How the finance function interacts with operations

Question 1

Operations

Answer 1

Activities concerned with the acquisition of raw materials, their conversion into finished products and the supply of that finished product to the customer.

Question 2

Operations Management

Answer 2

Activities involved in designing, producing and delivering products and services that satisfy the customer’s requirements.

Question 3

4 V’s of the Operations Processes

Answer 3

VOLUME of inputs and outputs
VARIETY of inputs and outputs
VISIBILITY to customers
VARIATION in demand

Question 4

Porter’s value chain - Primary Activities

Answer 4

Inbound logistics
Operations
Outbound logistics
Marketing and sales
After sales service

Question 5

Porter’s value chain - Secondary Activities

Answer 5

Infrastructure
Human Resource Management
Technology
Procurement

Question 6

Process Design

Answer 6

Method by which individual specialists seek to understand business processes and ensure that these processes are designed to be as efficient and as effective as possible.

Question 7

Process Map

Answer 7

Provides a visual representation of the steps and decisions by which a product or transaction is processed.

Question 8

Advantages of Process Maps

Answer 8

Management Understanding
Role Understanding
Standardisation
Highlights Inefficiencies
Supports Corporate Initatives

Question 9

How does purchasing co-operate with the finance function?

Answer 9

Establishing credit terms
Prices
Payment
Data Capture
Inventory
Budgeting

Question 10

How does production co-operate with the finance function?

Answer 10

Cost measurement, allocation and absorption
Budgeting
Cost Vs Quality
Production processes
Inventory

Question 11

Characteristics of Services

Answer 11

Intangibility
Inseparability
Perishability
Variability

Question 12

Supply chain

Answer 12

Consists of a network of organisations. Together they provide and process the necessary raw materials firstly into work in progress and then into finished goods for distribution and sale to the end customer.

Question 13

Spokes on Cousins wheel

Answer 13

Organisation structure
Relationships with suppliers
Cost/benefit
Competences
Performance measures

Question 14

MRP

Answer 14

A computerised system for planning the requirements for raw materials, WIP and finished items.

Question 15

MRP Benefits

Answer 15

Improved forecasting
Improved ability to meet orders leading to increased customer satisfaction
Reduced stock holding
Schedule can easily be amended
Can warn of purchasing/production issues due to bottlenecks
Close relationship tends to be built with suppliers

Question 16

Manufacturing Resource Planning (MRPII)

Answer 16

Goes beyond MRP and includes;
- Production Planning
- Machine Capacity Scheduling
- Demand Forecasting & Analysis
- Quality Tracking Tools
- Employee Attendance
- Productivity Tracking

Question 17

Enterprise Resource Planning (ERP)

Answer 17

Integrates information from many aspects of operations and support functions into one single system.

Question 18

Benefits of ERP

Answer 18

• Identification and planning the use of resources across organisation
• Free flow of information across all functions and improved communication between departments
• Aids management decision making due to decision support features
• Can be extended to incorporate SCM.

Question 19

Statistical Process Control

Answer 19

A method for measuring and controlling quality during a process.

Question 20

Total Quality Management (TQM)

Answer 20

Continuous improvement in quality, productivity and effectiveness obtained by establishing management responsibility for processes as well as outputs.

Question 21

Fundamental features of TQM

Answer 21

• Prevention of errors before they occur
• Continual improvement
• Real participation by all
• Commitment of senior management

Question 22

Kaizen

Answer 22

Japanese term for philosophy of continuous improvement in performance via small, incremental steps. Kaizen involves setting standards and then continually improving these standards achieve log-term sustainable improvements.

Question 23

Six Sigma

Answer 23

A quality management programme that was pioneered in the 1980’s. Aim of the approach is to achieve a reduction in the number of faults that go beyond an accepted tolerance limit through the use of statistical techniques.

Question 24

Lean Thinking

Answer 24

Aims to systematically eliminate waste through the identification and elimination of all non-value adding activities.

Question 25

Lean Synchronisation

Answer 25

Aims to meet demand instantaneously with perfect quality and no waste.

Question 26

Just-in-Time

Answer 26

System whose objective it is to produce or or procure products or components as they are required by the customer or for use, rather than for inventory.

Question 27

Reverse Logistics

Answer 27

The return of unwanted or surplus goods, materials or equipment back to the organisation for reuse, recycling or disposal.

Question 28

Critical Success Factors (CSF’s)

Answer 28

Vital areas where things must go right for the business in order for them to achieve their strategic objectives.

Question 29

Key Performance Indicators (KPI’s)

Answer 29

Measures which indicate whether or not the CSF’s are being achieved.