3920u7 - New Venture and Small Business Management THE...

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Unformatted text preview: New Venture and Small Business Management THE OPERATIONS PROCESS INPUTS UNIT 7 CONVERSION Introduction OR TRANSFORMATION OUTPUTS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved PRODUCTIVITY = OUTPUT INPUT ENTREPRENEURS MUST UNDERSTAND THE NATURE OF OPERATIONS, INCLUDING... l l l l l l TO IMPROVE PRODUCTIVITY, ENTREPRENEURS CAN... l l l what are the physical space requirements? what layout is most appropriate? what equipment should be used? what applicable technology is available? how should operations be planned? etc... Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved do more with a constant level of inputs do the same with less inputs do more with less ! Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management LOCATION DECISIONS HAVE LONG-LASTING IMPLICATIONS... UNIT 7 MODULE 1 Location Selection l access l visibility l costs l flexibility l etc... Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved LOCATION DECISIONS... FORMATION EXPANSION STABILITY LOCATION SELECTION PROCESS REGIONAL STAGE COMMUNITY STAGE initial location decision subsequent location decisions result from... l cost reduction efforts l market access l expansion SITE STAGE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved CHOOSING A COMMUNITY IN LIMITING THEIR LOCATION ALTERNATIVES, ENTREPRENEURS MAY OVERLOOK... "The Top Ten" l occupancy and construction costs l educated labour force l access to highways l access to primary markets l advanced energy and telecommunications systems l pro-business local government l property taxes l crime rate l corporate and business taxes Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved l Macro-Environmental Considerations l Industry-Specific Issues Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management "SHOULD I MOVE SOUTH?" LAND CONSTRUCTION UNSKILLED COST COST LABOUR SKILLED LABOUR TAXES RATE-VOLUME-COST MODEL London, Ontario 1 3 2 3 1 Rochester, New York 3 2 3 2 3 COST = T1V1D1 + T2V2D2 + ..... TnVnDn Raleigh, North Carolina 2 1 1 1 2 Based on these criteria, the winner is: RALEIGH, NORTH CAROLINA Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved SITE SELECTION CRITERIA l COSTS l ZONING l NEIGHBOURHOOD X X X X X CONDITIONS TRENDS l POPULATION l CUSTOMER ACCESS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Montreal + Toronto + Vancouver Ottawa = 200 x $4.00 + 750 x $5.00 + 500 x $8.00 = $8550 Winnipeg = 200 x $7.00 + 750 x $6.00 + 500 x $6.00 = $8900 Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved HOME OTHER LOCATION LOCATION l COST l CUSTOMER PERCEPTIONS `Home is where the business is!' l ZONING l FLEXIBILITY l CUSTOMER ACCESS l OPPORTUNITY FOR CONTACT l IMPACT ON TIME AVAILABILITY l MOTIVATION l DISTRACTION Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 2 New Venture and Small Business Management BUSINESS INCUBATORS ARE STAFFED BY EXPERIENCED BUSINESS PEOPLE AND, AS A RESULT, BUSINESSES STARTED HERE ARE 30% MORE LIKELY TO SUCCEED Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 3 New Venture and Small Business Management UNIT 7 MODULE 2 Operations Layout LEASING ALLOWS THE ENTREPRENEUR TO AVOID LARGE CASH OUTLAYS. BUT... IDEAL CONFIGURATION LEASED SPACE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved A FACILITY'S BASIC FUNCTIONAL REQUIREMENTS l SIZE w too large w too small COST INEFFICIENCIES THE PRODUCTION PROCESS FACTOR INPUTS CONVERSION OUTPUTS GARMENT MANUFACTURER l SUITABILITY (eg. age, condition, accessibility) l l l l l fabric thread buttons machines operators l l l l receiving cutting sewing pressing l IMAGE (i.e. customers' perceptions) Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved HAIR SALON l chair l scissors l stylist l wash l cut l dry Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved CHILDREN'S GARMENT MANUFACTURER (A Hypothetical Situation) CHILDREN'S GARMENT MANUFACTURER CUTTING CYCLE TIME SEWING BUTTONING PRESSING 5 minutes 12 minutes 12 5 4 minutes 15 3 minutes 20 CUTTING SEWING BUTTONING PRESSING MAXIMUM OUTPUT PER HOUR bottleneck process limits output to 5 garments per hour 5 minutes 12 minutes 4 minutes 3 minutes 5 minutes used 12 minutes available OPERATING EFFICIENCY + 12 minutes used 12 minutes available + 4 minutes used 12 minutes available + 3 minutes used 12 minutes available = 48 minutes available = 50% Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 24 minutes used 1 New Venture and Small Business Management CHILDREN'S GARMENT MANUFACTURER CHILDREN'S GARMENT MANUFACTURER CUTTING CYCLE TIME MAXIMUM OUTPUT PER HOUR EFFICIENCY SEWING #1 SEWING #2 BUTTONING PRESSING DEMAND (100 articles / day) SUPPLY / hour 8 ( 5 garmentsarticles /xdayhours ) = 40 5 minutes 6 minutes 12 5/6 CUTTING #1 CUTTING #2 4 minutes 3 minutes 20 3/6 = 80% PRESSING 10 80 /day 15 OPTIONS: decline orders or increase supply Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved CYCLE 2.5 TIME MAXIMUM OUTPUT PER HOUR EFFICIENCY SEWING #1 SEWING #2 } BUTTONING SEWING #3 4 minutes 15 120/day 15 6/6 4/6 minutes 4 minutes 24 3 minutes 20 2.5/4 4/4 4/4 3/4 = 84% Given SUPPLY > DEMAND, efficiency drops to 70%. Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved HAIR SALON (A Hypothetical Situation) WAIT WASHING WASHING CUTTING CUTTING CUTTING DRYING DRYING DRYING MANUFACTURING LAYOUT PRODUCT LAYOUT RECEIVING RECEIVING PROCESS 1 PROCESS LAYOUT PROCESS 1 PROCESS 2 One customer begins the process every 7 minutes. PROCESS 2 PROCESS 3 IF..... 15 customers arrive every hour, PROCESS 3 PROCESS 4 PROCESS 4 PROCESS 5 THEN..... the average waiting time is approximately 24 minutes Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved PROCESS 5 SHIPPING SHIPPING Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved MANUFACTURING LAYOUT VOLUMES OTHER MANUFACTURING CONSIDERATIONS... l receiving and shipping areas l ceiling height l safety aspects l access to utility outlets l ease of maintenance and cleaning Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved TIME PROCESS LAYOUT PRODUCT LAYOUT Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 2 New Venture and Small Business Management RETAIL LAYOUT GRID PATTERNS FREE-FLOW PATTERNS RETAIL LAYOUT MERCHANDISING CONSIDERATIONS... PRODUCT LOCATION l staple goods l convenience goods l shopping goods l specialty goods l high margin goods Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved l back of store l at checkout l by category with competing brands l anywhere l at eye level Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved RETAIL LAYOUT VALUE OF SHELF SPACE... 3 ENTRANCE 4 3 2 6 5 6 2 1 1 = highest value 6 = lowest value Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 3 New Venture and Small Business Management GENERAL PURPOSE vs. SPECIALIZED EQUIPMENT UNIT 7 MODULE 3 Equipment And Technology GENERAL PURPOSE EQUIPMENT IS UNLIKELY TO PLAY A MAJOR COMPETITIVE ROLE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved EQUIPMENT GENERAL PURPOSE SPECIALIZED TECHNOLOGY PERMITS... l minimal lead times COST FLEXIBILITY EFFICIENCY Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved l small l high, batch runs consistent quality operation l continuous l electronic data interchange l novel marketing programs Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved SMALL, HOME-BASED BUSINESSES ARE EMBRACING TECHNOLOGY... l 92% l the have computers majority have faxes, printers, etc... access is growing in popularity l internet l 70% intend to make a major software purchase Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management MANAGING INVENTORY EFFECTIVELY ENHANCES PROFITABILITY AND CASHFLOW. REMEMBER... UNIT 7 MODULE 4 Purchasing And Inventory Management l A LOT OF MONEY IS SPENT ON INVENTORY ! w 50% of sales in retail w 70% of sales in wholesale w 35% of sales in manufacturing l INVENTORY TIES UP CASH, SPACE, EMPLOYEES, TIME, ETC... l QUALITY OF OUTPUT = Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved I (QUALITY OF INPUT) Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved MANAGING INVENTORY EFFECTIVELY INVOLVES... l securing factors of production (quality + quantity + best price + timeliness) THE PURCHASING CYCLE IDENTIFY INVENTORY NEEDS LOCATE SOURCE OF SUPPLY l maximizing sales while minimizing investment in inventory ISSUE PURCHASE ORDER FOLLOW UP ON ORDER l protecting inventory against theft, Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved obsolescence, deterioration, etc... VERIFY RECEIPT OF GOODS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved IDENTIFY INVENTORY NEEDS LOCATE SOURCE OF SUPPLY MAKE vs. BUY 3 IMPORTANT QUESTIONS... l WHERE DO WE GET INFORMATION ? l control supply and quality l reduce costs l greater flexibility l reduce capability requirements l protect proprietary information w sales representatives w advertising w trade associations w word-of-mouth l HOW DO WE GET THE BEST PRICE ? l HOW MANY SUPPLIERS SHOULD WE HAVE ? Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved l utilize capacity Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management LOCATE SOURCE OF SUPPLY LOCATE SOURCE OF SUPPLY 3 IMPORTANT QUESTIONS... l WHERE DO WE GET INFORMATION ? l HOW DO WE GET THE BEST PRICE ? w `BEST' = I (price, quality, timeliness, order accuracy) w `BEST PRICE' = I(number of quotes) l HOW MANY SUPPLIERS SHOULD WE HAVE ? Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 3 IMPORTANT QUESTIONS... l WHERE DO WE GET INFORMATION ? l HOW DO WE GET THE BEST PRICE ? l HOW MANY SUPPLIERS SHOULD WE HAVE ? ONE vs. SEVERAL quotes w increases volumes volume discounts w number of negotiating power Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved BUILDING STRONG SUPPLIER RELATIONSHIPS... l treat them fairly l pay bills on time l keep appointments l don't abruptly cancel orders l etc... Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved ISSUE PURCHASE ORDER TO AVOID MISUNDERSTANDING FOLLOW UP ON ORDER TO ENSURE ON-TIME DELIVERY VERIFY RECEIPTS OF GOODS TO ENSURE QUANTITY, QUALITY, ETC., AND ENTER RECEIPT INTO INVENTORY RECORDS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved INVENTORY RECORD MANAGEMENT INVENTORY CLASSIFICATION l RAW MATERIALS l WORK-IN-PROCESS l FINISHED GOODS l PERIODIC PHYSICAL COUNT (accurate point-in-time information) l PERPETUAL SYSTEMS (require strict adherence to procedures) Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 2 New Venture and Small Business Management INVENTORY COSTS INVENTORY MANAGEMENT SYSTEMS l REORDER POINTS l PERIODIC REVIEW l MATERIALS REQUIREMENT PLANNING l ORDERING COSTS w information gathering w negotiation w issuing P.O. w follow-up w etc... l CARRYING COSTS w interest on money w insurance w handling w deterioration w obsolescence w pilferage w etc... Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved INVENTORY MANAGEMENT SYSTEMS REORDER POINTS INVENTORY INVENTORY MANAGEMENT SYSTEMS ECONOMIC ORDER QUANTITY TOTAL COST CARRYING COSTS INVENTORY COST maximum minimum = reorder point safety stock ORDER COSTS } TIME QUANTITY PER ORDER lead time Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved INVENTORY MANAGEMENT SYSTEMS PERIODIC REVIEWS INVENTORY DEMAND OVER LEAD TIME REORDER = MAXIMUM LEVEL QUANTITY Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved } EOQ INVENTORY ON HAND INVENTORY ON ORDER Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved INVENTORY MANAGEMENT SYSTEMS `ABC' INVENTORY MANAGEMENT 100% 90% 75% + PERCENT OF TOTAL INVESTMENT IN INVENTORY A 20% B 50% C 100% PERCENT OF TOTAL ITEMS IN INVENTORY Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 3 New Venture and Small Business Management "THE NEWSBOY PROBLEM" AS INVENTORY SOLD OUT ! RECYCLE RISK OF LOST SALES Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved WHAT IS THE BEST ORDER QUANTITY ? Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved "THE NEWSBOY PROBLEM" NEWSPAPERS FREQUENCY DEMANDED (days / 100 days) "THE NEWSBOY PROBLEM" PAYOFF TABLE PROFIT 39 sold x $1.50 = $58.50 40 bought x $1.00 = $40.00 $18.50 38 39 40 41 42 10 % 20 % 35 % 25 % 10 % 100 % NEWSPAPERS DEMANDED 38 NUMBER OF NEWSPAPERS KAREN BUYS 39 40 41 42 38 39 40 41 42 $19.00 $19.00 $19.00 $19.00 $19.00 $18.00 $19.50 $19.50 $19.50 $19.50 $17.00 $18.50 $20.00 $20.00 $20.00 $16.00 $17.50 $19.00 $20.50 $20.50 $15.00 $16.50 $18.00 $19.50 $21.00 Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved "THE NEWSBOY PROBLEM" PAYOFF PROBABILITY EXPECTED DAILY PAYOFF $1.90 $3.80 $6.65 $4.75 $1.90 $19.00 NEWSPAPERS DEMANDED 38 39 40 41 42 WHICH IS THE BEST INVENTORY MANAGEMENT DECISION ? 40 NEWSPAPERS PER DAY Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved NUMBER OF NEWSPAPERS KAREN BUYS 38 39 40 41 42 $1.80 $1.70 $1.60 $1.50 $3.90 $3.70 $3.50 $3.30 $6.83 $7.00 $6.65 $6.30 $4.88 $5.00 $5.13 $4.88 $1.95 $2.00 $2.05 $2.10 $19.35 $19.40 $18.93 $18.08 Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 4 New Venture and Small Business Management ROOTS OF DISSATISFACTION UNIT 7 MODULE 5 Quality Management PRODUCT / SERVICE DELIVERY GAP ? CUSTOMER'S EXPECTATIONS EXPECTATIONS ARE INFLUENCED BY... l l l l product / service specifications the customer's needs past experiences input from others Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved NEGATIVE CONSEQUENCES OF DISSATISFACTION l entrepreneurs may develop a false sense that they are doing things right SUCCESSFUL QUALITY MANAGEMENT DEPENDS ON... l adopting a customer focus l a supportive organizational culture l understanding quality's tools and techniques l run-off from the customer base l bad word-of-mouth behaviour Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved QUALITY IS A CUSTOMER PERCEPTION... THEREFORE, ASK THE CUSTOMERS WHAT QUALITY IS ! Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved NOT SURPRISINGLY, ENTREPRENEURS ARE OFTEN UNIFORMED AS TO WHAT CRITERIA CUSTOMERS ARE USING TO MEASURE QUALITY. EXAMPLE ACCOUNTANT CLIENT l ACCURACY ! l l l l l TIMELINESS EMPATHY ASSURANCE FEES PROFESSIONALISM Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management QUALITY MEANS EXCEEDING STANDARDS... THE ENTREPRENEUR MUST LEAD THIS `QUALITY CULTURE' Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved APPROACHES TO QUALITY l EMPLOYEE PARTICIPATION l INSPECTION l STATISTICAL METHODS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved ISO CERTIFICATION IMPLIES QUALITY Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 2 ...
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