B6: Process and Project Mgmt, Globalization, Financial Risk Mgmt, Decisions, and Valuation Flashcards
Business Process Management (BPM)
Process Management
mgmt approach that seeks to coordinate the functions of an org toward an ultimate goal of continuous improvement in customer satisfaction
- customers are both internal and external
- seeks effectiveness and efficiency through promotion of innovation, flexibility, and integration w technology
BPM Activities
Process Management
grouped in 5 categories:
- Design
- ID existing processes and conceptual design of how they should function in improved - Modeling
- introduces variables to the conceptual design for what if analysis - Execution
- design changes are implemented
- key indicators of success are developed - Monitoring
- info is gathered and tracked and compared to expected performance - Optimization
- using the monitoring data and original design, process manager continues to refine the process from step 1
BPM Techniques
Process Management
Define
- define the original process as a baseline for current process functioning or process improvement
Measure
- determine indicators that will show a change to the process
Analyze
- w various simulations or models
Improve
- improvement is selected and implemented
Control
- monitor the improvement and apply the data to the model for improvement
Process Management commonly referred to as “PDCA”
- Plan
- Do
- Check
- Act
Measures
Process Management
Gross Revenue
- financial
- appropriate in sales driven orgs
Customer Contacts
- leads
- non financial
- can be used in sales driven orgs
Customer Satisfaction
- complaints
- non financial
- relationship marketing techniques
Operational Statistics
- time
- non financial
- manufacturing operations may use
Benefits
Process Management
Efficiency
- fewer resources used
Effectiveness
- greater predictability
Agility
- responses to change are faster and more reliable
Shared Services
Process Management
seeking out redundant services, combining them, and then sharing those services w/i a group or organization
- shared w/i an org or group of affiliates
Implications for Business Risks and Controls
- creates efficiency (+) but might..
a) Service Flow Disruption
b) Failure Demand
Outsourcing
Process Management
contracting of services to an external provider
- contractual relationship b/w business and its service provider
can provide efficiencies (+), but risks are:
- Quality Risk: single product or service might be defective
- Quality of Service: their quality of work isnt good
- Productivity: may be reduced
- Turnover: experienced and valued staff may leave the org
- Language Skills
- Security: give outsource ppl access to sensitive info
- Qualifications of Outsourcers: credential of service providers may be flawed
- Labor Insecurity: now w new service, employees may feel like their jobs are at risk
Offshore Operations
Process Management
outsourcing to an external party in a different country
most common types are:
- information technology
- business process (call centers, accounting operations, tax compliance, etc)
- software research and development
- knowledge process
Risks
- lack of controls associated w proximity
- potential language issues
Selecting and Implementing Improvement Initiatives
Process Management
Selecting Improvement Initiatives, 2 Methods
- Irrational
- intuitive and/or emotional - Rational
- structured and systematic
- involves:
a. Strategic Gap Analysis- external (environmental) vs internal (organizational)
b. Review Competitive Priorities
c. Review Production Objectives
d. Choose Improvement Program
Implementing Improvement Initiatives
- several crucial features of successful implementation activities:
a. Internal Leadership- senior mgmt must provide direction and commit resources to the implementation
b. Inspections- monitor and measure
c. Executive Support- executive mgmt must be supportive
d. Internal Process Ownership- ppl involved w process mgmt must be committed to the need for the improvement and have the resources to carry it out (accountability)
Business Process Reengineering (BPR)
Process Management
techniques to dramatically improve customer satisfaction and service, cut costs, and enhance competitiveness
- BPM seeks incremental change, BPR seeks radical changes
Concepts
- Fresh Start: mgmt wipes the slate clean and reassess from the ground up
- reengineering uses benchmarking and best practices to evaluate success - Current Status: reengineering is not as popular as when it was introduced in mid 1990s
- criticized for overaggressive downsizing
- benefits not as anticipated
Performance Improvement
seek to provide the highest-quality goods and services in the most efficient and effective manner possible
Just-in-Time (JIT)
Performance Improvement
Process Management
scheduling the deployment of resources just-in-time to meet customer or production requirements
Inventory Does Not Add Value
- produces wasteful costs
- underlying concept
Benefits
- reduce costs, improve quality
- schedule w demand (pull process)
- necessary coordination and team approach w suppliers
- efficient flow of goods b/w warehouse and production
- reduced set up time
- greater efficiency in use of employees (bc not working in warehouse for inventory)
Quality
Performance Improvement
Process Management
“APIE” (appraisal, prevention, internal, external)
- product’s ability to meet or exceed customer expectations
- Costs of Quality
- conformance w quality standards and
- correcting nonconformance w quality standards
- “prevention and cure” - Conformance Costs
a) Prevention Costs
- prevent production of defective units
b) Appraisal Costs
- discover and remove defective parts before they are shipped to customer or next department - Nonconformance Costs
- difficult to compute bc most are in the form of opportunity costs
a) Internal Failure
- cure a defect before product is sent to customer
- appraisal is more within the process, internal is more like right before putting it in the box
b) External Failure
- cure a defect discovered after product is sent to customer
Quality Control Principles- Total Quality Mgmt (TQM)
Performance Improvement
Process Management
represents an organization commitment to customer focused performance that emphasizes both quality and continuous improvement
7 critical factors:
- Customer Focus
- each function of the corp exists to satisfy the customer
- external customer: ultimate consumer
- internal customer: each link in the value chain - Continuous Improvement
- quality is not just the goal’ it is embedded in the process - Workforce Involvement- Quality Circles
- team approaches and worker input to process development and improvement - Top Mgmt Support- Delegation and Empowerment
- top mgmt must actively describe and demonstrate support for the quality mission of the org - Objective Measures
- measures of quality must be unambiguous, clearly communicated, and consistently reported - Timely Recognition
- acknowledgment of TQM achievements - Ongoing Training
- should occur on recurring basis to ensure workforce understands and is involved
Quality Audits and Gap Analysis
Performance Improvement
Process Management
Quality Audits
- mgmt assesses quality practices of the org
- identifies strengths and weaknesses
- like an internal audit
Gap Analysis
- determines the gap or difference b/w industry best practices and current practices of the org
- produces target areas for improvement
Lean Manufacturing
Performance Improvement
Process Management
requires use of only those resources required to meet the requirements of customers
- seeks to invest resources only in value-added activities
Waste Reduction
- not quality focus, focus on reduction and efficiency
Kaizen
- continuous improvement efforts that improve the efficiency and effectiveness of organizations through greater operational control
- ensure that resource usage stays w/i target costs
- occurs during mfg stage
Activity-Based Management
- activity based costing (ABC) and ABM are highly compatible w process improvements and total quality mgmt (TQM)
- highlight the costs of activities
- makes identification of cost of quality and value-added activities more obvious
- ABC and ABM programs are more likely to have the info they need to implement a TQM program
- B6-12
Demand Flow
Performance Improvement
Process Management
manages resources using customer demand as basis for resource allocation
- in contrast w resource allocation based on sales forecasts or master scheduling
- akin to JIT that focus on the efficient coordination of demand for goods in production with the supply of goods in production
- kanban systems, which visually coordinate demand requirements on the manufacturing floor w supplier, are techniques used to coordinate demand flow
- designed to maximize efficiencies and reduce waste
- one piece flow manufacturing environments, in which components move progressively from production function to production function, benefit from demand flow ideas
Theory of Constraints (TOC)
Performance Improvement
Process Management
states that orgs are impeded from achieving objectives by the existence of one or more constraints
- either works around or leverages the constraints
- concerned w maximizing throughput by identifying and alleviating constraints
Contraints
a) Internal Constraints: when market demands more than the system can produce
b) External Constraints: when system produces more than the market requires
5 Steps
- Identification of the Constraint
- use of process charts or interviews IDs constraint that produces suboptimal performance - Exploitation of the Constraint
- planning around the constraint uses capacity that is potentially wasted - Subordinate Everything Else to the Above Decisions
- mgmt directs its efforts to improving the constraint - Elevate the Constraint
- add capacity to overcome the constraint - Return to the First Step
- reexamine the process to optimize the results
Buffer
- managers add buffers before and after each constraint to ensure that enough resources to accommodate the constraint exist
- buffers eliminate the effect of the constraint on work flow
Six Sigma
Performance Improvement
Process Management
anticipates the use of rigorous metrics in the evaluation of goal achievement
- a continuous quality-improvement program that requires specialized training
- expands on the PDCA model and outlines methods to improve current processes and develop new processes
- Existing Product and Business Process Improvements “DMAIC”
- Define the Problem
- Measure Key Aspects of the Current Process
- Analyze Data
- Improve or Optimize Current Processes
- Control - New Product or Business Process Development “DMADV”
- Define Design Goals
- Measure CTQ (critical to quality issues): features that provide value to the customer and the production capabilities that are available
- Analyze Design Alternatives
- Design : use modeling techniques
- Verify the Design: implement and test
Operations Management
Project Management
ongoing production of goods and services and ensuring that a company’s operations function efficiently by using optimal resources necessary to meet the sales demand of its customers
Project
Project Management
temporary undertaking intended to produce a unique service, product, or result
- has a definite beginning and end
- project is terminated when: objective has been achieved, determined obj cant be met, or when mgmt determines completion is no longer necessary
Project Management
Project Management
consists of 5 major processes carried out by a project manager tasked w balancing the needs and expectations of various stakeholders against the organizations constraints
- Initiating
- Planning
- Executing
- Monitoring and controlling
- Closing
Initiating
Step 1
Project Management
project scope is defined, project is authorized, and the initial financial resources are committed
- project charter is a document that contains a business justification to fulfill the needs of initial stakeholders by carrying out a statement of work that will achieve the project objectives
- stakeholders: positively or negatively affected by the project
- statement of work: describes the product or services the project must deliver at completion
Planning
Step 2
Project Management
involves all activities necessary to further detail the scope of the project, refine the project objectives, and define the course of action required to attain the project objectives
- ongoing process, could be altered
includes
- initial project mgmt plan
- define stakeholders’ requirements
- define scope of the project
- breakdown small, manageable tasks
- present activities in an activity list: order activities must be performed
- sequence the activities: dependent activities and independent
- estimate the activity resources
- duration of activities
- schedule of activities based on availability of resources, the event sequence, and amt of time to complete
- estimate costs of activities to develop a budget
- define what a quality outcome is or define the standard of quality
- identify project roles, responsibilities, skills, and reporting relationships
- identify needs of stakeholders and develop a communication approach
- risk management
- develop options if risks manifest
- acquire the needed equipment and supplies
Executing
Step 3
Project Management
activities associated w completing the work that has been specified in the project plan and producing the deliverables
- assure quality
- B6-17
Monitoring and Controlling
Step 4
Project Management
procedures to observe a project execution so that potential problems can be identified in a timely manner and corrective action can be taken to ensure the completion of the project
includes
- reviewing where the project is against the baseline defined in the plan
- actual vs plan comparisons
- status reports
- identify the need for any changes
- verify the scope
- control the scope
- control the schedule
- control the costs: use budget
- control procurement
- perform quality control
- distribute performance information
- implement a risk response plan
- manage vendor relationships
Closing
Step 5
Project Management
verifies that all defined project phases are complete, closes the project, and closes all procurement relationships
- project mgmt process summarized by statement: an authorized project plan is initiated, executed, monitored, and controlled, and eventually ends when the objectives have been completed
Project Manager
Project Management
responsible for project administration on a day-to-day basis
- achieve project objectives while balancing project constraints of budget, time, and resources
- ID and manage internal and external stakeholder expectations
- develop the project plan, implementing, monitoring and control, and closing the project
- ID and procure the project team members, resolve conflicts, and provide feedback
- break the project down into smaller manageable tasks and assign/delegate them
- communicate project metrics to stakeholders and team members
Project Members
Project Management
perform the project tasks
Project Sponsor
Project Management
responsible for providing resources and support to the project as well as enabling the success of the project
- responsible for overall project delivery
- supports project manager
- chair the steering committee
- champion the project to upper mgmt
- remove obstacles
- sign off and approve
- review the project
- interface b/w org and project
- communicate project needs to steering committee
Executive Steering Committee
Project Management
is to a project what the BoD is to a company
- direct but do not manage
- group of executive lvl ppl or external orgs that oversee the project
- represent all significant areas of participation
includes
- B6-20
Project Risk
Project Management
uncertain condition or event that could have negative (or +) effect on one or several project objectives
- distinction b/w individual project risks and overall project risk
Planning for Risk Mgmt
a) Risk Assessment
- anticipate everything that could go wrong
- specify how those uncertainties can affect the performance
- prioritize risks that must be eliminated completely (severe risk), regular mgmt attention to significant risks, and risks immaterial to project
b) Risk Control
- spend money in advance to mitigate or prevent most severe risks
- plan for emergencies
- track effects of identified risk in a risk register
Inputs Used for Planning for Risk
- risk mgmt plan
- cost mgmt plan
- schedule mgmt plan
- risk register
- environmental factors
- organizational process assets: learn from previous projects
Human Resources (Communication) Management
Project Management
HR plan: staff to work on the project, assign each team member responsibility for tasks, acquire staff both internally and externally, and develop team members by providing feedback and guidance so team collaborates effectively
Influence on the HR Plan
- org culture
- existing staff lvls
- conditions of the market
- establishing communication channels
- industry regulation/current laws
- sources of additional staff
Tools to Enhance Communication and Success in HR Plan
- hierarchical charts
- a matrix
- text-oriented narrative description
- staffing mgmt plan
- training and team building
- recognition and rewards
Conflict Resolution Strategies
- retreat from conflict
- focus on areas of agreement and ignore areas of disagreement
- compromise
- win-lose solution by leveraging authority
- solve the problem w discussion
Plan for Things to Go Wrong and Identify an Appropriate Response
Scope
Project Management
the challenge in managing scope is to include all he work required to complete a project and nothing else
Scope Mgmt
- product scope must define the attributes of the product, service, or result
- project scope defines work that must take place to produce the product, service, or result defined in the product scope
- scope baseline: formal written approval of the project scope and work breakdown structure (WBS), outlining both the end product (product scope) and the project scope
Project Scope Mgmt Process
- make scope mgmt plan
- collect and document project requirements
- define the scope
- create a work breakdown structure
- validate the scope
- monitor and control
Relevant Documents
- Requirements Documentation: written doc describing project requirements from all stakeholders
- Requirements Mgmt Plan: documents how requirements will be analyzed, documented, and managed, tracked, and reported
- also describes how changes will be approved and processed
Time Management
Project Management
plays a critical role in completing a project w/i time constraints outlined in the project budget and to potentially avoid cost overruns
Cost Management
Project Management
Cost Baseline
- cumulative amt of money that is expected to be spent on a project
Project Funding Requirements
- specify the total funding requirements and periodic funding requirements based on the cost baseline
Project Cost Mgmt Process
- planning for cost mgmt
- estimating the costs necessary for the project
- determining the budget
- controlling project costs
Cost Estimation Methods
- Judgement: mgrs consider a combo of historical info and cost of materials and labor
- Parametric Estimating: relies on statistical relationship b/w historical cost and other variables
- Analogous Estimating: cost of similar sized previous project used to approximate cost
- Work Breakdown Structure Estimation (WBS): bottom-up analysis bc each activity is estimated and then costs of each are aggregated
- Three Point Estimates: cost estimates based on most-likely assumption
a) optimistic assumption: reflects best case scenario
b) pessimistic assumption: reflects worst-case scenario - Reserve Analysis: monetary padding to allow for uncertain cost estimations
- Project Mgmt Software
- Vendor Bid Analysis: assumes vendor will bid on the work and a contract will be awarded
- Earned Value Mgmt
a) Planned Value (PV): money the project should be worth at a particular point in the schedule
b) Earned Value (EV): physical work that has been completed to date
c) Actual Cost (AC): actual cost to date
d) Estimate at Completion (EAC): estimated total cost at completion
e) Cost Performance Index (ECI) = EV/AC: if CPI < 1, project is over budget
Quality Management
Project Management
activities and processes performed on an ongoing basis to ensure the quality of everything pertaining to a project will meet the needs or requirement for which the project was designed
Plan Quality Mgmt
Perform Quality Assurance
Control Quality
B6-26
Globalization
Impact of Globalization on Companies
Globalization and Local Economies
distribution of industrial and service activities across a number of nations
- produces deeper integration of the world’s individual national economies and makes them more interdependent*
- measured by world trade as a % of GDP*; the greater, the greater degree of globalization
Factors that Drive Globalization*
- increased efficiencies in transportation
- technological advancements and knowledge-based products
- deregulation of international financial markets
- operational options for international business
Globalization Promotes Specialization
- specialization that leverages comparative advantage
Globalization Imparts Responsibilities of World Citizenship
- corporations have an implied duty to:
- act responsibly regarding environmental issues
- promote political stability and cooperation among nations
Motivations for International Business Operations
Impact of Globalization on Companies
Globalization and Local Economies
to achieve shareholder value
- Comparative Advantage
- used to max the value of their efforts and resources
- bermuda focuses on tourism and importing stuff - Imperfect Markets
- ability to trade freely is often limited by physical immobility of the resource or regulatory barriers
- in order to retrieve more resources, companies must trade outside their borders - Product Cycle
- initial development of the product to meet needs in the domestic markets
- meet foreign demand to maintain efficient use of capacity
Methods of Conducting International Business Operations
Impact of Globalization on Companies
Globalization and Local Economies
- International Trade
- exporting/importing products or services - Licensing
- provide right to use processes or technologies in exchange for a fee - Franchising
- provides training and related service delivery resources in exchange for a fee - Joint Ventures
- takes advantage of comparative advantage of one or both of the participants in marketing or delivering a product - Direct Foreign Investments (DFI)
- purchasing a foreign company as a subsidiary or starting a subsidiary operation in a foreign country - Global Sourcing
- synchronization of all lvls of product manufacturing
- frequently implemente d through a range of organizational and business arrangements
Relevant Factors of Globalization
Impact of Globalization on Companies
Globalization and Local Economies
- Political and Legal Influences
- Potential for Asset Expropriation
- Taxes and Tariffs
- mitigation of risk is typically handled through transfer pricing - Limitations on Asset Ownership or Joint Venture Participation
- Content or Value Added Limits
- govs may provide tariff reductions to companies whose imports include specified percentages of material and laboor in their products - Foreign Trade Zones
- zones in which tariffs are waived until the goods leave the zone - Economic Systems
a) Centrally Planned Economies
- factors of production are owned by the gov and subject to restrictions
b) Market Economies
- factors of production are owned by individuals
- most industrialized economies
c) Conglomerates
- self-sustaining entities that could not exist in the US (fully integrated financing, manufacturing, and supplying orgs would likely violate antitrust laws) - Culture
a) Individualism vs Collectivism
b) Uncertainty Avoidance
c) ST vs LT Orientation
d) Acceptance of Leadership Hierarchy
e) Technology and Infrastructure
Inherent Risks of International Business Operations
Impact of Globalization on Companies
Globalization and Local Economies
- Exchange Rate Fluctuation
- transaction risk
- economic risk
- translation risk - Foreign Economies
- risk of functioning w/i the general health or weakness of a particular economy
a) Foreign Demand
- income of customer
- purchasing power of currency
b) Interest Rates
c) Inflation
d) Exchange Rates - Political Risk
- effects on economy of politics in that country like war, etc
Complications of Global Sourcing
Impact of Globalization on Companies
Globalization and Local Economies
- Global Sourcing Anticipates Multiple Sources for Materials
- different parts of process may be done in diff countries and have to take into account things happening in all countries - Global Sourcing Anticipates Multiple Exchange Rates
International Accounting Practices
Impact of Globalization on Companies
Globalization and Local Economies
IFRS vs GAAP vs wtv else that country may use
- differences impact financial reporting transparencies
Shifts in Economic Balance of Power
Globalization and Local Economies
used to be unipolar: US dominant now multipolar: US, EU, BRIC (brazil, russia, india, and china) shifted power
- due to expansion of other countries economies
Functional Interdependence
- the participation of nations in worldwide institutions
- United Nations, World Trade Organization, International Monetary Fund
Systematic Interdependence
- acknowledges that all members of the global community share the planet Earth
- climate or safety (like nuclear proliferation) affects all nations
Multipolarity
- acknowledgement of interdependence of nations and cooperation among nations consistent w shifts in balance of power
Dynamics of Balance of Power
- Developed vs Emerging
- developed nations gr regarded as world’s largest industrial economies
- emerging nations gr regarded as countries not included on list of developed nations led by BRIC - Trade Deficits
- developed nations have gr produced trade deficits bc more imports than exports (disadvantages)
- emerging nations gr have trade surpluses as exports > imports (advantage) - Balance of Power
- emerging nations (notably China) have maintained an artificially low valuation of their currencies relative to developed nations, keeping their gods cheap and effectively finances richer countries/developed
Definitions
- B6-34
7 quality control (7QC) tools
used to solve quality related problems pertaining to project quality management
- flowcharts
- check sheets
- cause and effect diagrams
- histograms
- pareto diagrams
- scatter diagrams
- control charts
statistical quality control is categorized as
appraisal cost
