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AMA - Dev in Business Env > Development in Business Environment > Flashcards

Development in Business Environment Flashcards

1
Q

Value Chain & Objective & Methodology

A

VC is linked set of value creating activities
VC activities begin from basic RM to delivery to customer
6 Business functions in VC R&D/Design/Mktg/Prodn/Dist/Cust service
Objective
- means to increase cust satisfaction & manage cost effectively
- individual VC parts co-ordinate to improve cust satisfaction and manage cost/quality/delivery
- cust satisfaction at lower cost increases competitive advantage
Methodology
- Identify industy VC and assign cost/Rev/Assets
- DIAGNOSE cost drivers regulating activity
- SUSTAIN cost advantage by controlling cost driver

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2
Q

Total LCC and why it is important

A

Estimates tracks accum cost during entire product life
Aim is to trace cost / rev over several calendar period
cost from R&D/Design/Mktg/produ/dist/cust ser/disposal

Why imp

  • if non prod cost rd/design/mktg high - then must identify them for Target pricing/VE/VA
  • if non prod cost rd/dsign/mkt major portion of total cost - must predict expected mfg cost/rev to decide whther R&D must be done or not
  • Locked R&D / Design - cost not incurred but decision takn so cannot avoid cost later
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3
Q

Differentiate Between VA/NVA Activities

A

VAA

  • Activities customer pervieve add usefulness to prod/ser
  • if activity eliminated REDUCE USEFULNES earlier avail
  • eg car painting before delivery / sw with coputer

NVAA

  • Activity has possible cost reduction
  • cost reduction will not reduce service potential
  • if activity eliminated - not reduce usefulness
  • does not reduce CUSTOMER PERCIEVED VALUE
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4
Q

Six benefits of ERP

A 
Product costing
Production Planning
Quality control Automatic
Quick response to market
Sales Service
Distribution & Delivery
E Commerce
Inventory Mgt
Competitive edge
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5
Q

Steps in Target costing process

A

Set TGT selling price as per customer expectation
Set Target Margin based on LONG Term Objectivt
Determine Target Cost/Allowable cost
Compare with - CURRENT COST
Establish Cost reduction target by VE / VA

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6
Q

Essential requirement for sucessful TQM Implementatino

A 
Commitment
Culture
Continous improvement
Co operation
Customer focus
Control
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7
Q

How does JIT help in improving profitability

A

JIT Helps in reducing cost and increasing SP
Reducing cost
- Fast detection of defective goods & early correction
- Reduces WIP between machine within WORKING CELL
- OH cost rental/insurance/Warehosue reduced
Increase SP
- High quality - hence increases prices

no idea which category
- Problem areas detection helps reduce cost of improvement

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8
Q

Why intensive marketing research is reqd for Target Costing

A

TC = Diff between Estimatd SP - Target margin for
(proposed product with specific functionality)
Target Costing
- cost mgt technique with aim to produce sell and ensure target margin
Target costing - integral part of desing itself
- while desining must understand what value custome assign to attirbutes and quality of product
how can we understand ? – only through VE / VA / Cost Mgt
Also extensive market research is required
VVV IMP
- THIS ACTIVITY MUST BE DONE BEFORE PRODUCT IS INTRODUCED
So there is a space between
- what company can offer
- what customers expect

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9
Q

What is product LCC and types of cost in Prod LCC

A 
PLCC - trace cost over life of produce over diff cal per
Stages
- Dev Stage (R&D / Design cost)
- Introd Stage (promotion/capacity)
- Growith stage (Mktg/Dist )
- Decline stage (sold / scrapped)
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10
Q

Cost at point of commitment and not incidence so need to manage cost drivers to manage cost ( explain WRT Structural / Executional Cost Drivers)

A 
Firm commits cost as follows :
 - at time of designing the product
 - at time of deciding method of prodn
 - at time of deciding delivery channel
in above 3 stage cannot save cost once incurred. so cost can be managed at commitment and not incidence level

Cost drivers and its management
Cost drivers are FACTORS that drive consumption of resources so if we manage cost drivers we can manage cost
Structural cost drivers
- cost drivers managed by making structural changes
- this cost arises due to business model adopted
eg : scale of operation / complexity of ops/ Technology

Executional cost drivers
- cost drivers managed by executive decisions
eg : capacity utilization / plant layout effficency/product config

so we can now understand that cost can be managed only at point of sturctureal and operating decision as RESOURCES BECOME COMMITTED

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11
Q

Diff between Traditional costing & ABC, reason of using ABC over traditional

A

Traditional
- OH first alloc to CC and then absorbed by cost object

ABC
- OH first assigned to activities then to cost objects
(this is refinement over traditional approach)

CC include diff activities ..so diff product create diff demand for activities so traditional cost will not allocate correctly the cost based on avtivities that consume the resources

Reason for adoption

  • competitive pressure so less margin - ABC gives correct cost to position price in market
  • Product & customer profileration (increase) - so ABC helps in tracking product / customer wise profitability and consumption traced to product/customer
  • New prodn technique hence incrase in SERVICE SUPPORT COST
  • Reduced cost related to BAD DECISION
  • Reduced DATA processing cost so cost of tracking redn
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12
Q

Main features of ERP

A 
Companywise integration
compelte integration
project management
Inventory/cash/productivity mgt
Internet/Intranet/edi
customer service and company image
information gap
BI tools
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13
Q

Explain concept and aim of Theory of constraints AND what are KEY Measures of TOC

A

TOC - Focus is on constraints and BOTTLENECKS that hinder speedy production
Concept is ==> Maximize rate of Manufacturing output in
THROUGHPUT TIME
Here it examins CONSTRAINTS AND BOTTLENECKS

BOTTLENECK
- IS ACTIVITY withing an org where demand for the activity is more than its capacity to supply

CONSTRAINT
- IS A SITUATIONAL FACTOR
where achievement of objective is more difficult
(eg : meeting customer deliver scheudel is constraint
bottleneck may be certain machine)

so BOTTLENECK/CONSTRAINTS are closely examined to INCREASE THROUGHPUT

Measures of TOC
1. Throughput contribution
- rate at which system generates profits thru sales
- only 100 % variable cost considered (eg labour exclude)
2. Investment
(MC + Inventory + WIP + FG + R&D + Bldg)
3. Other operating cost
All except material (lab + utilities + etc)

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14
Q

Describe four types of benchmarking of critical success factors

A

Global / competitive / Strategic / Functional / Process / Internal / External

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15
Q

How Target costing may assist in controlling cost and pricing of products

A
  • TC considers PRICE that OUGHT to be charged to achive market share
  • TC should take LCC into consideration
  • Gap between TC and expected cost to reduce
  • Can control cost by comparison
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16
Q

Diff between Trading mgt acct and VCA in STRATEGIC FRAMEWORK

A

Traditional

  • Focus on INTERNAL info
  • emphasis on MANUFACTURING COST
  • Assumes cost can be reduce din Value Added process
  • Single COST DRIVER applied overall firm
  • Insight for STRATEGIC decision is limited

VCA

  • Convers INTERNAL & EXTERNAL Data
  • Exploints linkage through VC (Firm/supplier/customer)
  • Applies multiple cost driver (structural/executional)
  • identitfy cost dirver at individual activity and can control cost by controlling cost driver
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17
Q

Describe JIT Systmes

A

BEGINS with prodn/deliveries to prodn facilities
CONTINUES through Manufactuing plant
INCLUDED accouting transactions too

  1. Ensure receive supplies in time/directly at prodn facility
  2. Reduced RM inventory as direct to prodn supply
  3. Ensure defect free supplies
  4. SUPPLIERS are paid based on prodn units without defects (i.e no payment for defects)
  5. Long SET UP time reduced by eliminating ineffiency
  6. KANBAN card ensures right qty to FEEDER to ensure
    PULLING PROCESS and eliminate inventory
  7. Another method is WORKING CELL
    ( 5 & 6 identify defects quick and reduce maint cost)
  8. Vast VARIANCE REPORTING is avoided since employee can halt prodn and change / rectify defect
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18
Q

How JIT can be of competitive advantage

A
  • Stock RM/FG eliminated - cost of holding avoided
  • minimize wasting time / transportation cost
  • Avoid NVA activities - increase competitive advantage
  • Flexible to cust req - increase competitive advantage
  • focus on PERFORMANCE BASED PRODUCITON - high quality product
    -
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19
Q

Benefits from TQM implementation

A
  • Increased awareness of quality culture
  • commitment to continuous improvement
  • focus on customer satisfaction
  • emphasis on teamwork achived
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20
Q

Essential features of LCC

A
  • Tracing rev/cost over several calendar perid over life
  • Emphasis on accum of cost/rev over life of prod
  • LCC track Research and Design
  • Also tracks development cost
  • Total R&D cost is compred with rev generated later
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21
Q

What is disinvestment strategy and main reasons for disinvestment

A

Disinvestment strategy

  • strategy of selling of or shedding business
  • this will release resources which can be diverted
  • also includes selling off / release control of subsidiary

Reasons

  • Opp to get more profit/product but resource constraint
  • Businss purchased - some part not up to mark and sold
  • Some product/segment pulling down overall profit
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22
Q

How VCA can achieve cost reduction

A
  • identity/remove unnecsary component in product that had utility earlier
  • introduce substitute without reducing quality
  • simplify PRODUCT DESIGN
  • ALTERNATIVE METHOD with less cost and improved efficiency
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23
Q

What are Critical success factors for implementing TQM

A
  • focus on customer needs
  • focus on continuous improvement
  • everyone in org to be involved
  • Desing quality in product / production process
  • have effective PERFORMANCE MEASUREMNT SYSTM
  • Training and education to all to understand TQM
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24
Q

What is Back Flush in JIT and state problems to be addressed for effective function of system

A

BFC does not require data entry until Finished produce is completed
System multiplies components based on BOM and reduces inventory

Serious issues must be corrected for system to work properly

  • production reporting - report should be absolutely correct or else wrong calculation
  • Scrap reporting - Abnormal scrap DILIGENTLY recorded or else will fall outside BFC
  • LOT Tracing - not possible in BFC
  • Maintain accurate inventory
25
Q

Brief the principles associated with SYNCHRONOUS manufacturing

A

(note : key principle here is VARIATION IN TRANSFER AND PROCESSING TIME should be taken seriously)

now to answer
Synch Mfg - Is a Management PHILOSOPHY
- it includes consistent set of PRINCIPLE/PROCEDUR/TECHIQUE
- Every action evaluated in terms of overall goal

7 Principles

  • Focus is on synchrons production flow and not idle time
  • Value ot time at Bottlenck resource is equal to thgrouput rate of products processed by bottleneck
  • Value of time at non bottleneck resource Is negligilble
  • Utilizaton of non bottleneck resource is controlled by constraint within the system
  • Resources must be utlilized and not just activated
  • Transfer batch is not equal to process batch
  • process batch may be variable over time and route
26
Q

Mention the data required for MRP

A
  • master production file
  • Bill of material file
  • Inventory file
  • Routing file(seq of op from mrf/sub assemblies/FG)
  • Master parts file
27
Q

Explain major components of balance score card

A

Good BSC combines Financial measures of Past performance with Measures of Firms driver of future performance

Perspectives -
Customer P - How customer see us
Internal P - In what process firm must excel
Innovation/Learning - continue to improve/create value
Financial P - How we look at shareholder

28
Q

Remedies available for difficulties during PRAISE implementation

A

Problem identification - Particiapte group discussion/Brain stoming
Ranking - Participative approach/individual to grp approach
Analysis - Lateral thinking brainstorming
Innovation - Evaluation of all aspects of strategy
Solution - Effective internal communication system
Evaluaton - Participative approach \ track feedback

29
Q

Classificaton under theory of constraints measure

A 
R&d - Investment
Rent/Utlititie - Operating cost
Rm for prodn - Contribution
Depn - Operating cost
Labour - operating cost
30
Q

Name any 4 stages in process of benchmarking

A

Stages

  1. Planning
    - Determine benchmarking goal
    - Identify best performance
    - Establish process improvement team
    - Define benchmarking measures
  2. Collection of data of information
  3. Analysis of finding based on data collected
  4. Formulate/Implement recommendation
  5. Constantly monitor / review
31
Q

Classification under appropriate categories in BSC

A
  1. new product life insurance along with loan disbursed
    ( innovative/learning perspective)
  2. Housing loan to diff sector at diff int rate how sanctioned and performance in 4 yrs
    (Financial perspective)
    3.How many days to service loan , when addl loans released soon
    Customer perspective
32
Q

Pre-requisites of successful operation of MRP

A
  1. Adhere to latest production/purchase sked and don’t deviate for once
  2. RM/sub assemblies/components for production should be pre determined
  3. Appraise workforce of system and ensure strict adherence
  4. Develop internal control to ensure strict adherence
  5. DATA ACCURACY is very vital
33
Q

Classify under categories of equality cost prevention cost / appraisal cost / internal failure cost / external failure cost

A

Rework internal failure cost
Disposal of scrap internal failure cost
Warranty repairs external failure cost
Revenue loss external failure cost
Repair to manufactuing equipments internal failure cost
Discount on defective sale external failure cost
Raw material inspection prevention cost
Finished product inspection appraisal cost
Estalishent of quality circles prevention cost
Packaging inspection appraisal cost

34
Q

Phases in life cycle product

A

Introduction - prodct launch/non existent prft/no compete
Growth - Sales rise/compete come/phase end decline pft
Maturity - Sales increase at declining rate
Decline - Drop in volume/cheaper substititue available

35
Q

Concept of JIT in production process

A
  1. product/spare part/matl are directly recd in prodn floor. Inspection is done before delivery of product
  2. Set up time is reduced there for prodn run time also reduced - so defectives/obsolescence reduced
  3. WIP is reduced by KANBAN card, working cell or both
  4. Since workers are trained on VARIETY of machines if problem come anyone can fix it
  5. Support sys like Acct / IT reporting is done to suit JIT
36
Q

1) Polishing of furniture used by a suystems eng in software firm
2) Maint by software company Receivable mgt software for banking company
3) Paintings of pencil by pencil manufacturing company
4) Cleaning of customer keyboard by computer repair center
5) Providing brake adjsutment for car received for service by car service state

A 
NVA
VA
VA
VA
VA
37
Q

State with reason whether you would recommend ABC in each

A
  1. Company K produces one product. The overhead cost consists mainly of depreciation
    - NO - it is one product situation
    - for OH allocation ABC not recquired
    - ABC not beneficial since most of cost is depn
  2. Company L produces 5 different products using different production facilities
    - YES - Produce proliferation so ABC need for alloc
    - ABC needed for pricing
    - Cost drivers likely to be different
    - Cost redn may be possible
    - prodn facilities are diff
  3. A consultancy firm consisting of lawyer accountant and comp engg provided mgt consultancy services
    - YES - Activity based - ABC required for cost alloc
    - services are diff
    - ABC needed for pricing
    - Cost redn may be possible
  4. Company S produces 2 diff labour intensive products. Contribution per unit for both is very high
    BEP is very low. All work is carried out efficiently to meet target costs
    - NO - since labour intensive can alloc based on lab hrs
    - so ABC not required for alloc
    - Low BEP = low cost of FC as % of sales/Total cost
    - given efficient ops - so no room for reduction
    - many FC can be aligned to labour cost
38
Q

Has composition of manufacturing cost changed recently. How has the change effected design of cost accounting system

A

Traditionally Mfg cost alloc to products are

  • direct matl
  • direct lab
  • indirect mfg cost

Nowdays mfg in computerized env so costing system is being refined to provide better measurement of OH cost to COST OBJECTS
So Mfg cost is classified into 3
Direct cost - can trace directly (max identify to reduct IDC)
Inidrec cost pool - Pool with Homogenous cost creted
Cost - Effect criteria to identify cost allocation base

Bcos of above change ABC introduced where FOCUS is on individual activieis as cost objects
ABC calculates cost of individual activities and assigns cost to cost objects like products/services

39
Q

Define quality and its important dimensions

A

Quality = measure of goodness and how specs met
= It is intangible
= Excellent product/service that exceed expect

9 Important dimensions
Performance - Primary charectristics (car performance)
Features - secondary charectistics (car features)
Conformance - meet specs (global emission)
Reliability - performance consistency (long distance)
Durability - useful life (tough ride)
Service - problem resolution (car service center)
Response - Human interface (customer service)
Aesthetics - Sensory (design of car)
Reputation - past performance (Brand)

40
Q

Quality COst

A

QC = Cost of performing activities to CHECK FAILURE
to meet quality specs
= It is not price of creating a quality product
but NOT Creating a quality product/service
so – everytime work is re done cost of quality increases
eg : rework mfd item
retest assembly
rebuild tool
bank statement correction

in short - any cost that would not have been spent if quality were perfect - adds to cost of quality

QC = Total of cost incurred by

  • investing in preventin of non conformance of requirement
  • Appraising a prodct/service for conformance of requirement
  • Failing to meet requirement internal/external
41
Q

Explain 4 Ps of quality improving principles

A

People - some peple not participative and lack enthusiasm ..so if these people are incharge will not ensure success

Process
- Proble solving through formal process and not jump into conclusion

problem
- Break down into BITE SIZE chunks

Preperation
- Courses on creative thinking and encourage participatin and give greater appreciation of diversity

42
Q

What are universal beliefs in respect of tQM

A
  1. owner customer satisfaction is measure of quality
  2. Everyone is customer / owner
  3. Contiuous improvement - quality
  4. Analysis of Process is key to quality improvement
  5. Employee involvement is key to quality improvement
  6. Sustained TQM possible only with leaderhip
  7. Must continuously improve
43
Q

Demings 14 Points

A
  1. Create constancy of purpose towards improvement
  2. Cease dependence on improvement (reduce variation)
  3. Institute on job training (will result in less variation)
  4. Institute education and self improvement
  5. Improve constantly and for ever
  6. Institute leadership
  7. Transformation is everyones job
  8. Eliminate mgt by objectives (max prodn less quality)
  9. Eliminate Slogans
    10 Eliminate Fear
  10. Remove BARRIERS to pride workmarship
    12.Breakdon BARRIERS between departments
    13.Adopt new PHILOSOPHY
    14.Move towards SINGLE SUPPLIER for an item
44
Q

Short note on

  • PLAND - DO - STUDY - ACT
  • SHEWART CYCLE
  • DENINGS WHEEL
A
  • These are ACTIVITIES that company needs to PERFORM to INCOROPRATE CONTINUOUS IMPROVEMENT CULTURE
  • Why cycle ? - since it is circular nature and continuos improvement is continuing and never ending process

Steps in the cycle are
Plan - Evaluate current process and make plans based on problems found
- document process - collect data / identify probs
- use this to develop plan for improvement and evaluate problem

DO - Next stp is implement plan (document changes and collect data for evaluation)

STUDY - Data evaluate to see if plan is achieving objective/goal established

ACT - last phase act base on result found and communicate to members of company

45
Q

Write short notes on six sigma

A

Continuous improvement can be brought in org culture by briningin in continusly changing PLANNED TARGETS
EG : SIX SIGMA ACCURACY

SIGMA accuravy means 99.999998% accurate or process can make only 0.02 % defects per million (structural meaning) but actual as per quality 3.4 parts per million

Six Sigma is QUALITY MEASURE to ensure quality of products and services
Six Sigma academy has developed strategy of
MEASURE / ANALYZE / IMPROVE / CONTROL
This will help improve BOTTOMLINES

Improvements can be seen in

  • Material/Labour savings
  • Customer satiscation
  • reduction cycle time
  • increased productivity
  • reduction in defects
  • improved process flow
46
Q

Criticisms of TQM

A

By Albrecht & Zemke

  1. Focus on Doumentation and ill measurable outcome
  2. Emphasis on Qual measurement than improvement
  3. Internal focus & not customer oriented

Carlzon says - for Customer focus

  • Emphasis of Total employee involvement
  • This will ensure Front line customer service troops
  • main Featues of TEI
    - Loyalto to vision of co- as have visible goals
    - recognize satisfied customer and motivated empl
    - Delegate decision making for speedy decision mkg
    - De centralize Mgt to use workfoce more creatively

Albrecht says

  • TQM not suitable for service industry and they should use TQS
  • TQM ignores culture of organization
  • TQS is customer oriented and promotes enthusiasm/commitment
Poor service - sloppy procedure
poor service - Errors
Poor service - Inaccuracies
Poor service - oversights
Poor service - poor co-ordination
47
Q

Benefits of ABC

A
  • Excellent Basis and focus on cost reduction
  • Excellent Basis for Mgt decision making
  • Ops mgr clear view of how to make activity based bud
  • Clear understanding of cause of processing costs
  • Identificaiton of waste element in process enablve to priotize and leverage KEY RESOURCE
48
Q

State main advantages of ABC

A
  • more accurate costing of product/service/customer etc
  • better understanding of overhead
  • utilizes unit cost instead of total cost
  • integrates with six sig and other continus improv proces
  • makes waste and nov value add VISIBLE
  • supports performance mgt / scorecards
  • Enables costing of process / supply chain etc
  • Facilitates BENCHMARKING
49
Q

ABC a decision making tool

A

It brings to light picture of operation that may not be visible by other costing techniques
ABC helps analyse segments (eg ; market/customer/product/employee)

Decisions where ABC is implemented

  1. Complements TQM. Can track financial impact of TQM improvements.
  2. Wholesale distributors get advantage
  3. Facility and resource expansion decisions (by target specific cost and give clear pic to mgt)
  4. HR Decision support augmented
  5. Cost plus mark up - easified
  6. Traditionally OH distributed equally over product lines. AB based on resource consumed by activity
  7. Make or Buy, Transfer pricing, plant close , outsourcing decisions
50
Q

Features of Service org that may create problems in ABC application

A
  1. Facility sustaingin cost - impossible to arrive at cost driv
  2. Intangible products definintion difficult
  3. Many org no costing sys - and info required not existant so ABC might be expensiv
51
Q

Key elements of ABB

A
  • type of work/activity to be performed
  • qty of work/activity to be performed
  • cost of work/activity to be performed
52
Q

Short note on Batch level activities

A

Cost of some Activities are driven by number of batches of units produces
1 Material ordering
2 Machine set up cost
3 Inspection of products

53
Q

How does Target costing foster teamwork

A

(use same def detail as in target costing earlier)
for team work - below
- Target cost is achived by assigning cost reduction target to diff operations involved in prodn process
- Eventually all operation do not achieve cost redn target , but overall is achieved through teamwork

so TC fosters teamwork

54
Q

Advantages of Target costing

A 
1 - Ensures proper planning ahead of prodn / mktg
2 - Enhances emp awareness / empowerment
3 - Partnership with suppliers
4 - Minimize Non VA activities
5. - Encourage lowest cost VA Activities
55
Q

Companies which seems to benefit most from TC

A
  • Assembly oriented industries as against repetitive process ind producing homogenours products
  • Involved heavily in diversification of product lines
  • use tch for factory automation / CAD / Office automation
  • Have experienced shorter product life cycles where payback for factory automation is 8 yrs
  • Must develop system for reducing cost at planning designing dev stage of product life cycle
  • Are implementing methods such as JIT/VE etc
56
Q

Control points in all target costing projects

A
  1. Identification of pricinple control point
    - there is always a point where cost of maintaining design team excess savings from addl iterations
    - most product must be launche in short period of time or else will loose market.. so principel control points should be taken care of
  2. Point of Go - No Go Decision
    - if target costing not reached mgt has power to abandon design of product
  3. Milestone can be in terms of Timer of points
57
Q

Feature on Product life cyvle costing - Fiona

A

Product life cycle span time from initial R&d on a product to when customer service support is not required

LCC is important when
1. High % of total LCC is incurred before prodn begins and revenue earned over several period

  1. High fraction of LCC is locked in R&D / Desing cost

Identifie co’s where above features are prevelant
- Auto/pharma co’s - Tata motors/ Ranbaxy / Dabur

58
Q

Steps involved in VCA for assessing competitive advantage

A

most companies have mission of creating prod/service
Others are aware of strategic importance of individual activities within value chain
concentrating on activities that allow to capture max value for their customer and themselves
They use VCA to understand segments, dist channel, price points
what will give them maximum competitive advantage
- Product differentiation
- Selling propositions
- VC configuration

How VCA helps orgn to asses competive advantage is by following steps

  • Internal cost analysis
  • Internal differentiation analysis
  • Vertical linkage analysis

VC approach is impotant in strategic planning process
VCA is continuous process of gathering evaluatin and communicating info for business decision making

59
Q

Limitations of VCA

A
  1. Non Availability of Data
  2. Indentification of Stages
  3. Asertainment of Cost/REvene/Assets
  4. identification of cost drivers
  5. Resistance from employees
  6. Science vs art

AMA - Dev in Business Env (5 decks)

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