to get final design ready. Short time to market = product might be released before competitors & means lower dev costs.
Product & service development: stage 5
Product testing = ensure product works as intended and that customers like it.
How can finance support the purchasing (procurement) operations teams: credit terms
Finance can liaise between purchasing and suppliers to help negotiate favourable credit terms.
How can finance support the purchasing (procurement) operations teams: price
Support profit margins by advising on maximum prices that should be paid.
How can finance support the purchasing (procurement) operations teams: payment
Purchasing approves payments to suppliers but finance actually processes them.
How can finance support the purchasing (procurement) operations teams: data capture
Data such as supplier and order details originally captured by purchasing –> passed onto finance
How can finance support the purchasing (procurement) operations teams: inventory
Liaise over inventory levels. Finance let purchasing know how many units are in stock so purchasing can order the right amount to fulfil an order.
How can finance support the purchasing (procurement) operations teams: budgets
Finance discuss costs when preparing budgets.
How can finance support the production (operations) team: cost measurement, allocation & absorption
Production measures quantities of materials and labour time in products. Finance team use this to calc monetary value of the cost (MC). This is then allocated and absorbed into production costs.
How can finance support the production (operations) team: budgets
Production determines level of output, finance calcs overall cost and incorporates into overall budget.
How can finance support the production (operations) team: cost and quality
Discuss product features and which materials to use. Agreement over level of quality required in raw materials and whether extra quality justifies cost.
How can finance support the production (operations) team: inventory
Discuss inventory levels to ensure sufficient materials for production that is planned.
4 main characteristics of services
- Intangibility
- Inseparability
- Perishability
- Variability
Service characteristic: what does intangibility mean?
Few, if any physical aspects to services which are activities performed by an org for the customer.
Service characteristic: what does inseparability mean?
Services consumed by consumer as they are created by the org = cannot distinguish service from the employee or bis performing it.
Service characteristic: what does perishability mean?
A service cannot be stored or saved to consume later.
Service characteristic: what does variability mean?
Services are unique and cannot be performed exactly the same way every time = difficult to truly standardise.
Finance link with service provision: charge out rates
Hourly rate charged to client for the service. Sufficient to cover employee salary plus other overheads and profit. Finance team helps determine suitable rate that’s not too high to put the consumer off.
Finance link with service provision: cost estimates
estimate level of overheads to include in the service charge and manage situations where costs increase due to service taking longer than expected to perform, making the cost too much to pass onto customer.
Finance link with service provision: measuring benefit
Market conditions may restrict charge out rate = lower profit margin. Finance can determine level of other intangible benefits of keeping customer happy and keeping repeat business therefore justifying continuing service provision.
Supply chain mgmt =
concerned with the flow of goods and services through the supply chain. Ultimately, goal = contribute to customer satisfaction (not necessarily decrease cost).
What does it mean for an org to be downstream of another org?
If the org is closer to the customer than another org.
What does it mean for an org to be upstream of another org?
If the org is further away from the customer than another org.
Supply chains must be…(2)
- Responsive
2. Reliable
What can facilitate integration between an org and upstream and downstream members of the supply chain?
Integrated info systems
Finance can play an important role in effective supply chain mgmt through…
business partnering
Supply chain networks =
interconnecting groups of orgs which relate to each other through linkages between the different processes and activities involved in producing products/services to the ultimate consumer.
How do traditional supply chains operate? How was this maintained?
Independently - maintained through holding buffer stocks & managing lead times.
Business motivation for more integrated supply chain networks
Market & competitive demands compressed lead times and reduced inventories and excess capacity = need to work more closely within supply network.
Integrated supply chains means the chain should be considered as a… not a…
As a NETWORK, NOT a PIPELINE. A network of vendors supporting a network of customers with 3rd parties such as transport businesses helping link them.
Arrows between orgs on traditional supply chain diagram vs integrated
Tradition: arrow between each stage & feedback
Integrated: one big arrow from first supplier to ultimate consumer (+feedback)
Implication of integrated supply chains for price & inventory
Businesses coordinate price so everyone gets fair share of profit+ coord inventory policies to avoid problems and bottlenecks caused by SR demand surges such as promotions.
Implication of integrated supply chains for computer systems
Linked systems e.g. through EDI which allows paperless comms, billing and payment.s
Implication of integrated supply chains for prod dev & component design
Suppliers get involved earlier
Implication of integrated supply chains for logistics design
Distribution systems might be restructured to allow certain product components to be added at dist factories rather than central factories (e.g. user manuals for products)
The BC for integrated supply chain mgmt is…
benefit to all participants ito performance objs, speed, dependability and cost.
What research did Cousins conduct?
He conducted a 12-month research project to investigate the level of strategic maturity in the purchasing function of UK/European companies.
What’s in the centre of Cousins’ strategic supply wheel?
Corporate and supply strategy
5 aspects in Cousin’s strategic supply wheel.
- Org structure: (de) vs centralised control
- Perf measures
- Skills & competencies (negotiation skills)
- Cost/ben analysis - intangible + tangible
- Portfolio of relationships
Portfolio of relationships AKA
Partnership sourcing
State 2 types of potential relationships with suppliers (Cousins) (both have 2 diff names each)
- Adversarial/contractual
2. Collaborative/relational
Adversarial/contractual supplier relationship =
Traditional: low levels cooperation, suppliers selected on basis of price and the threat of buyer power. supplier expected to comply with terms of contract (quantity, quality, price, delivery schedules).
Collaborative/relational supplier relationship =
Contemporary: high levels coop, work together to meet market needs.
Demand networks are a solution to what problem?
The problem of how much of which product/service to produce - producing too much or too little = operationally inefficient because of wastage/selling at a loss or missing out on sales & so profit.
What does a demand network mean?
Products are ‘pulled’ into existence in response to demand signals. Orgs within a demand network share info and collaborate to produce a product/service which consumers are demanding.
To create comp adv, orgs within a demand network have to manage what 3 factors?
- Alignment - of share incentives
- Agility - to respond quickly to demand
- Adaptability - to adjust structure of supply chain to meet demand.
How can supply portfolios increase production efficiency?
By ensuring the flow of raw materials, of suitable quality, are always available when needed in production.
5 factors that an org chooses suppliers based on / why chooses > 1 supplier
- quality
- price
- > 1 location to reduce risk e.g. of adverse weather
- different sizes so match order size to supplier
- Varying expertise between suppliers = build relationships with multiple to help buyer make informed choices.
Single supply strategy =
Buyer chooses 1 source of supply.
Multiple supply strategy =
Buyer chooses several sources of supply.
Delegated supply strategy =
Supplier given complete responsibility for the delivery of a complete sub-assembly. Choose a single ‘first tier’ supplier rather than dealing with multiple. e.g. computer manufacturer outsources production of keyboards to a single specialist supplier.
Parallel supply strategy =
Combine the 3 other approaches to maximise the benefits of each.
what is benchmarking?
A tool to improve efficiency of production and delivery by analysing performance compared with a similar activity elsewhere. Can help identify inefficient processes.
Adversarial vs Relational supplier relationships: how do they differ by how they view procurement function?
Adversarial: procurement = administrative function
Relational: procurement = strategically important function
Material Requirements Planning (MRP I) =
a technique for deciding the volume and timing of materials in manufacturing conditions where there is dependent demand.
When is MRP I NOT appropriate?
If sales cannot be forecasted.
2 purposes of MRP I
- Calc quantity of materials required for each type of material
- Determine when they’re requried.
How does MRP I enable manufacturing org’s to determine when to order materials?
By working backwards from when they will be required for production & allowing necessary lead time for production or purchasing from external supplier.
3 pros of MRP I system
- reduce inventory while meeting orders
- identify and warn of problems/bottlenecks
- helps with forging close supplier relationships.
MRP II system =
Evolved out of MRP I. A plan for planning and monitoring all the resources of a manufacturing company: manufacturing, marketing, finance & engineering. E.g. when to market? is money in bank to pay suppliers?
MRP I vs MRP II
II involves all resources of a manufacturing company, not just inputs for manufacturing - looks at org’s other functions and their inputs and processes.
What is MRP II physically?
A computerised system that incorporates a single database used by many different areas of the org. All use same version of the bill of materials - engineering, manufacturing & finance all work from a common set of data.
MRP II is sophisticated in what sense?
It enables optimal inventory control based on matching of supply and demand.
Optimised production technology (OPT) =
computer-based method for scheduling production that focuses on known capacity constraints (bottlenecks) of the operation.
Define bottleneck
One process in a chain holding up the entire system.
4 stages of OPT
- identify capacity constraints in system
- schedule production to these constraints
- identify ways of overcoming constraints to increase capacity
- then identify next capacity constraint & schedule production to that constraint
Enterprise resource planning developed out of…
MRP II
What is ERP and how does it differ to MRP II?
ERP performs a similar function to MRP II but on a wider basis, integrating and using databases from all parts of org.
MRP II = engineering, manu, finance & marketing only.
Which key elements of the supply chain does ERP software manage?
- production planning
- purchasing
- inventory control
- customer service incl. order tracking
Quality assurance =
focuses on the way a product/service is produced. Procedures and standards devised with the aim of ensuring defects are eliminated (or at least min) during dev/prod process.
Quality control =
Checking and reviewing work that has been done. Narrower focus than quality assurance.
Historically, did quality refer to quality assurance or control?
control
What type of approach is quality control?
Inspection approach - establish standards, sample output by inspection or test, take corrective action.
What’s the problem with quality control?
It allows for built in waste - it’s retrospective.
The modern approach to quality is…
to assure quality in production processes rather than inspecting goods once they’re made.
What does quality assurance mean for supplier relationships?
Supplier guarantees quality = need a close relationship, which may extend to allowing customer representatives to view/monitor production processes.
what’s the logic behind quality assurance?
If processes and procedures are tightly controlled and monitored, the resulting product/service will be high quality - quality has been built in = no (or less) need for inspection after it’s produced.
What did Deming say on quality?
- Managers should prompt continual improvement
- managers should seek feedback from workers
- Workers should be trained on what needs changing and how
What did Juran say on quality?
Pareto principle - 85% quality issues due to system weaknesses not humans.
- focus on system improvements not employee motivation
- customer should be focus of quality - whether external or internal customer.
What did Crosby say on quality?
- ZERO DEFECTS
- prevention is key - cost of preventing < cost of fixing
- workers should be involved in quality projects & should be motivated to do something about quality.
Quality planning and mgmt =
activities that aim to ensure products/services are fit for purpose and meet specifications. Encompasses quality control + assurance.
Quality planning and mgmt: stage 1
Plan - establish quality standards, procedures or production methods that will ensure the desired quality is met.
Quality planning and mgmt: stage 2
Devise: devise suitable instruments & techniques to monitor actual quality.
Quality planning and mgmt: stage 3
Compare: actual vs planned quality using quality measures. Quality circles suggest how to improve products and processes.
Define quality circles
Employees from all parts of org meet regularly to discuss quality issues.
Quality planning and mgmt: stage 4
Control - take corrective action when actual < planned quality.
Quality planning and mgmt: stage 5
Review - review the plan and standards to ensure continuous improvement.
Statistical process control =
the application of statistics to quality control.
What is the aim of Statistical process control? When can it be applied?
Ensure that a finished product conforms to an ‘ideal standard’ and can be used where any deviation from the standard can be measured statistically.
Process variability refers to…
the amount of unpredictability in a process.
How does process variability relate to quality and productivity?
Lower process variability –> higher quality & productivity.
Six Sigma aim + principle =
A process designed to help orgs focus on developing and delivering near-perfect products/services. The aim is to reduce the number of faults in a product below an accepted tolerance limit.
What does sigma in six sigma stand for?
Standard deviation = statistical measure of variation in output.
What does a score of 6 x Sigma mean?
99.999% of manufactured items are within specification = only 3.4 defects per million.
What does a score of 3 x Sigma mean?
93.32% specification compliance = 67,000 defects per million.
Therefore: how does quality vary with sigma score?
Higher sigma score = fewer defects per million.
What company developed six sigma and when?
Motorola in 1980s
Six sigma ensures the progressive elimination of defects by…(3)
- Identifying root cause of error
- Confirming critical root causes
- Implementing corrective action
How can six sigma improve profits?
Min defects = improve customer satisfaction = more profit.
What’s a key adv of 6 sigma?
It can be implemented alongside other quality initiatives like TQM.
How does 6 sigma differ to TQM?
It’s customer focused rather than operations oriented. It looks at strategically critical outcomes that affect customer satsifcation.
Total quality mgmt (TQM) =
the continuous improvement in quality, productivity and effectiveness obtained by establishing mgmt responsibility for processes as well as output.
TQM principle 1: prevention
orgs should take measures to prevent poor quality happening in the first place.
TQM principle 2: right first time
culture should be developed that encourages workers to get it right first time.
TQM principle 3: eliminate waste
org should seek most efficient and effective use of all its resources.
TQM principle 4: continuous improvement
Improve processes continually
TQM principle 5: everyone’s concern
everyone in org responsible for improving processes and systems under their control. Also commitment to quality from senior mgmt.
TQM principle 6: particiaption
all workers encouraged to share their views and org should value them.
TQM principle 7: teamwork & empowerment
workers across all departments should form team bonds so the org eventually becomes one.
TQM promotes the concept of…
The internal customer and internal supplier: work done by internal supplier for internal customer will eventually affect quality to external customer - they are linked in quality chains. So view internal customer same as external.
State 4 practical aspects of TQM if the approach is to succeed.
- Internal SLAs
- Quality culture
- empowerment
- Quality costs
Practical aspect of TQM: Internal SLAs
SLA = statement or standard of service and supply provided to internal customer to cover range of services supplied, response times and dependability.
Practical aspect of TQM: quality culture
employees should not just comply with perf standards and procedures, but be proactive in improving their perf and perf of others.
Practical aspect of TQM: what 2 key aspects does empowerment include?
- Allowing employees freedom to decide how to do necessary work using their skills and acquiring new skills
- making employees responsible for achieving production targets and for quality control.
Practical aspect of TQM: State the 4 types of quality costs
- Prevention costs
- Appraisal costs
- Internal failure costs
- External failure costs
Practical aspect of TQM: What 2 categories can the 4 types of quality costs be broken into?
Prevention + appraisal = conformance costs
Internal + external failure = non-conformance costs
TQM target for how many defects?
ZERO - shouldn’t accept inevitability of errors, failure and poor quality are unacceptable.
Practical aspect of TQM: Prevention costs =
Costs of designing in quality, quality training for workers, equipment testing for conformance to quality standards.
Practical aspect of TQM: Appraisal costs =
Costs of inspecting final goods or raw materials received.
Practical aspect of TQM: Internal failure costs =
Costs of scrapping and re-working poor quality work or selling sub-standard goods @ lower price.
Practical aspect of TQM: External failure costs =
Cost of recalling poor quality goods and lost customer goodwill.
TQM: Relative size of conformance and non-conformance costs.
Conformance costs < non-conformance costs therefore better to pay for preventing poor quality than not do anything and pay for its consequences.
TQM: Relative size of internal and external failure costs.
Internal < external failure costs.
Is it better to spend money on prevention or appraisal costs?
Prevention - better to prevent poor quality than spend money on inspection.
Kaizen AKA =
AKA continuous improvement
quality mgmt is not a one-off process but the continuous examination and improvement of processes.
What is the Kaizen approach?
Uninterrupted incremental change - improve every aspect of bis in step by step approach , while gradually developing employee skills through education, training and increased involvement.
Kaizen: gradual improvement or radical change?
Gradual improvement
How does Kaizen consider people?
Most important org asset
Kaizen: improvement should be based on…
statistical/quantitative evaluation of process performance.
Kaizen: must align…
Resources, measurements, rewards and incentives.
Kaizen enables what 2 things to be accounted for/introduced?
- Account for changing customer needs
2. Introduce new tech
Kaizen Tools: The 5 why process
Identify root cause of a problem by encourage employees to ask why to generate a symptom. This creates issues and questions & the process repeats until a reason is discovered (often after 5 why’s)
Kaizen Tools: Fishbone diagrams
Cause and effect diagrams to analyse all causes (or inputs) that result in a single effect (or output). A map in the form of a fishbone is created & route of continuous improvement drawn. Potential problems splinter off from the path.
Kaizen Tools: Plan-do-check-act (PDCA)
Encourages continuous improvement
Plan the process, execute the process, check the outcome, act on feedback to improve the process.
Kaizen Tools: Pareto analysis (80/20 rule)
80% of an outcome is dependent on 20% of the work (inputs or processes). Or 20% of output accounts for 80% of overall rev/value. For quality, means org focus on important 20% of factors that make up 80% of quality = most benefit from min input.
A key reason why continuous improvement and other quality initiatives may fail is the failure to…
consider the necessary changes to employee behaviour that are required. Not only systems and processes need to change, also mindsets and collective knowledge of workforce.
Lean thinking: 2 AKAs
Lean thinking AKA lean production AKA lean process improvement.
What does lean thinking involve?
The systematic elimination of waste
7 examples of waste lean thinking aims to eliminate
- Overproduction & early production
- Waiting - time delays, idle time, any time value not added
- Transportation - multiple handling, delays
- Inventory - holding too much
- Motion - actions of people/equip that do not add value
- Over-processing - unnecessary steps (non value adding)
- Defective units - scrapped or requires rework
The 2 guiding tenets of lean thinking are…
- Continuous improvement
2. respect for people
Lean synchronisation =
application of many operational techniques and ideas aimed at delivering right quantity of right product at right time in right location for right price. Many techniques studied above could apply.
An org’s choice of mix of techniques for lean synchronisation depends on…(3)
- culture & nature of org
- Industry
- strategy of org
3 barriers to lean synchronisation
- Failure to eliminate waste
- Failure to involve all relevant people
- Failure to adopt principle of continuous improvement - is a gradual process over time.
Just in time system =
org produces and/or purchases goods and materials as they are required by customer or production process. Aim = min number of products or materials in inventory.
JIT purchasing =
only purchase raw materials when required to fulfil a customer order.
JIT production =
driven by demand, components and finished goods ‘pulled’ into existence by customer demand or when required by next stage of production process.
5 requirements for JIT system
- Quality & reliability - right first time.
- Eliminate non-value add activities (storing inventory)
- Throughput speed: rate of prod synchronised with customer demand. Focus on short production runs that produce low stocks of products.
- Flexibility - easily switch between products
- Focus on reducing cost - increase quality, reduce waste, min inventory, increase throughput speed.
JIT system requirements: quality & reliability require…(3)
developing highly skilled staff, maintaining equipment properly and establishing LR links with suppliers.
JIT system requirements: flexibility requires…(2)
employees to have wide range of skills & empowered to deal with problems as they arise.
What country do the 5Ss come from?
Japan
What’s the overriding idea behind the 5S’s?
‘There is a place for everything and everything goes in its place’ - discipline, pride, standardisation and repeatability are critical to efficiency.
The 5S’s are often associated with what other quality principle?
Lean production
5S’s: Seiri or Structurise
Segregate or discard. Introduce order where possible.
5S’s: Selton or Systemise
Arrange and identify for ease of use. Approach tasks systematically.
5S’s: Seiso or Sanitise
Clean daily, be tidy, avoid clutter (e.g. clean desk policies).
5S’s: Seiketsu or Standardise
Revisit each S frequently. Be consistent in approach.
5S’s: Shitsuke or Self-discipline
Sustain via motivation. Do the above daily.
Reverse logistics is the process of…
Receiving products back from the customer. Return of faulty or unwanted goods (manu recall, warranty claims, installation/usage problems, e-commerce customers returning goods according to returns policy) + return of used products + unsold stock from retailers.
Where possible, what should an org try to do with returned goods?
recycle into new products, refurbish, sell again or dispose of appropriately.
What system can support reverse logistics?
Enterprise resource planning (ERP) systems.
3 options for org on how to structure reverse logistics function
- Create profit centre to max income from returns & use best tech
- Centralise returns centre
- Outsource returns process
What 2 aspects of logistics should an org separate?
Forward & reverse logistics.
4 ways finance can assist operations ito assembling info
- mgmt accounts
- establish KPIs
- Monitor perf of supply chains
- Process data into KPI info and report
4 ways finance can assist operations ito analysis for insight
- Analyse KPIs & other info to identify patterns & causes behind mgmt account variances
- Break KPIs into diff perf measures to identify causes
- Quality and ops process improvements.
3 ways finance can assist operations ito advising to influence
- reporting for decision makers
- effective comms of insights
- objective overview of perf and develop solutions for ops issues
4 ways finance can assist operations ito applying for impact
- Appling info to harness value for ops
- Strategic plans & budgets to guide future direction
- Control systems to manage bis and ops risks
- Deploy other solutions such as op strategies and new KPIs
State some of 7 general KPIs for ops
- cost of quality
- number of customer orders fulfilled
- warehouse costs
- transportation costs
- supply chain costs per unit sold
- asset / labour util rate
- queues and waiting times
KPI: Operating expense ratio (OPEX) =
OPEX in period t / Sales rev period t x 100
Ability to manage costs in relation to rev. Aim for OPEX to decrease.
KPI: capacity utilisation rate
acutal capacity period t / possible capacity period t * 100
Is org working to full potential?
KPI: Process downtime level
Actual productive time of process / planned productive time of process x 100.
High level downtime = time wasted due to breakages etc.
KPI: Machine downtime level
Actual productive time of machine / planned productive time of machine x 100.
KPI: order fulfilment cycle time
Source cycle time + make cycle time + delivery cycle time. Total time from customer order to delivery.
KPI: inventory shrinkage rate
(recorded inventory level - actual inventory level) / recorded. % inventory lost between when produced and sold. High rate = wastage of inventory, theft, perishable goods thrown out.
KPI: rework level
number or % items produced requiring rework.
