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Operations Strategies

Operations Strategies. A look at the syllabus. What do we consider to be the key areas of interest when considering our operations success?. Performance objectives. Performance objectives. Q antas S ales D epend F oreign C ustomers C alling. Performance objectives.

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Operations Strategies

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  1. Operations Strategies

  2. A look at the syllabus

  3. What do we consider to be the key areas of interest when considering our operations success? Performance objectives

  4. Performance objectives

  5. Qantas Sales Depend Foreign Customers Calling Performance objectives

  6. Come up with some KPIs for each

  7. Outsourcing is the use of external providers to perform non-core business activities on your behalf in exchange for a fee. Usually this is done because they can do the tasks required at a lower cost than you can. Strategy 1: Outsourcing

  8. Accounting IT manufacturing Legal advice Pretty much anything nowadays What types of things can be outsourced?

  9. http://www.youtube.com/watch?v=rYaZ57Bn4pQ Outsourcing video

  10. Outsourcing – pros and cons (p.91)

  11. Inventory Management refers to the amount of stock that a business has on hand at any particular point in time. (raw materials, work-in progress and finished goods). Operations Strategies 2: Inventory Management

  12. Consumer demand can be met immediately. Less chance they will leave the premises and buy from somewhere else. Reduces lead times between order and delivery of product Making purchases in bulk can reduce the cost price per item. These big purchases need to be warehouses somewhere, hence stock is accumulated. Advantages of holding stock?

  13. Numerous costs including : leasing the facility, insurance, theft and handling expenses, security costs, obsolescence (if can’t be sold), Stock represents cash tied up and not earning any interest. Disadvantages of holding stock?

  14. Valuing Stock A petrol station takes TWO fuel deliveries per week. Delivery 1] The cost they paid was $1.45 per litre for 500,000 litres. Delivery 2] The cost they paid was $1.10 per litre for 200,000 litres HOW THE HELL DO I CALCULATE MY PROFITABILTIY FOR THE SALES I MAKE?!!??!!

  15. Valuing Stock http://www.youtube.com/watch?v=ExNsFh0_39s (LIFO vs FIFO)

  16. Inventory valuation methods Step 1) JB HIFI bought 3 X-boxes at the cost of $500 each in the first delivery. THEN Step 2) JB HIFI bought another 5 X-boxes at the cost of $400 each in the second delivery. STEP 3) A customer comes up and buys an X-box for $450 from you. How much profit does JB-HIFI make?

  17. LAST IN FIRST OUT (LIFO) Method One method that can be used is called the LIFO method. This method of valuing inventory assumes that the last batch order of goods are also the first goods sold and therefore values the cost of this number of units sold at the cost of the last batch purchased. E.g. The last delivery of 5 X-boxes are assumed to be sold first, and as a result the first 5 X-boxes sold will all be costed at $400 each. The remaining 3 X-boxes will be costed at the previous cost price $500 Cost Price $ 500 each Cost price = $400 each

  18. FIRST IN FIRST OUT (FIFO) METHOD Another method that can be used is called the FIFO method. This method of valuing inventory assumes that first batch of goods purchased are the first goods sold and therefore values the cost of this number of units sold at the cost of the first batch purchased. E.g. The first delivery of 3 X-boxes are assumed to be sold first, and as a result the first 3 X-boxes sold will all be costed at $500 each. The remaining 5 X-boxes will be costed at the previous cost price $400 each. Cost Price $ 500 each Cost price = $400 each

  19. FIRST IN FIRST OUT (FIFO) METHOD Cost Price $ 500 each

  20. Some general conclusions • The overall profitability will be identical over a long enough time period. • However, the different methods will produce different results in the short-term. Early on there is Big difference in profitability Eventually it sorts itself out.

  21. Some general conclusions ***Note: the opposite effect has happened in our example because the X-box falls in price over time. It is an unusual circumstance.

  22. An inventory management system that ensures that the exact amount of material inputs will arrive only as they are needed in the operations process. • Benefits include • Easier to conduct stock take (less stock on hand) • Retailers can display a wider range of products because they do not have to stock as many duplicates • Saves on all stock related expenses mentioned earlier Just in Time – Inventory method

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