Flashcards in Process/Project Management, Globalization, Financial Risk Management, Decisions, valuation Deck (71):
5 categories of Business Process Management
What is Business Process Management
BPM is a management approach that seeks to coordinate the functions of an organization to customer satisfaction. seeks effectiveness and efficiency through promotion of innovation, flexibility, and integration with technology.
Process Management has 4 aspects which includes?
Fewer resources are used to accomplish organizational objectives
Objectives are accomplished with greater predictability
Responses to change are faster and more reliable
Irrational methods defined
Intuitive and emotional, They lack structure and systematic evaluation. Based on fashion, fad, or trend.
Rational methods defined
Structured and systematic
Key features of successful implementation activities.
1. Internal Leadership
2. Internal process ownership
4. Executive Support
JIT pros and cons
1. Productions matches demand
2. Supplies arrive at regular intervals
3. Reduced set-up time
4. Empowers employees using employees with multiple skill sets with greater efficiency
1. NOT VALUE ADDED
Types of Cost of Quality and their subcategories
1. Conformance Costs-ensuring Conformance
a. Prevention Costs
b. Appraisal Costs
2. Nonconformance Costs-Opportunity Costs
a. Internal Failure
b. External Failure
Prevention Costs defined and categorized
Incurred to prevent the production of defective units.
1. Employee training
2. Inspection Expenses
3. Preventive Maintenance
4. Redesign of product
5. redesign of processes
6. Search for higher-quality supplier
Appraisal Costs defined and categorized
Detecting before; Incurred to discover and remove defective parts before they are shipped to the customer or the next department.
1. S-tatistical quality checks
4. M-aintenance of the laboratory
Internal Failure defined and categorized
The costs to cure a defect discovered BEFORE the product is sent to the customer
1. Rework costs
3. Tooling changes
4. Disposal costs
5. Cost of the lost unit
External Failure defined and categorized
The costs to cure a defect discovered AFTER the product is sent to the customer; Selling
1. Warranty Costs
2. Cost of returning the goods
3. Liability claims
4. Lost Customers
5. Re-engineering an external failure
Total Quality Management(TQM) defined
Represents an organizational commitment to customer focused performance that emphasizes both quality and continuous improvement.
7 Critical factors of TQM
1. T-op Management Support-Delegation and Empowerment
2. O-bjective Measures
3. C-ustomer Focus (Internal and External)
4. T-imely Recognition
5. O-ngoing Training
6. C-ontinuous Improvement
3. Workforce: Involvement-Quality Circles
Quality Audits defined
Technique used as part of the strategic positioning Function in which management assesses the quality practices of the organization. Identifies strengths and weaknesses, Identifies the improvement steps that will produce the greatest ROI
Gap Analysis defined
Determines the gap or difference between industry best practices and the current practices of the organization; targets areas for improvement, common objective database from which to develop strategic quality improvement.
Lean Manufacturing defined
Cut the Fat; requires the 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.
Continuous Improvement; Improve the efficiency and effectiveness of organizations through greater operational control
Visually coordinate demand requirements on the manufacturing floor with suppliers; also used to coordinate demand flow.
Theory of Constraints(TOC) defined
States that organizations are impeded from achieving objectives by the existence of one or more constraints. Works around or leverages the constraint.
Anything that impedes the accomplishment of an objective
Internal constraints defined
Evident when the market demands more than the system can produce. Equipment inefficient, People lack the skills, Policies prevent the use of resources.
External constraints defined
Exist when our system produces more than the market requires
5 steps of TOC
1. Identification of the constraint
2. Exploitation of the constraint
3. Subordinate everything else to the above decisions
4. Elevate the constraint
5. Return to the first step
How is Identification of the constraint carried out?
Use of process charts or interviews results in identification of the constraint that produces suboptimal performance.
How is Exploitation of the constraint carried out?
Planning around the constraint uses capacity that is potentially wasted by making or selling the wrong products, improper procedures in scheduling, etc.
How is Subordinate everything else to the above decisions carried out?
Management directs its efforts to improving the performance of the constraint.
How is elevate the constraint carried out?
add capacity to overcome the constraint
How is return to the first step carried out?
reexamine the process to optimize the results. Remain cognizant that inertia can be a constraint.
What is Six Sigma?
Anticipates the use of rigorous metrics in the evaluation of goal achievement. Continuous quality-improvement program that requires specialized training. Expands PLAN-DO-CHECK-ACT.
Existing product and Business process Improvements steps. (Six Sigma)
1. D-efine the problem
2. M-easure key aspects of current process
3. A-nalyze data
4. I-mprove or optimize current processes
New Products or Business Process Development(Six Sigma)
1. D-efine design goals
2. M-easure CTQ
3. A-nalyze design alternatives
4. D-esign optimization
5. V-erify the design
5 major processes of project management(PM)
Authorization(Project Charter) in PM is defined as what?
document that contains a business justification to fulfill the needs and expectations of initial stakeholders by carrying out a statement of work that will achieve the project objectives. Formally establishes a partnership between the requesting organization and the receiving organization.
Planning in PM is defined as what?
Involves all the activities necessary to determine the scope of the project, refine the project objectives, and define the course of action required to attain the project objectives; Ongoing process throughout life of project; establishes the "Baseline(Standard for quality)."
Implementation in PM is defined as what?
The activities that are associated with "Completing the work" that has been specified in the project plan and producing the deliverables; Assures Quality
Monitoring(Controlling) in PM is defined as what?
Consists of procedures that are performed to observe 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.
Risk Assessment steps
1. Analyze everything that could go wrong throughout the project plans
2. Analyze each risk
3. Prioritize risk and determine which risks must be eliminated(Severe Risks), receive regular attention(Significant Risks), and which are immaterial.
What is Parametric Estimating?
A technique that relies on a statistical relationship between historical cost and other variables, such as square footage.
What is Analogous Estimating?
The cost of similar sized projects conducted in the past is used to approximate the cost of the current project; Less accurate because it is a top-down approach and generally doesn't address the unique qualities of the project on hand.
What is work breakdown Structure Estimation(WBS)
Considered a bottom-up analysis because each activity is estimated, and then the costs of each activity is aggregated to form the project budget.
What is Three-Point Estimates?
Refers to a range of cost estimates based on a most-likely assumption(realistic) of project costs.
What is Reserve Analysis?
Monetary padding to allow for uncertain cost estimations.
What is Comparative Advantage?
Specialization in the production and trade of specific products in relation to trading partners.
Exchange Rate Risks are divided into 3 categories.
1. Transaction Risks
2. Economic Risks
3. Translation Risks
What is Transaction Risk?
The exchange rate risk associated with the time delay between entering into a contract and settling it.
What is Economic Risk?
In financing a project, the risk that the project's output will not generate sufficient revenues to cover operating costs and to repay debt obligations.
What is Translation Risk?
The exchange rate risk associated with companies that deal in foreign currencies or list foreign assets on their balance sheets. The greater the proportion of asset, liability and equity classes denominated in a foreign currency, the greater the translation risk.
What is Functional Interdependence?
The participation of nations in worldwide institutions; Cooperation amongst nations to address global issues.
What is Systemic Interdependence?
Acknowledges that all members of the global community share the earth. Actions of governments that adversely impact the climate or reduce our safety impact all nations; Global issues
What is Multipolarity?
Increase will require an acknowledgment of interdependence of nations and cooperation among nations consistent with shifts in the balance of power.
What is Unipolar?
USA; Sole economic and military superpower.
What is Risk-Indifferent behavior?
Increase in the level of risk does not result in an increase in management's required rate of return.
What is Risk-Adverse behavior?
Increase in the level of risk results in an increase in management's required rate of return. require higher expected returns to compensate for greater risk.
What is Risk-Seeking behavior?
Increase in the level of risk results in a decrease in management's required rate of return. Willing to settle for lower expected returns as the level of risk increases.
What is Interest Rate Risk?
Represents the exposure of the owner of the instrument to fluctuations in the value of the instrument in response to changes in interest rates.
What is Market Risk?
The exposure of a firm to fluctuations in value as a result of operating within an economy; Nondiversifiable risk
What is credit Risk?
As credit ratings decrease, higher interest rates. As credit ratings increase, lower interest rates.
Short term focus advantages and disadvantages.
1. Increased Liquidity
2. Increased Profitability
3. Decreased Financing Cost
1. Increased Interest Rate Risk
2. Increased Credit Risk
Long term Financing advantages and disadvantages
1. Decreased Interest Rate Risk
2. Decreased Credit Risk
1. decreased Profitability
2. Decreased Liquidity
3. Increased Financing Costs
Annuity Present Value Formula
C x (1-PV factor/r)
C=Amount of annuity(Equal future cash flows)
r= Rate of return
t= Number of years
Present value of a Perpetuity formula
Stock Value per share with Assumed Growth
D(t+1)= Dividend one year after period "t"
R= Required Return
G= Growth rate
Price-Earnings(P/E) Ratio formula
P/E Ratio= P0/E1
P0= Price or value today
E1= Expected earnings in one year
PEG Ratio formula
P0= Price or value today
E1=Expected Earnings in one year
G=Growth rate=100x expected growth rate
Price to sale ratio formula
P0= Price or value today
S1= expected sales in one year
Price-to-Cash-Flow Ratio formula
Price-to-Cash-Flow ratio= P0/CF1
P0= Price or value today
CF1= Expected cash flow in one year