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In this assignment we are discussed about operation management within the institute and explain how operations management supports business activities. We are explaining in this project about quantitative techniques in strategic decision making and strategic models.acorrding to given data in the assignment project we are explain about cash budget and apply the formula of cost- volume -profit.
The three primary functions such as operations, finance and marketing in any institute perform different activities; many of their decisions impact the other areas of the organization. The three major functions of business institute:-
By exchanging information finance and operation management corporate each other and describe such activities as the following:-
Budgets are numerical plans and, within organization, they represent the projected allocation resources.bedget provide direction and helps in estimating the available resources and then allocating the resources for various purposes. In fact, the budget is the most widely used planning and controlling tool at every level of an organization. Budget helps in estimating the available resources and then allocating the resources for various purposes. When the available resources are not sufficient, then it is called resource gap.
Economic analysis of investment proposals: - Evaluation of alternative investments in plant and equipment requires inputs from both operations and finance people.
Provision of funds - The necessary funding of operations and the amount and timing of funding can be important and even critical when funds are tight. Careful planning can help avoid cash-flow problems.
Marketing mainly focus on selling and promoting the goods and services of an organization. It is also responsible for consider customers wants and for communicating those to operations people short term and to design people long term. Because of these operations needs information about demand over the short to intermediate term so that it can plan accordingly, while design people need information that relates to improving current products and services and designing new ones. Market design must work closely together to successfully implement design changes and to develop and produce new products.
Operations can supply information about capacities. Operations will also have warning if new equipment or skills will be needed for new products or services.
There are different methods which are used in institute to determine these quality and operation. Some of the well known methods are
Key performance indicator (KPI)
Six sigma method
Total quality management
Just in time method
Key performance indicator:-
Key performance indicator defined as measures which provide managers with the important performance information to enable them or their stakeholders to understand the performance level of the institution. It also helps the institutions understand how well they are performing i relation to their strategic goals and objectives.
Example of KPI
Number of units passed by quality inspection
Number of times per year a full stock is sold
Graduation rates of its students
Number of clients assisted during the year
Six sigma method: - six sigma looks at various steps in order eliminate any defects. It is a management procedure used to improve the quality of process outputs by find in and removing the causes of defects. Defects in case of six sigma is defined as any process output which is not meeting customer specifications or may be indirectly creating an output that may lead to not meeting customer specification. All the element of six sigma is financially bounded.
TQM:- this methods looks at the quality and performance of the products produced; it is not just looking at the overall quality of the institute services instead looking at involving all the employees at all stages and levels of the production process to add quality to the services so that at the end it meets the customer satisfaction or demand.
JIT:-JIT looks at minimizing the storage of goods and materials. It looks at bringing the goods and materials to the production area as and when required. It also linked to the way the production is done, line of products needs to be manufactured will go back to the previous step and indicate the necessity of the products and then that line of production produces the required product.
Finance people should be included in these exchanges in order to provide information on what funds might be available short term and to learn what funds might be needed for new products and services to long term. Thus marketing operations and finance must interface and process design forecasting, setting realistic schedules, quality and quantity decisions and keeping each other informed on the other's strengths and weaknesses.
The value chain analyses:
The value chain-Every organization consists of activities that link together to develop the value of the business: Purchasing supplies, manufacturing, distribution and marketing of its good and services. These activities taken together form its value chain. The value chain identifies where the value is added in an organization and links the process with the main functional parts of the organization. It used for developing competitive advantage because such chains tend to be unique to an organization. According to porter, the companies are divided into two activities:
Primary activities of production, such as the production process itself
Support activities such as human resources management, that give the necessary the background to the running of the company but cannot identified with the individual part.
"The direction and scope of an organization over the long-term which achieves advantages for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations". (Johnson and schools, 2008)
Strategy can involve hard decisions about the scope of the business, its management and its organization structure. Successful implementation of these strategies is very much dependent on the efficient and effective deployment of all organizational resources.
Models of strategic information system planning
According to James Van Horne, the functions of finance/ accounting comprise three decisions: the investment decision, the financing decision and the dividend decision. It is important to recognize that a firm's financial condition depends not only on the functions of finance, but also on many other factors that include:- management, marketing, management production/ operations, research and development and management information systems decisions etc.
Decision making in organisation behaviour is very vital and it is one of the most important function for any organisation. Decision making is a process of choosing alternative course of action from different alternatives available and it should be kept in mind that the decision made should be effective and efficient for the organisation. According to the Herbert A simov decision making involve three steps which are mentioned below.
Identifying the problem- This step includes the identification of the problem that the organisation is facing
Identify and examine the different alternatives available to solve the problem.
At last when the problem is identified and the various options are available then the organisation decides which alternative to choose and that alternative should be effective for the organisation.
Systematic Approach to decision making:
Systematic approach in decision making helps the organisation to take good decisions to help the organisation in solving the problems.
Creation of useful environment for decision making- while creating the environment different factors should be considered:
One should know that what he or she wants to achieve.
Should know that how the decision will be taken in the end.
Involvement of the people that are keen to provide solution for the problem organisation should include the people who are qualified and can take the effective decisions for the organisation.
It is very important that everyone should get the chance to involve in decision making process so that the employees will be highly motivated and feel like hold importance for the organisation.
Next important thing that should be considered is to bring out different ideas from mind that can help in making the decision. Because if more and more ideas are available then the organisation will have more choices while making the decisions.
Analyse the different course of alternatives present it includes the amount of risk involved in selecting the specific action and what will its implications and will it have positive or negative effect.
Now choose the best alternative among the different alternatives available. After complete analysis of the different alternatives the decision maker will select the most effective alternative that will provide the solution for the problem
Cross checking the decision taken after the decision is made now it is important to cross check that the decision made is worth or not and is it working properly or not or if its needs any amendments.
At last when everything is done now the decision should be communicated to the people who are affected by it and to each and every member who is associated with the implementation of the decision. And provide the complete details about it so that they agree upon the decision taken and appreciate it.
In organisations creativity can be used in various ways to improve the performance of the company. The various ways of doing this are:-
Personal Mastery -
In personal mastery, managers give their employees the freedom to create and explore something new.
Mental Models -
In mental models, mangers try to give their employees challenges to find new and better methods to perform any task.
Team Learning -
Team learning is a very important fact as most of the decisions in the company as group based decisions.
Building a shared vision -
In an organisation, all the people work to achieve the common goal of the company. So, creativity helps in finding new and creative ways of influencing and motivating employees towards the common goal.
Systems thinking -
It helps in understanding the impact of decisions of the company on other companies.
Cost- volume -profit:-
CVP analysis is used to decide how changes in costs and volume affect an institute operating income and net income. In performing CVP Used several assumptions such as:-
Constant sales price per unit
Constant variable costs per unit
Constant total fixed costs
Sold everything which is produced
Because of activity changes cost affect
They are sold in the same mix if a company sells more than one product
An institute required to produce a cash budget in order to ensure that there is enough cash within the institute to achieve the operational levels by the functional budgets. Using given information in the below table we are explain cash budget:-
Format and Example:-
The following example illustrates the format of cash budget. Company A maintains a minimum cash balance of $5,000. In case of a deficiency, loan is obtained at 8% annual interest rate on the first day of the period.
For the Year Ending December 30, 2013
Beginning Cash Balance
Add: Budgeted Cash Receipts:
Total Cash Available for Use
Less: Cash Disbursements
Selling and Admin. Expenses
Net Cash from Financing
Budgeted Ending Cash Balance
All directors of institute need to maintain a safe level of cash to enable them to carry on business activities. The cash budget helps for this.The priority task for any director will be assist employees to improve business performance. We are known that tends to increase profits while either not increasing or actually reducing the resources employed to generate those profits produces healthy growth. A strategy that grows sales while costs rise disproportionately and more assets are employed to achieve that growth.
Break even analysis:-
The break even points occur when the sales income from the products and services sold is equal to the total costs incurred by the business. To calculate the break even point , three vital figure are required:-
The amount the product or service costs the consumer to buy
The total fixed cost
The variable costs
The simplest way to calculate the output level required to break even is to use the following formula:-
Fixed costs/selling price per units- variable costs per unit
The breakeven point is defined as being the point at which the level of sales is not great enough for the business to make a profit and yet not low enough for the business to make a loss. Although it is not always possible for new businesses new products and services to cover their costs with their sales revenue ultimately this is their
Cash flow forecast:-
the cash flow forecast shows estimates of monthly recipts and payments over a forthcoming period-normally 6 or 12 months.this enablesa business to estimate the casg available to it. This should mean that potential cash shortages are predicted well in advance so that action can be taken to prevent them occurring.
Cash flow management:- a business will generate cash from normal day to day sales. The differently demands on business cash and uneven timing of receipts and payments mean that cash from customers does not always flow in quickly enough.
Cash flow problems:-
Customers take too long to pay or sales are seasonal
Suppliers and other bills paid too quickly
Too much is spent on equipment
Materials cost too much
Overheads are too high
Sales price is too low
Rate of turnover is too low
The bank is not helpful enough in giving loans and overdrafts
Not enough capital
Too much stock is held
Too much taken as drawings of dividends
Solutions to cash flow problems:-
Collecting receipts more quickly
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