How the finance function interacts with operations Flashcards
Operations
Activities concerned with the acquisition of raw materials, their conversion into finished products and the supply of that finished product to the customer.
Operations Management
Activities involved in designing, producing and delivering products and services that satisfy the customer’s requirements.
4 V’s of the Operations Processes
VOLUME of inputs and outputs
VARIETY of inputs and outputs
VISIBILITY to customers
VARIATION in demand
Porter’s value chain - Primary Activities
Inbound logistics
Operations
Outbound logistics
Marketing and sales
After sales service
Porter’s value chain - Secondary Activities
Infrastructure
Human Resource Management
Technology
Procurement
Process Design
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.
Process Map
Provides a visual representation of the steps and decisions by which a product or transaction is processed.
Advantages of Process Maps
Management Understanding
Role Understanding
Standardisation
Highlights Inefficiencies
Supports Corporate Initatives
How does purchasing co-operate with the finance function?
Establishing credit terms
Prices
Payment
Data Capture
Inventory
Budgeting
How does production co-operate with the finance function?
Cost measurement, allocation and absorption
Budgeting
Cost Vs Quality
Production processes
Inventory
Characteristics of Services
Intangibility
Inseparability
Perishability
Variability
Supply chain
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.
Spokes on Cousins wheel
Organisation structure
Relationships with suppliers
Cost/benefit
Competences
Performance measures
MRP
A computerised system for planning the requirements for raw materials, WIP and finished items.
MRP Benefits
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
Manufacturing Resource Planning (MRPII)
Goes beyond MRP and includes;
- Production Planning
- Machine Capacity Scheduling
- Demand Forecasting & Analysis
- Quality Tracking Tools
- Employee Attendance
- Productivity Tracking
Enterprise Resource Planning (ERP)
Integrates information from many aspects of operations and support functions into one single system.
Benefits of ERP
- 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.
Statistical Process Control
A method for measuring and controlling quality during a process.
Total Quality Management (TQM)
Continuous improvement in quality, productivity and effectiveness obtained by establishing management responsibility for processes as well as outputs.
Fundamental features of TQM
- Prevention of errors before they occur
- Continual improvement
- Real participation by all
- Commitment of senior management
Kaizen
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.
Six Sigma
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.
Lean Thinking
Aims to systematically eliminate waste through the identification and elimination of all non-value adding activities.
Lean Synchronisation
Aims to meet demand instantaneously with perfect quality and no waste.
Just-in-Time
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.
Reverse Logistics
The return of unwanted or surplus goods, materials or equipment back to the organisation for reuse, recycling or disposal.
Critical Success Factors (CSF’s)
Vital areas where things must go right for the business in order for them to achieve their strategic objectives.
Key Performance Indicators (KPI’s)
Measures which indicate whether or not the CSF’s are being achieved.
