March 31, 2015

Financial Analysis for Operations Management Decisions - Review Notes

Operations managers has to do engineering economic analysis and financial analysis of their project and expenditure proposals.

Chapter Outline of

Richard B. Chase, F. Robert Jacobs, Nicholas J. Aquilano, Operations Management for Competitive Advantage, 10/e, McGraw-Hill Higher Education, 2004

Concepts and Definitions

Fixed Costs
Variable Costs
Sunk Costs
Opportunity Costs
Avoidable Costs

Expected Value
Economic Life and Obsolescence

Straight-Line Method
Sum-of-the-Years' Digits (SYD) Method
Declining-Balance Method
Double-Declining Balance-Method
Depreciation-By-Use Method

Activity-Based Costing
The Effects of Taxes

Choosing Among Investment Proposals

Determining the Cost of Capital

Interest Rate Effects
Compound Value of a Single Account
Compound Value of An Annuity
Present Value of A Future Single Payment
Present Value of An Annuity
Discounted Cash Flow

Methods of Ranking Investments

Net Present Value
Internal Rate of Return

Ranking Investments with Uneven Live

Relevant Costs for Decision Making

Financial Analysis for Operations Management Decisions - Summary for Revision

Financial analysis tools and concepts are important for OM.

These tools include the types of costs, activity-based costing, risk, and expected value, and depreciation for more periodic operating decisions. When the focus of OM decisions is capital investment, issues of cost-of-capital calculations and methods of ranking investment proposals are important.

Fixed costs are any expenses that remain constant regardless of the level of output of production.

Variable costs, conversely, vary directly with changes in output levels.

Sunk costs are past expenses or investments that have no salvage value and therefore should not be taken into account when considering investment alternatives.

Opportunity costs are the benefits lost that result from choosing one action over another action.

Avoidable costs are expenses not incurred if an investment is made but that must be incurred if the investment is not made. Avoidable costs becomes the cost savings, for the proposed projects and hence enter into financial or economic analysis as positive cash flows against the negative cash flows due to investment in the project.

Expected value is the sum of expected outcomes multiplied by the probability of their occurrence. Expected values result because there is risk inherent in any investment decision.

The life of a machine or other income-producing assets is estimated and for accounting purposes, the asset is depreciated over this period. Depreciation is a method for allocating costs of capital equipment. Methods of depreciation include the straight-line method, the sum-of-the-years' digits method, the declining-balance method, the double-declining -balance method, and the depreciation-by-use method.

Activity based costing is an important accounting concept for OM and it is the practice of allocating overhead to better reflect actual proportions of overhead consumed by the production activity. Causal factors or cost drivers are identified and are used as the basis for overhead allocation as direct labor is not the best basis for allocating all overheads.

When choosing among investment proposals, investments are generally ranked according to the return they yield in excess of their cost of capital. Investment decisions can include the purchase of new equipment or facilities, replacement of existing equipment or facilities, make-or-buy decisions, lease-or-buy decisions, temporary shutdowns or plant abandonment decisions, or the addition or elimination of a product or product line.

Other financial decisions include determine the cost of capital, tax issues, and interest rate effects on OM decisions. Ways to rank investments include the net present value method, payback period, and the internal rate of return.

Costs relevant to aggregate production planning include basic production costs to costs associated with changes in the production rate, inventory holding costs, and backordering costs.

Important Operations Decisions Requiring Financial Analysis

1. Purchase of new equipment or Facilities
2. Replacement of existing equipment or facilities
3. Make or buy decisions (components)
4. Lease or buy decisions (equipment)
5. Temporary shutdowns or total plant closure decisions
6. Addition or elimination of a product or product line

Richard B. Chase, F. Robert Jacobs, Nicholas J. Aquilano, Operations Management for Competitive Advantage, 10/e, McGraw-Hill Higher Education, 2004

Originally posted at

Full material from the book

Updated 27 March 2015, 9 Dec 2011

March 30, 2015

Operations Management Update 2014

MBA Core Management Knowledge - One Year Revision Schedule

March 2015

Construction Management in Transportation Projects
FTA Guide 2006
Federal Transit Administration


December 2014

Learn from the Manufacturing Leaders of the Week - Industry Week Articles

 SEP 2014 Harvard Business School  WORKING PAPERS
Chief Sustainability Officers: Who Are They and What Do They Do?
by Kathleen Miller and George Serafeim

April 2014

Demystifying Technology Decisions

Europe's Solution Factories - How some manufacturing companies are successful in competing against low labor cost economy - but good quality competition. The strategies that they are using.

They use one or more of four distinct strategies:
They leverage data flows to integrate closely with their supply chain partners;
they optimize customer value across the whole chain, not just their part of it;
they cooperate with suppliers to rapidly improve their manufacturing processes; and
they harness their technical capabilities to offer a high degree of product customization for their customers. In short, they work with partners to manufacture solutions for other partners.

HBR article - April 2014


36 Operational Excellence Stats Every Manufacturing Leader Must See
Posted by Mike Roberts on Mon, Jan 27, 2014

Managing Operational Excellence
Quality Magazine Article

POMS 2014 Martin K. Starr Excellence in  Production andOperations Management Practice Award
Dr. Dean Bartles, Vice‐President, Advanced Programs and Strategic Growth, General  Dynamics  
Mr. Josue Gomes da Silva, CEO, Coteminas, Inc.              

Dr. Dean Bartles

Dr. Dean Bartles has been a manager with General Dynamics for twenty‐nine years and currently serves as Vice President, Advanced Programs and Strategic Growth, and General Manager of the Ordnance and Tactical   Systems Division—the largest strategic business unit in the firm.  He has previously served as Vice
President and Director of Business Development, Director of International Marketing and has been a Program Manager and Administrator.
In his career at General Dynamics, Dr. Bartles has excelled in operations management practice
through the introduction of many manufacturing innovations and improvements.  He first
managed modern co‐production facilities in Egypt and Turkey under US supervision.  He
successfully implemented lean manufacturing at three heavy manufacturing plants, greatly
increasing productivity.  His plants have received numerous awards for environmental and
manufacturing excellence, including a US Secretary of Defense Environmental Excellence Award
for Sustainability and several General Dynamics Manufacturing Excellence Awards.   He serves
as Chairman of the board for the National Center for Defense Manufacturing and Machining
and is an International Director of SME.  In 2014 he will join the Board of the National Center
for Manufacturing Science.

Dr. Bartles received his PhD in Technology Management from Indiana State University, a
Doctorate in Business Administration from Nova Southeastern University, Master’s degrees in
Business from Tampa College and Shippensburg University and a BS in Business Administration
from Shepherd University.

Josue Gomes da Silva

Mr. JosueGomes da Silva isthe Chairman and Chief Executive Officer of Coteminas, a global bed and bath
home fashion products company based in Brazil, with manufacturing facilities in several countries in the
Americas. He joined the company in 1989 as Chief  Financial Officer and became CEO in 1993. As CEO, he developed international operations with rapidly increasing exports and, subsequently, with the
acquisition of Springs, Inc. in the U.S., was able to combine low cost, efficient South American
manufacturing facilities with brands and a distribution platform in the U.S. and Canada.
Coteminas developed a vertically integrated operation including cotton production, ginning,
spinning, weaving, dyeing, printing and finishing of textiles.  With faster operations the firm was
able to move closer to the end user and serve more than 5,000 retail customers.  Beginning in
2009, Coteminas introduced 50 retail outlets, and today has about 250 stores. Under Josue’s
leadership, Coteminas diversified and increased production capacity by incorporating 17 new
plants into the group, acquiring some plants through mergers and acquisitions and others as
greenfield facilities.  A global sourcing platform was created through the establishment of
strategic alliances with suppliers in Pakistan, India, and China.  Today Coteminas operates a
completely integrated, dynamic global supply chain in textiles from cotton all the way to the
final consumer.

Mr. Gomes da Silva is founder and Chairman of the Board of Cantagalo General Grains S.A., a
company with integrated operations including the production, commercialization, and distribution of grains. Josue is a Board member of Embraer. He also is President of the  International  Textile Manufacturers Federation– ITMF, and is Chairman of  the  Brazil Chapter of  the  Brazil‐United States CEOs Forum‐ICESP.

Mr. Gomes da Silva has a graduate degree in civil engineering from the Federal University of
Minas Gerais (1986) and a law degree from Faculdade Milton Campos (Belo Horizonte, MG‐
1987). In 1989, he received a Master’s of Business Administration from Vanderbilt, and was
awarded Vanderbilt’s Founder’s Medal for First Honors in recognition of his academic
achievement. He has received numerous tributes for his operations and entrepreneurial
activities, including the Medalha da Ordem do Merito Industrial – CNI.

Basic Articles on Operations Management

Chapter Summaries of Chase - Aquilano Book

Material Requirements Planning - Review Notes for Chase et al. Book Chapter

Summary for Revision

When demand is dependent on multiple materials, managers use a concept known as materials requirements planning, or MRP, to determine demand for lower level items. MRP is a logical approach to determine the number of parts, components, and material needed to produce each end item. It also provides the time schedule specifying when each of these materials, parts, and components should be ordered or produced.

MRP has grown from planning materials to also planning for other organizational resources needed.

Bill of Materials gives the hierarchical details of finished product, main assemblies, sub assemblies, components and materials of a product.

From an organization's aggregate plan, the master production plan (MPS) is developed. The MPS is the time-phased plan specifying how many and when the firm plans to build each specific end item. Further down the MPS process is the MRP, which calculates and schedules all of the raw materials, parts, and supplies needed for production.

If customers give advance orders, management must specify a time fence, or period of time in which the customer can make changes in their order. Once this time has passed, the order becomes fixed. The MRP uses this fixed plan to create schedules to identify the parts and materials required to produce end items, the exact numbers needed, and the dates when orders for these materials should be released and be received or completed within the production cycle.

Today, computerized inventory systems for MRP control inventory levels, assign operating priorities for items, and plan capacity to load the production system. The goal of MRP is to get the correct materials to the right place at the right time.

The objectives of inventory management under an MRP system are to improve customer service, minimize inventory investment, and maximize production operating efficiency. The MRP interacts with the master production schedule, the bills of material file, and the inventory records file. Product demand data for MRP systems comes from two sources -- from customers who have placed firm orders and from forecasted or anticipated demand.

The bill of materials (BOM) file contains the complete product description listing the materials, parts, and components as well as the sequences in which the product is created. MRP outputs can take a variety of forms and can be classified as primary and secondary output reports. Capacity constraints can be determined using capacity requirements planning. An MRP program with a capacity requirements planning module allows rescheduling to try to level capacity through either backward or forward scheduling. The master schedule will try to level out the load so that requirements for work centers remain within the available capacity.

MRP II has expanded the role of MRP to include planning for staffing, facilities, and tools. Called manufacturing resource planning, it can plan and monitor all the resources of a manufacturing firm including manufacturing, marketing, finance, and engineering within a closed-loop system.

JIT is best suited to repetitive manufacturing. MRP is used in everything from custom job shops to assembly line production. The term flow manufacturing is now being used by many software vendors to describe new software modules that combine MRP and JIT logic.

MRP applications have many uses even in service organizations. But so far only a few service organizations have developed or implemented MRP. Many believe that it is a manufacturing tool.

Chapter Outline of

Richard B. Chase, F. Robert Jacobs, Nicholas J. Aquilano, Operations Management for Competitive Advantage, 10/e, McGraw-Hill Higher Education, 2004

Where MRP Can Be Used
A Simple MRP Example
Master Production Schedule
Time Fences
Material Requirements Planning (MRP) Systems
Purposes of MRP
Material Requirements Planning System Structure
Demand for Products
Bill of Materials File
Inventory Records File
MRP Computer Program
An Example Using MRP
Forecasting Demand
Developing a Master Production Schedule
Bill of Materials (Product Structure) File
Inventory Records (Item Master) File
Running the MRP Program
Improvements in the MRP System
Computing Work Center Load
Closed-Loop MRP
MRP II (Manufacturing Resource Planning)
Flow Manufacturing: Embedding JIT into MRP
Lot Sizing in MRP Systems
Economic Order Quantity
Least Total Cost
Least Unit Cost
Choosing the Best Lot Size


Originally posted in

Updated 30 March 2015, 10 Dec 2011

March 27, 2015

Inventory Control - Review Notes for Chase et al. Book Chapter

Inventory is the stock of any item or resource used in an organization.

Inventory can exist as raw materials, finished products, components parts, supplies, and work-in process.

Organizations keep inventory for a number of reasons including to maintain independence of operations, to meet variation in product demand, to allow flexibility in production scheduling, to provide a safeguard for variation in raw material delivery time, and to take advantage of economic purchase order size.

Costs associated with inventory include holding or carrying costs, setup or ordering costs, and shortage or stockout costs. Inventory management has the responsibility to optimize these costs along with the benefits that accrue due to inventories.

Independent demand items are unrelated to each other and thus needed quantities for these independent items must be determined separately. For dependent demand items, the demand for one item is a direct result of the need for other items. Component parts demand, for example, is dependent on the demand for the final product. If the schedule of finished product delivery is finalized, one can arrive at the demand for component parts in various time buckets.
Inventory planning and ordering systems can be modeled as fixed-order quantity or fixed-time period. In the fixed-order quantity model, the same amount of inventory is replenished in each order. The assumptions include: demand is known, constant, and uniform throughout a period. Lead time is constant and the price per unit and ordering costs are constant. But the model is applied to situations with varying annual as well as periodic demand

In a fixed-time period system, inventory is counted at fixed time intervals and orders are placed on a periodic basis. This model is desirable in situations when vendors make routine visits to customers and take orders for their complete line of products or when buyers want to combine orders to save on transportation costs.
Organizations must make decisions about the amount of safety stock to maintain for protection against stockouts. The safety stock ensures a firm's desired service level will be met.

The quantity-discount inventory model applies when the cost of an item varies with the order size. This model, as in all inventory models, computes an economic order quantity (EOQ) to minimize order costs and holding costs.

ABC analysis is a planning and control technique. The highest dollar volume items, or "A" items, are given the most attention in planning and the most rigorous cycle counting and attention for inventory control.

Because many firms, including services, may have large inventory investments, inventory reductions will lead to reduced costs. The managers of Toyota Motors developed their production planning methods with a view to reduce inventory and found that it required cutting set up times. Hence reduction in set up times was pursued, they reduced 8 hours of set up time to 8 minutes and further to three minutes. They also found that they needed to reduce defects and hence took up quality improvement activity in production processes. The succeeded in achieving low inventories that gave them savings in costs associated with inventory and also reduced their quality costs and set up costs. Overall they got lower cost of production hence became globally competitive.

Two examples where inventory control is used on in service companies are a department store and an automobile service agency.

Chapter Outline of
Richard B. Chase, F. Robert Jacobs, Nicholas J. Aquilano, Operations Management for Competitive Advantage, 10/e, McGraw-Hill Higher Education, 2004

Definition of Inventory
Purposes of Inventory
Inventory Costs
Independent versus Dependent Demand
Inventory Systems
Single Period Model
Multi-Period Inventory System
Fixed Order Quantity Models
Establishing Safety Stock Levels
Fixed-Order Quantity Model with Safety Stock
Fixed-Time Period Models
Fixed-Time Period Models with Safety Stock
Price-Break Models
Miscellaneous Systems and Issues
Three Simple Inventory Systems
ABC Inventory Planning
Inventory Accuracy and Cycle Counting
Inventory Control in Services

Case: Hewlett-Packard - Supplying the DeskJet Printer in Europe


Richard B. Chase, F. Robert Jacobs, Nicholas J. Aquilano, Operations Management for Competitive Advantage, 10/e, McGraw-Hill Higher Education, 2004

Originally posted at 2utb2lsm2k7a/ 438

Updated  27 March 2015, 10 Dec 2011

The IBM® Cognos® 8 Business Intelligence Solution for Operations Excellence

The IBM® Cognos® 8 Business Intelligence solution can make your entire supply chain, all your operations and your entire enterprise intelligent — by delivering the global visibility that is the key to your success in your business endeavor.

IBM Cognos 8 BI can track a number of key metrics that are the critical factors in the success of your Operations, for example:

Increased throughput.
Reduced manufacturing costs.
Shortened lead times.
Reduced backlog.
Improved quality performance.
Reduced reject rate.
Reduced scrap levels.
Reduced line downtime.

Linking strategic metrics developed by executives down to operational metrics on the plant floor

Most Operations personnel working in a large plant may have little idea of the official corporate strategy, or how they can best contribute to that strategy. Similarly, visibility of operational performance between the corporate and business levels is often very poor.

A scorecarding system, which may be based on the Balanced Scorecard approach or on the SCOR (Supply Chain Operations Reference) model created by the Supply Chain Council, can be very effective in making performance visible, thereby forcing an emphasis on visibility of performance targets and actual performance and encouraging an environment of increased accountability.

Manufacturers that have undertaken the  task of defining their KPIs are well positioned to adopt scorecarding technology. They will be very useful if these have been defined across multiple plants within a business unit. These KPIs should be hierarchically defined, so that business users can “drill down” into areas of poor performance to understand root causes. Web-based scorecards and dashboards
ensure maximum visibility, access and use.

Linking strategic metrics developed by executives down to operational metrics on the plant floor drives business and operational alignment, and the result is operational excellence.

Procurement Excellence

 The purchasing organization and your suppliers’ performance are quantified and tracked with KPIs
that measure quality and cost (including comparisons to alternate sources), delivery and order or requisition placement.

Supplier scorecards enable continuous, timely measurement against consistent standards for all suppliers.
With consolidated procurement information, you are better able to leverage your company’s purchasing power. You can identify suppliers that offer the same materials or services, and rapidly evaluate their offerings against the same standards.

With the ability to monitor all your suppliers, you can leverage your knowledge to improve supplier responsiveness and the efficiency of your supply chain, and you can gather data that will help you make the most profitable decisions when negotiating future procurement contracts. In addition, you can share information, such as supplier performance data, with suppliers via an extranet, so they know when corrective action is required or when standards have not been met.

Also, having aggregate information on demand, including inventory, supply, supplier performance, etc., allows for quicker and better purchasing decisions leading to a more proactive purchasing organization. With better information in hand, you can consolidate and optimize your suppliers and leverage your buying power, which means a potential for better terms and lower supply costs.

Production Excellence

IBM Cognos BI software offers visibility across all plants, lines and shifts, allowing you to monitor performance trends and to identify, isolate and analyze the source and impact of problems, whether product defects or production anomalies. With the ability to make accurate comparisons, for example, between facilities and shifts, you can discover lags and other problems that had previously gone unnoticed. You
can also identify trends in quality, efficiency or throughput, and make proactive decisions based on this insight.

Similarly, the solution makes available allows you to analyze the cost of failures: scrapped production, customer returns and other quality-related problems; downtime; as well as costs for specific
overhead items such as re-engineering and equipment upgrades.

This intelligence can be used to help capitalize on success, to analyze savings created by new efficiencies or to help understand how to repeat an event that improved quality or throughput. It also offers the benefit of being able to share production performance information with staff, including comparisons across
locations, over time, measurement against production standards, etc.

Inventory Management Excellence

The solution opens visibility into the entire inventory: the levels and locations of all assets at any point in time, their worth, their depletion rates, their use; who supplied them, who uses them; what is spoiled, obsolete or surplus; what alternative items are available. With inventory accurately quantified and tracked
across the company and its partners, and with changes measured against common standards, such as minimum or age thresholds, you will know at all times what you have, where it is and how long it will last.

From start to finish, from negotiations with suppliers through customer delivery, IBM Cognos software offers full visibility into processes and events, transparency of information and coherent standards made available across your organization.

Reference - The content is from IBM White Paper on Operational Excellence

March 26, 2015

Just-in-Time and Lean Systems - Review Notes of Chase et al. Book Chapter

Just-in-time or JIT is an integrated set of activities designed to achieve high-volume production using minimal inventories of raw materials, work in process, and finished goods. Parts arrive at the next workstation "just in time" and are completed and move through the operation quickly. Nothing is produced until it is needed later in the assembly line. The consumer expresses a need for a product, and "pulls" demand through the production system.

In Japan, JIT has been used to isolate the elements of waste in an organization. The Japanese practice a great respect for people and depend on the personnel to identify and eliminate sources of waste, excess, and inefficiency. The basic elements of JIT are a focused factory with networks following the strategy of reducing waste, the use of group technology or teams for problem-solving, quality at the source so no time and energy and materials are wasted on less than perfect quality products, uniform plant loading, Kanban production control systems, and empowerment of workforce.

While North American systems have modified JIT, the techniques can be used in layouts and design flows as well as in job shops. JIT has also merged in theory and practice with TQC, or building quality into the process. JIT works at its best when only good-quality products are pulled through the system and no "just-in-case" extra inventory is needed.

JIT requires a stable schedule over a lengthy time horizon. Along, with customers and employees, who are key components of the JIT system, vendors are also important to the process.

JIT is also applicable to service industries. Successful service applications include organizing problem-solving groups, upgrading housekeeping and quality, clarifying process flows, eliminating unnecessary activities, and developing supplier networks among others.

JIT is a powerful tool for reducing inventory and improving production and service operations. Management support, commitment, and training to continuing JIT progress are essential to success.

Industrial engineering and JIT

I define industrial engineering as human effort engineering and systems efficiency engineering. Functional design of a system is not the core focus of industrial engineers. There are various disciplines of engineering for functional design. Each of the designs created by functional engineers can be evaluated by industrial engineers for efficiency audit and improvement. JIT may have started as an efficiency improvement initiative. But now JIT could have become a functional discipline. Industrial engineers still have the role to audit efficiency of JIT systems and improve their efficiency further with the tools of efficiency currently in their tool box and tools which may come out subsequently.

Chapter Topics

Lean Logic

Lean production is an integrated set of activities designed to achieve production using minimal invetories of raw materials, work-in-progress, and finished goods. Parts arrive at the next workstation "just in time" and are completed and move through the process quickly. Lean is also based on the logic that nothing will be produced until it is needed.

The Toyota Production System

Toyota production system was created as the chief of Toyota told his team, we have to become price competitive to survive American imports. Hence we have to become lower cost and more productivity company.

Elimination of waste, improvement of efficiency, an industrial engineering slogan became the theme of Toyota Managers. Taichi Ohno, a production manager is credited for the development of TPS. Along with the elimination of waste, respect for people is also highlighted in Toyota culture. People are given importance in the system and they are asked to learn new skills and focus on productivity and continuously improve productivity.

The book gives a Toyota President, Fujio Cho's statement. "We must use the minimum amount of equipment, materials, parts, and workers (working time) which are absolutely essential to production." So the emphasis on finding optimal or ideal requirement of resources and controlling the process in such a way that production is achieved with those optimal resources.  But waste occurs in production processes and more resources are consumed by production systems. Seven types of wastes were described in TPS which have to measured and eliminated. 1. Waste from overproduction  2. Waiting time 3. Unnecessary transportation  4. Inventory  5. Unnecessary processing  6. Unnecessary human motionand 7. Defects and reworking.

MIT Team who studied TPS and developed theory of lean systems, recommended value stream mapping as the major visual tool to identify waiting time and inventory. It provided a box structure to various show waste at various work centers and operations in a process.

Lean Implementation Requirements

Design principles that guide the design of lean supply chains (Production facility and supply and distribution networks)

Focused factory networks
Group technology
Quality at the source
JIT Production
Uniform plant loading
Kanban production control systems
Minimized Setup times
Respect for people

Lean layouts and design flows
Preventive maintenance
Six sigma quality
A stable schedule
Working with suppliers as partners on a long term contracts

Lean Services

The concepts of efficiency implemented very successful in production systems are being extended to services systems.

Suggestions given are:

Organize problem solving groups.
Upgrade housekeeping
Upgrade quality
Clarify process flows
Revise equipment and process technologies
Level the facility load
Eliminate unnecessary activities
Reorganize physical configuration
Introduce demand pull scheduling
Develop supplier networks

Chapter Outline of  Richard B. Chase 12/e

Richard B. Chase. F. Robert Jacobs, Nicholas J. Aquilano, Operations and Supply Chain Management 12/e, McGraw-Hill Higher Education, 2010

Lean Six Sigma at Solectron
Lean Logic
The Toyota Production System
Lean Implementation Requirements
Lean Services

Chapter Outline of Richard B. Chase  10/e

Richard B. Chase, F. Robert Jacobs, Nicholas J. Aquilano, Operations Management for Competitive Advantage, 10/e, McGraw-Hill Higher Education, 2004

JIT Logic
The Toyota Production System
Elimination of Waste
Respect for People
North American Modifications of JIT
JIT Implementation Requirements
JIT Layouts and Design Flows
JIT Applications for Line Flows
JIT Applications for Job Shops
TQC (Total Quality Control)
A Stable Schedule
Work with Suppliers
JIT in Services

Case: Toyota, Ford, GM, and Volkswagen - Some Differing Opinions about Working with Suppliers
Case: Quality Parts Company


Richard B. Chase, F. Robert Jacobs, Nicholas J. Aquilano, Operations Management for Competitive Advantage, 10/e, McGraw-Hill Higher Education, 2004

Originally posted in 448

Updated  26 March 2015, 10 Dec 2011

March 21, 2015

3PL and 4PL Logistics Services - Issues, Implementation Decisions, Service Provider Selection and Management

Michael Maloni
Kennesaw State University,
Spring 2006 

Enterprise Resource Planning: Fundamentals of Design and Implementation - K. Ganesh et al. Book Information

Enterprise Resource Planning: Fundamentals of Design and Implementation (Google eBook)

Front Cover
K. Ganesh, Sanjay Mohapatra, S. P. Anbuudayasankar, P. Sivakumar
Springer, 2014 - 170 pages
0 Reviews

This book introduces the fundamental principles of understanding business requirements to apply enterprise resource planning (ERP) in order to meet business needs. The book also helps readers understand the usage of ERP for monitoring and controlling business processes, while providing practical oriented solutions to the design and implementation of ERP. Using the provided framework, a business can decide to provide more value at lower cost which increases its competitive advantage. This should be an ideal reference for executives, researchers and consultants in project management of ERP. ERP can be considered to be an integrated package of business process. The scope of ERP determines the extent of automation of business process. For example if ERP covers Human Resource (HR) and finance business processes only, then business process related HR and finance are automated. Typically business process that are automated in HR and finance employee entry and exist process, allocation of employee ID, payroll, processing , income tax planning and actual deduction etc. There is seamless flow of employee data and information is available at an effectively faster rate to take appropriate decision. As custom demand increases, there is a need to meet the changing scenario with speed and efficiency. While there is a need to increase productivity, there is also a need to reduce cost of operation. The repetitive business processes can be handled effectively by automating them and freeing human resources for meeting other uncertainties. These automations not only should be done for each department, but also should cut across different departments. Thus there is a need for automating business processes at enterprise level. This enterprise level automation started with MRP, then MRP II, ERP and then finally open source ERP have taken centre stage. Out of the standard products available in the market, an organization can chose an ERP product for implementation, depending on the features available and the total cost of ownership (TCO). This comparison helps an organization to choose the product that best suits the needs for the organization. Enterprise Resource Planning: Fundamentals of Design and Implementation highlights these concepts while discusses different good practices to design and implement ERP.

Design and Development of Knowledge Management for Manufacturing: Framework, Solution and Strategy - Ganesh et al. Book Information

Design and Development of Knowledge Management for Manufacturing: Framework, Solution and Strategy (Google eBook)

Front Cover
K. Ganesh, Sanjay Mohapatra, S. Nagarajan
Springer Science & Business Media, Nov 19, 2013 - 213 pages
0 Reviews

This book examines the modules/elements required before implementing knowledge management solutions in typical manufacturing and service industry. The objective is to develop a framework, design and model suitable for all requirements and a strategy to properly implement. Related case studies from organizations are included, with the results provided to use as a solution to problems experienced when implementing knowledge management in the industry.Implementing a knowledge management system can be complex and dynamic, no matter how well planned and developed. Inevitably a degree of organizational inertia is focused on the current state rather than the new. Within an enterprise, personal and group involvement and interests process status and technology landscape can deflect the commitment needed to successfully implement such a system. Cumulative evidence from past research in knowledge management suggests that effective implementation of KM solution in any organization requires a robust designs and models for various critical elements of process, people and technology. Using the techniques provided in this book, readers should be able to design knowledge management strategies, to align objectives of the KM initiatives with their business goals.

March 18, 2015

Learning Curves - Review Notes

Learning curves are important in a variety of business applications, especially manufacturing. The learning curve theory is a relationship between unit production time and the cumulative number of units produced. As individuals or organizations collectively repeat a particular process, they gain skill or efficiency from their experience and production time improvements result.

The learning curve theory is based on three assumptions: (1) the amount of time required to complete a given task or unit of a product will be less each time the task is undertaken, (2) the unit time will decrease at a decreasing rate, and (3) the reduction in time will follow a predictable pattern. This is often referred to as "practice makes perfect."

If production has been in progress for some time, the learning percentage can be obtained from production records. The longer the production history, the more accurate the estimate will be. For new production projects, it is more a function of guesswork and expert opinion to estimate a learning curve percentage.

A firm's learning rate may differ from that of the industry due to differences in operating characteristics or even procedural differences. Often the rates will vary whether the industry rate is based on a single product or an entire product line. The manner in which the data were aggregated will cause rates to vary. Learning curves and organizational knowledge can depreciate if key individuals leave the organization or if technologies become inaccessible or difficult to use. Learning curves provide an excellent means to examine performance.

Learning curve theory was generalized into experience effect and it was made applicable to costs. The cumulative volume and average cost of production have an inverse relationship. As cumulative volume doubles average cost goes down by a certain percentage. For example, 90% learning curve implies, if the cumulative volume doubles, the average cost will come to 90% of the earlier average cost, This means, the firm selling more volume will be able to produce the incremental units at a lower cost, when the law is in operation and can sell at a lower price, thus enlarging the market demand for its products. Customers may shift their demand to that company and wait buying from it at lower price. Thus experience effect becomes a competitive strategy issue.

Application of Learning Curves
Learning Curve Defined
Individual Learning Defined
Organizational Learning Defined

Plotting Learning Curves
Logarithmic Analysis
Learning Curve Tables
Estimating the Learning Percentage
How Long Does Learning Go On?

General Guidelines for Learning
Individual Learning
Organizational Learning

Learning Curves Applied to Heart Transplant Mortality

Full note of the book

Summaries of all Chapters of Operation Management

March 15, 2015

Strategic Management: An Integrated Approach by Charles Hill, Gareth Jones - Book Information

MBA Core Management Knowledge - One Year Revision Schedule

Strategic Management: An Integrated Approach
10th  Edition
Charles Hill, Gareth Jones
Cengage Learning, Feb 21, 2012 - 960 pages

This leading strategy text presents the complexities of strategic management through up-to-date scholarship and hands-on applications. Highly respected authors Charles Hill and Gareth Jones integrate cutting-edge research on topics including corporate performance, governance, strategic leadership, technology, and business ethics through both theory and case studies.

Based on real-world practices and current thinking in the field, the tenth edition of STRATEGIC MANAGEMENT features an increased emphasis on the changing global economy and its role in strategic management. The high-quality case study program contains 31 cases covering small, medium, and large companies of varying backgrounds. All cases are available in the main student text or the core case text.

Table of Contents


1. Strategic Leadership: Managing the Strategy-Making Process for Competitive Advantage.
2. External Analysis: The Identification of Opportunities and Threats.


3. Internal Analysis: Distinctive Competencies, Competitive Advantage, and Profitability.
4. Building Competitive Advantage Through Functional-Level Strategy.


5. Building Competitive Advantage Through Business-Level Strategy.
6. Business-Level Strategy and the Industry Environment.
7. Strategy and Technology.
8. Strategy in the Global Environment.
9. Corporate-Level Strategy: Horizontal Integration, Vertical Integration, and Strategic Outsourcing.
10. Corporate-Level Strategy: Formulating and Implementing Related and Unrelated Diversification.


11. Corporate Performance, Governance, and Business Ethics.

12. Implementing Strategy in Companies that Compete in a Single Industry.
13. Implementing Strategy in Companies that Compete Across Industries and Countries.


Best Buy: Sustainable Customer Centricity Model. Whole Food Markets in 2010:

How to Grow in an Increasingly Competitive Market. Herman Miller: A Case of Reinvention and Renewal.

Wells Fargo: The Future of a Community Bank. Staples in 2011.

The Apollo Group (The University of Phoenix) in 2011.

The Evolution of the Small Package Express Delivery Industry, 1973-2010.

Airborne Express: The Underdog.

Google in 2011.

HCSS: Employee Ownership and the Entrepreneurial Spirit.

KCI Technologies: Engineering the Future, One Employee at a Time.

W.L. Gore: Developing Teams to Meet 21st Century Challenges.

Home Video Game Industry, 1968-2011.

Tom Tom: New Competition Everywhere.

Alarm Ringing: Nokia in 2010.

AB Electrolux: Challenging Times In the Appliance Industry.

American Airlines Since Deregulation.

How SAP's Business Model and Strategies made it the Global Business Software Leader--Part I.
 Blockbuster, Netflix, and the Entertainment Retail Industry in 2011.


SAP and the Global Business Software Industry in 2011--Part 2.

How Became the Leading Online Retailer in 2011.

eBay and the Online Auction and Retail Sales Industry in 2011.

Is Yahoo's Business Model Working in 2011?

Viacom is Successful in 2011.

GE: Ecomagination--Driving Sustainable Growth for GE.

Cemex's Acquisition Strategy.

3M: The Second Century.

Kodak in 2011.

Boeing Commercial Aerospace in 2011.


Merck, the FDA and the Vioxx Recall.

Nike: Sweatshops and Business Ethics.

March 11, 2015

Planning - Principle of competitive strategies

In a competitive arena, it is important to choose plans in the light of what competitor will or will not do and navigate based on what competitors are doing or not doing.

Planning - The Principle of navigational change

Manager needs to periodically check events of the plan and redraw plans to maintain the move toward a desired goal.

Planning - The Flexibility Principle

Building flexibility in planning is beneficial, but cost of building flexibility needs to be evaluated against the benefits.

The Commitment Principle

Planning can cover a period over which commitment of resources can be clearly visualized.

14 Edition

Logical planning should cover a period of time in the future necessary to foresee as well as possible, through a series of actions, the fulfillment of commitments involved in a decision made today.

Principle of the limiting factor

Consider limiting factor in generating alternatives and selection from alternatives.

Planning - Principle of alternatives

Select the plan which is the most effective and the most efficient to the attainment of a desired goal.

This principles was not given in the 14 edition.

Planning - Principle of timing

If plans are structured to provide a network of derivatives plans in sequence, there will be more effectiveness in attainment of enterprise objectives.

This principles in not included in the 14th edition.

Planning - Principle of planning premises

If more people in an organization use common and consistent planning premises, the enterprise planning will be more coordinated.

Development of planing premises requires market research, forecasting, and environmental scanning.

Planning - Principle of primacy of planning

Planning is the primary prerequisite for all other functions of management. Every action of the manager follows a planning step.

!4 Edition
Planning logically precedes all other managerial functions.

Planning - Principles of Objectives

If objectives are to be meaningful to people, they must be clear, attainable, and verfiable

(The principles I saw first n 14th Edition of Weihirch, Cannice and Koontz)

Planning - Principle of contribution to objectives

Every plan has to contribute positively toward the accomplishment of enterprise objectives.

Every proposed action has to be evaluated to determine its contribution to the accomplishment of enterprise objectives.

Engineering economic analysis in case of engineering actions.

March 8, 2015

Management - 14th Edition by Koontz, Weihrich, Cannice - Chapter-wise Presentation Slides

Management Principles and Practice - Methods and Tools

Koontz and O’Donnell - First Edition

Weihrich, Cannice and Koontz - 14th Edition, 2013

Available:  MBA management theory revision notes by Narayana rao K.V.S.S. , Professor, NITIE


All Core Management Subjects - One Year Revision Plan

Chapter 1

Management - Definition

It is a process of designing and maintaining environment in which individuals, working together in groups, efficiently accomplish selected aims.
Effectiveness: Accomplishment of selected aims.
Efficiency: Accomplishment of aims with the least amount of resources.

Management is the process of designing and maintaining the environment.
Environment – External and Internal
External – Society, Government, Physical environment, Customers, Suppliers
Internal – Selected objectives, goals, mission, technology, equipment, tools, materials, accepted orders, staff, training, reward systems, recognition and discipline systems, communication systems

The functions of managers
Leading and

Planning involves selecting missions and objectives as well as the actions to achieve them.
Planning involves decision making.
The decisions require commitment of resources – human and material.

Planning identifies and prescribes actions to achieve the objectives of the organization.
These actions have to be split into tasks that can be accomplished by equipment and man combinations.
The men have to be grouped and managers have to be assigned to groups to help the operators with daily plans, training, material flow, coordination with other groups etc.

Staffing involves filling, and keeping filled, the positions in the organization.
This is done by identifying workforce requirements, inventorying the people available, and recruiting, selecting, placing, promoting, appraising, planning the careers of, compensating, and training or otherwise developing recruits and job holders.

Leading is influencing people so that they will contribute to organizational and group goals.
Leadership is interpersonal aspect of managing.
Leader needs followers.
People tend to follow those who offer means of satisfying their own needs, wishes and desires.
Leading involves concepts and processes of motivation, leadership styles, and communication.

Controlling is observing and correcting actions to make sure that they follow designed processes and measuring and correcting individual and organizational performance to ensure that events conform to plans.

Managerial functions at different organizational levels
All Managers carry out all managerial functions.
Top level managers spend more time on planning and organizing and direct and control middle mangers.
Middle managers take more active role in staffing and direct and control supervisors or first level managers.
First level managers spend more time in directing and controlling the activities of front line employees who actually produce products or services.

Managerial skills
Conceptual skills (Business Model – Market, Technology and Financial Returns)
Human skills
Technical skills
Problem solving skills (Solving challenges that appear periodically by analyzing the problem and synthesizing the solution. The solution is to be tested and validated).

Management Methods

Management Methods – Management Process






Management Methods – business functions
Strategic Management
Marketing Management
Operations Management
Supply Chain Management
Human Resource Management
Financial Management
Information Systems Management

Chapter 4 essentials of planning and managing by objectives
Missions or Objectives – Objectives or Goals
Strategies – Policies – Procedures – Program
Budget -

Steps in Planning
Management planning tool – management by objectives (mbo)
The Nature of Objectives
Hierarchy of Objectives
Multiplicity of Objectives
How to Set Objectives
Quantitative and Qualitative Objectives
Guidelines for Setting Objectives
Evolving Concepts in MBO
Benefits and weaknesses of mbo
Case – Developing Verifiable Case

5. Strategies, policies and planning premises
Developing Strategies
Developing Policies
Role of Planning Premises to Guide Planning
The strategic planning process
Inputs to the organization
Industry Analysis
Enterprise Profile
Orientation, Values and Vision of Executives
Mission (Purpose), Major Objectives, and Strategic Intent
Present and Future External Environment
Internal Environment

Development of Alternative Strategies
Evaluation and Choice of Strategies
Consistency Testing and Contingency Planning
The  tows matrix: a modern tool for analysis of the situation

                                                          Strengths                   Weaknesses
External Opportunities       SO                    WO

External Threats                 ST                     WT
Tows matrix strategic alternatives
SO – Vigorously pursue the opportunity

WO – Take up measures to reduce weakness

ST – Challenge the threat

WT – Withdraw from the activity
Blue ocean strategy –pursuit of opportunities in uncontested market
The authors suggested a framework called strategic canvas.
The portfolio matrix: a tool for allocating resources
Major kinds of strategies and policies
Products or Services

Hierarchy of Strategies
Corporate Level
Business Level
Functional Level
Porter Generic Competitive strategies
Cost leadership
Premising and forecasting

Marketing Research

Forecasting of Economic, Social, Political/Legal and Technological Environments

Forecasting with Delphi Technique

6. Decision making
Rationality in Decision Making
Limited, or”Bounded,” Rationality
Development of Alternatives and the Limiting Factor
Heuristics in Decision Making
Evaluation of Alternatives – Quantitative and Qualitative Factors
Marginal Analysis
Cost Effective Analysis

Three Alternatives Approaches for Decision Making: Experience, Experimentation, Research and Analysis using Mathematical and Simulation Models.
Programmed and Nonprogrammed Decisions
Decision Making under Risk and Uncertainty

Creativity – Making People Creative and Harnessing Their Creativity
Brain Storming – Creative Manager

Invention and innovation

Invention is a technical achievement.
Innovation is a business achievement.
Inventions are done by technical people
Innovations are done by business managers.
For Innovation managers have to understand the needs of the customers and then use existing technical alternatives to develop a new solution.
Managers can fund a research and development solution as a part of innovation project.

7. The Nature of organizing
Henri Fayol said organization involves decisions regarding material organization and human organization.
Management theory has not developed adequately in material organization.
Formal Organization
Informal Organization
Organizational Division – The Department
Organizational Levels arise due to Span of Management
Factors Determining an Effective Span

The Process of organizing

There will be opportunities of reengineering during the life of an organization.
Reengineering emphasizes the deep understanding of the capabilities of a new technology and redesigning the processes of an organization to make the best use of the new technology.

Organization structure: departmentation
Departmentation by Business Functions or Enterprise Functions
Departmentation by Territory or Geography
Departmentation by Customer Group
Departmentation by Product
Matrix Organization
Strategic Business Units

The virtual organization
Group of people connected through information technology.
Independent firms of suppliers, customers can also form virtual network of organizations.

The technological possibilities are exciting, but how do we manage people we never see? This is a topic that needs development.

The boundaryless organization
Jack Welch, CEO of General Electric stated this idea.
He wanted GE to be boundaryless organization.
It is a global organization.
An idea can generate in any unit of GE.
It can be sold to the global market.

Procedure - departmentation
The aim: Achieving Objectives

Mixing Types of Departmentation: The first level of departmentation can be on one basis and sections within departments can be organized on a different basis.

9. Line/staff authority, empowerment, and decentraliztion
Authority and Power
Line/Staff Concepts and Functional Authority
Decentralization of Authority: Federal Government – Different powers by constitution.
Delegation of Authority – Organization by an individual manager


10. Effective organization and organization culture

Avoid Mistakes in Organizing – Planning Stage
Planning for the ideal
Modification for the Human Factor
Avoid Inflexibility – Make it Flexible
Readjust as needed.

Making staff work effective

Make everybody understand authority relationships.
Make line listen to staff when specialist studies were done by staff and advice is given.
Keep staff informed of the developments in the organization.
Require Complete Staff Work: Staff must give a recommendation that is complete and implentable.
Making staff work acceptable and useful.

Tools of organization

Organization Charts
Avoid conflict in organization through clarification of roles, authority and reporting relationships.
Position Descriptions
Ensure Understanding of the organization Design by teaching people – Explain to people the basis and expected benefits (sell the design).

Informal  organization

Recognize its inevitable formation.
Recognize its benefits to members.
Use it for organization benefit appropriately.
Promoting an appropriate organizational culture

Defining organization culture

Culture is the general pattern of behavior, shared beliefs and values explicitly declared and assumptions that are not stated but can be diagnosed which are shared in the members of an organization.
One can observe some common elements of behavior, common beliefs and values and even common assumptions.

The Influence of the leader on organization culture

What is Value?
It is a fairly permanent belief about what is appropriate and what is not that guides the actions and behavior of employees in performing processes to achieve the objectives of the organization.
The values of top managers are accepted by large number of people and are implemented.

Value driven corporate leaders serve as role models and transform their employees.
The ideal organization culture created by corporate leaders can result in managerial functions being carried out in quiet different ways.


11. Human resource management and selection

Systems approach to HRM
Factors Affecting the Number and Kinds of Managers Required
The Management Inventory

Promotion from Within
The Policy of Open Competition

Responsibility for Staffing

Matching Job requirements and Candidate Competence
Job design and job requirements

Skills and personal characteristics needed in managers

Analytical and problem solving abilities
Desire to manage
Communication skills and empathy
Integrity and Honesty
Integrity: The quality of being honest and firm in moral principles
Honesty: telling the truth, not breaking the law, and not deceiving others
Past performance as Manager

Selection process

Assessment Centers

Orienting and Socializing New Employees

EIU Survey – Managing in 2020

Areas that have the greatest potential for improving productivity are:
Managing knowledge.
Providing services and support to customers.
Improving operations and production processes
Developing businesses and strategies
Managing marketing and sales activities
Managing human resources and training

12. Performance appraisal and career strategy

Choosing Appraisal Criteria
Performance in Accomplishing Goals
Performance as Managers

Three Kinds  of Review or Appraisal
1. Comprehensive 2. Progress or periodic 3. Continuous monitoring
Appraisal process and issues
Self appraisal versus Judging
Subjective versus Objective Evaluation
Assessing Past Performance
Assessing Future Oriented Development Activities
Strengths and Weaknesses of Appraisal against Verifiable Objectives

Formulating the career strategy

1. Preparation of a personal profile
2. Development of long-range personal and professional goals
3. Analysis of Environment: Threats and opportunities
4. Analysis of personal strengths and weaknesses
5. Development of strategic career alternatives
6. Consistency training and strategic choices

7. Development of Short-range career objectives and action plans
8. Development of contingency plans
9. Implementation of the career plan
10. Monitoring progress.
11. Write your own biography
13. Managing change through manager and organization development

Approaches to Manager Development for Current Job, Next Job and Future Needs of the Organization.

On the Job Training

Planned Progression
Job Rotation
Creation of “Assistant-to” Positions
Temporary Promotions
Committees and Junior Boards

Internal and external manager training

Conference Programs
University Management Programs
In-House “Universities”
Readings, Television, Video Instruction, and Online Education
Special Training Programs

Managing change

Techniques for initiating change
Resistance to change

Organizational conflict
Sources of conflict
Managing conflict

Organization development
The organization development process

Learning organization
A learning organization is one that can adapt to changes in the external environment through continuous through continuous renewal of its structure and practices.

Case: Jack Welch Leading organizational change at GE
Page 345


18. The System and process of controlling

The Basic Control Process
Establishment of standards
Measurement of performance
Correction of deviations

Critical control points, standards, factors

Every objective and goal is a standard against which actual or expected performance has to be measured by an organization.
But these 8 categories of standards are important
Physical  2.  Cost  3. Capital  4. Revenue
5. Program 6. Intangible 7. Goals  8. Strategic plan

Benchmarking: it is finding best practices of other companies and using them as base for planning to do better.

Real time information and control

Real time information helps in quick control action and correction of deviation.
It helps to keep plans on track more closely.
New computer integrated information systems are providing real time information and thus helping real time control.

Preventive control or feedforward control
If expectation of results can be made, managers can judge whether current or proposed actions result in planned results.
If the expectation is not as per plans they can change actions to accomplish plans.

 Control of overall performance – profit center control

Profit and loss control
Return on Investment control
Management Audits

Requirements for effective control

Tailoring controls to plans and positions
Tailoring controls to individual managers
Designing controls to point up exceptions at critical points
Seeking objectives of controls
Ensuring flexibility of controls
Fitting the control system to the organizational culture
Achieving economy of controls
Establishing controls that lead to corrective actions

Case: Walmart in America and Around the Globe
Page 483


19. Control techniques and information technology

The Budget as a Control Device
Zero base budgeting

Traditional Nonbudgetary Control Devices
Time-event network analysis
Gantt charts
Milestone budgeting

The balanced scorecard

Financial Performance
Customer Assets – Brand Value
Internal Processes – Are they improving providing more value to customers and becoming  more efficient?
Organizational Learning – Are you able to learn new things and innovate? – Serve customers through new products and processes

Information technology

Basic Data Capture and Storage
Information Indigestion and Intelligence Services
Managing by the Numbers
The Twitter Phenomena

Opportunities and challenges created by information technologies

Innovation through analytics
Speech recognition devices
Computer Networks
The Internet
Intranet and Extranet
Information Security
The digital economy, e-commerce and M-commerce
The emerging digital economy
M-Commerce and Wireless Communications
Problems as Opportunities in Web Connections
Customer Relationship Management (CRM)


20. Productivity, operations management and total quality management

Productivity Challenges
Measurement of Productivity of knowledge workers

Production and Operations management

Manufacturing and Service
The Operations Management System
Planning operations
Product decision
Product design
Production system design
Operating the system

Tools and Techniques for improving productivity

Inventory planning and control (Improving Inventory productivity – Japanese came with zero inventory system)
Just in Time Inventory System – MIT people named it lean system
Operations research
Value engineering
Quality circles

Total quality management

Long term commitment to continuous improvement in quality.
Active participation of all members of the organization at all levels.
Ongoing data collection, evaluation, feedback and improvement programs
TQM benefits: greater customer satisfaction, fewer defects and less waste, increased total productivity, reduced costs and improved profitability.

Lean Manufacturing

MIT study of Automobile plants across the world showed that Japanese plants used.

Fewer workers, lower inventories, shorter development time, fewer suppliers, less production space.
Japanese also had much lower delivery time.

One MIT researcher called Japanese system as lean system as opposed to buffer stock system which is a  bulk system.
Lean system is brought into existence by Japanese managers by creative use of industrial engineering principles, practices and objective of decreasing resources use by identifying waste and eliminating waste.

Computer Aided Techniques to improve productivity

Computer aided Design
Computer Aided Process Planning
Computer Aided Production Planning
Automated Guided Vehicles
Automatic Storage and Retrieval Systems

Integration of the value chain with the managerial actions

March 6, 2015

Managing Service Quality

Kotler and Keller in Marketing Management, 14th Edition

We all know customers prefer quality or need quality. The product or service rated as the highest quality  one by the customers has maximum demand in the market provided it is made available within the affordability of the target market. In other words, the highest quality product has the top most demand curve when compared with demand curves of other brands of the same product. The customers pay a price premium and also demand a higher quantity.

How do you improve service Quality?

What is service quality?

Service quality is measured by the extent an offering satisfies customer needs related to offering.  It is more narrowly defined by using the term customer expectations. To improve the service quality, a service provider has to know customer expectations and design and deliver his service to match or exceed customer expectations.

Berry, Parasuraman, and Zeithaml recommended 10 activities for improving service quality.

1. Listening
2. Understand what is the basic service demanded and provide it.
3. Detailed service design - Take a holistic view, design it in detail and manage it.
4. Reliability - Make sure service is delivered as per promise every time.
5. Recovery - In case, there is slip, have a mechanism to discover it and correct it or to respond to a customer complaint instantly
6. Surprising customers - Always keep thinking of delivering more
7. Fair play
8. Team work
9. Employee research - Find out why service defects are occurring and help the employees by removing the causes of errors.
10. Servant leadership - Top management has to demonstrate the style of servant leader.

MIT Sloan Management Review

Five Imperatives for Improving Service Quality

Magazine: Summer 1990 July 15, 1990  Reading Time: 33 min
Leonard L. Berry, Valarie A. Zeithaml and A. Parasuraman

Customers are the sole judge of service quality.  A company can achieve a strong reputation for quality service only when it consistently meets customer service expectations.

The principal dimensions customers use to judge a company’s service:

Tangibles. The appearance of physical facilities, equipment, personnel, and communication materials.
Reliability. The ability to perform the promised service dependably and accurately.
Responsiveness. The willingness to help customers and to provide prompt service.
Assurance. The knowledge and courtesy of employees and their ability to convey trust and confidence.
Empathy. The provision of caring, individualized attention to customers.

What must every company interested in improving service do to actually improve it? In this paper, the answer is given  in terms of five service imperatives: define the service role, compete for talent (and use it), emphasize service teams, go for reliability, and be great at problem resolution.

Define the Service Role

Start with Research

Defining the service role effectively starts with formal research to identify customers’ principal service expectations. Marketing research  helps managers make choices among service standards and pare down the list of standards to the pivotal ones that will make a difference for customers. Customers judge a company’s service on the basis of a very few important service factors, and managers should establish a limited set of service standards for individual employees that contributes to the limited set of service goals for the organization.

Communicate and Reinforce Service Standards: The defined the service role has to be communicated and reinforced—in meetings and training sessions; in internal media such as wallet cards, desk signs, and wall posters; and in performance measurement, appraisal, and reward systems.

Defining employees’ service roles clearly, consistently, and credibly is important to any organization’s efforts to improve service. The behavior-guiding and motivational benefits of service standards are well worth the investment necessary to develop and reinforce them. Service employees need to know what excellent service means—and why they should care about delivering it.

Compete for Talent—and Use It

Any company needs personnel with the attitude, ability, and flexibility to fulfill the role designed by it.  Contact employees who believe their units are not meeting service standards disagree with the following statements:

My company hires people who are qualified to do their jobs.
I have the freedom in my job to truly satisfy my customers’ needs.

Services are performances, and most of the time it is people who render these performances. From the customer’s perspective, the people performing the service are the company.

Moreover, managers need to  a well-defined profile of people to hire. The profile has to be developed based on service standards specified by the company.

The problem of hiring the wrong people is getting worse due to labor-force shortfalls.

Service managers frequently add to their problems by not fully using the capabilities of those they do employ. The authors in this paper argue for giving flexibility to employees to servce the customer based on the need of the situation rather than by a strict rule book   People who are qualified will perform better and stay with the company longer if given room to maneuver, achieve, and grow.

The authors recommend: Market careers rather than jobs, market them in multiple ways, link hiring standards to service standards, and leverage the freedom factor. Companies that do these things will do just fine in the talent market.

To leverage the freedom factor, managers have to select their people well, provide them with a strong foundational culture in which to work, offer them strategic direction, and give them the company-specific training and education they need to perform their roles. And then managers need to get out of their way!

We agree with Robert Waterman, who writes in The Renewal Factor: “When managers guide instead of control, the sky’s the limit on what people can accomplish.” Managers must learn the dangers of overmanagement; they must learn to widen the solution boundaries for their people.

Emphasize Service Teams

Service work is frequently frustrating and demoralizing. Customers can be rude and insensitive. The sheer number of customers to be served can be psychologically and physically overwhelming. Control over service can be dispersed among multiple organizational units that function without cohesion or a unified spirit, limiting contact employees’ ability to come through for their customers.

One dynamic that is particularly important in kindling and sustaining service-mindedness is the presence of service “teammates.” An interactive community of coworkers who collaborate, overcome, and achieve together is a powerful antidote to service burnout. Membership on a team can be rejuvenating and inspirational. It can also raise the ante for individual performance. To let down the boss is bad, but to let down the team is often worse. Team participation can unleash one of the most potent of motivators—the respect of peers.

Service teamwork is also important because people in service organizations typically depend on one another. The end service the customer receives is commonly the result of many behind-the-scenes, internal services.

Our research shows convincingly that teamwork is a principal factor in delivering excellent service. Employees who indicate that their organizational units are not meeting service standards disagree with the following statements:

I feel that I am part of a team in my unit.
Everyone in my unit contributes to a team effort in serving customers.
I feel a sense of responsibility to help my fellow employees do their jobs well.
My fellow employees and I cooperate more than we compete.
I feel that I am an important member of this company.

Organizational teamwork is important. Service team building cannot be left to chance. Some degree of structuring, assigning, and facilitating is needed to overcome organizational inertia. Managers should strive to nurture teamwork within organizational units (intraunit teams) and between organizational units (interunit teams).  Creating the richest form of service teamwork requires long-lasting team membership; frequent team contact and communication; team leadership, direction, and goals; and team measurements and rewards (in addition to individual employee measurements and rewards).

Go for Reliability

Breaking the service promise is the single most important way service companies fail their customers. When a firm is careless in performing the service, when it makes mistakes, when it doesn’t do what it said it would do, customers lose confidence in the firm’s reliability; they lose confidence in the firm’s wherewithal to do what it promises to do dependably and accurately.

Service reliability is the service “core” to most customers. Little else matters to customers when a company is not dependable.

“Zero defects” attitude is as important in services as in manufacturing. And if more executives were to investigate the primary causes of service unreliability in their companies, they would find most of them rooted in poor service design, inattention to service details, and basic carelessness.

Reliability is the heart of excellent service.

Building a “Do-It-Right-First” Attitude

Managers should use every opportunity to build a “do-it-right-first” attitude. This means specifically addressing the reliability issue in company communications, including mission statements; setting reliability standards; teaching the why and how of reliability in training programs; appointing reliability teams to study specific services and recommend ways to improve reliability; measuring error rates; and rewarding error-free service.

Outstanding service reliability is the foundation on which to build a reputation for outstanding service quality. Companies that consider the service promise inviolate are most likely to earn the confidence of their customers. And the confidence of customers is the greatest asset a company can have.

Be Great at Problem Resolution

What happens after the service problem occurs—the firm’s response—becomes crucial. The firm can make things better with the customer—at least to some extent—or much, much worse.

All too often, service companies make things worse.

Three possibilities arise when a customer experiences a service problem:

The customer complains and is satisfied with the company’s response.
The customer complains and is not satisfied with the company’s response.
The customer does not complain to the company and remains dissatisfied.

Of these possible outcomes, the first one is good and the last two are very bad.

In effect, companies that do not respond effectively to customer complaints compound the failure; they fail to come through for the customer again.

Many dissatisfied customers do not complain and simply take their business elsewhere.  Managers need to come to grips with the seriousness of the lost business and negative word-of-mouth that occurs when customers cannot resolve problems with the firm, or do not even try. How a company handles service problems tells customers (and employees) a great deal about the firm’s service values and priorities.

Three Prescriptions

Being excellent in recovery is easier said than done. We offer these specific prescriptions.

Encourage customers to complain and make it easy for them to do so.

Make timely, personal communications with customers a key part of the strategy.

Encourage employees to respond effectively to customer problems and give them the means to do so.

Service employees need specific training about how to deal with angry customers and how to help customers solve service problems. In some cases, they need access to information systems that will tell them more about the customer, the situation causing the problem, and possible solutions.

Specifics aside, problem-resolution excellence requires that managers view services marketing as a way of cementing customer loyalty through service and trust that gives profits through repeat business, rather than focusing on acquiring new customers. Effective services marketing—and its cornerstone, service quality—requires that managers take the long view.

Excellent service is within reach if managers are willing to stretch for it.


2. L.L. Berry, D.L. Bennett, and C.W Brown, Service Quality— A Profit Strategy for Financial Institutions (Homewood, Illinois: Dow Jones-Irwin, 1989), p. 51.

March 3, 2015

Marketing Firepower Essential for Startups

Are you planning to start an enterprise.

Check whether you have The Marketing Firepower

Price discounts: Are you selling a comparable product at a lower price.

Cheaper goods: Are you offering economy goods with lesser number of features. The strategy will succeed when there is significant number of buyers in need of lower priced product.

Prestige goods: Are you launching a higher quality product with more features.

Product proliferation: Are you planning to offer a greater product variety.

Product innovation: Are you offering an improve product.

Service innovation: Improvement in service offered to the buyers.

Distribution innovation: a new distribution outlet that offers additional convenience to buyers.

Process innovations: Is your enterprise based on a process innovation that gives better quality or lower cost?

Advertising innovation: Do you have innovative communications strategy that reaches and motivates larger number of potential customers resulting in higher sales.

You have to develop the marketing fire power that allows you to succeed in the market. Enter the market with adequate marketing firepower to succeed.

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Competencies of Middle Managers

South Africa Public Sector Information

Core Competencies Essential to First Line Managers

The core competencies listed below are regarded as essential to first line managers employed within
the SA Public Sector irrespective of job title, agency, organisation or location.

The core competencies are overarched by the requirement of all SA Public Sector employees
to behave ethically and comply with the South Australian Public Sector Code of Ethics.
Middle manager common competencies

Maintain and enhance  confidence in public service
Apply government systems
Manage compliance with  legislation in the public sector
Manage policy implementation
Manage resources
Manage quality client service
Influence workforce effectiveness
Establish and maintain strategic  networks
Manage personal work priorities  and professional development

Middle Manager Competencies for the SA Public Sector

Middle manager common competencies The common competencies are relevant to the
majority of middle managers in the SA Public Sector, but may not be essential in every case. For example, not all middle managers manage people. These competencies are important to middle managers who wish to improve their current performance or future career options.

Formulate business strategies
Undertake research and
Recruit, select and induct staff
Facilitate people management
Manage budgets and  financial plans
Procure goods and services
Develop a business case
Manage risk
Manage innovation and  continuous improvement
Provide strategic direction

Rational Decision Maker
Business process designer
Business process improver
Team developer and manager
Coach, Performance manager and mentor
Change manager
Culture shaper
Cross functional facilitator

Framework given as 18 activties

1.Provide Leadership In The Workplace, Appropriate To The Level
Of Autonomy Accorded To Individuals/Teams.

1.1 Demonstrate High Standards Of Performance.

1.2 Contribute To The Organisation's Reputation.

1.3 Influence Individuals And Teams.

1.4 Make Decisions.

2.Manage Personal Work Priorities And Development.

2.1 Manage Self.

2.2 Negotiate, Plan And Organise Personal Work Priorities.

2.3 Develop And Maintain Personal Competence.
3. Lead And Participate In, And Facilitate Work Team/Group
Appropriate To The Level Of Autonomy In The Workplace

3.1 Plan The Establishment Of Work Team/Group.

3.2 Develop Team Commitment And Co‑Operation.

3.3 Participate In, And Facilitate Work Team/Group.

3.4 Manage And Facilitate Team Performance.
4. Establish And Manage Positive Relationships With
Colleagues And Customers.

4.1 Convey And Receive Information And Ideas.

4.2 Develop Trust And Confidence.

4.3 Build And Maintain Networks And Relationships.

4.4 Negotiate Positive Outcomes To Rectify Difficulties.
5.Value And Stimulate The Diversity Of People And The Environment.

5.1 Create An Environment Which Recognises; Diversity As An Asset.

5.2 Promote Action Which Harnesses The Diversity In The Work Team/Group.
6. Contribute To The Development Of A Learning Environment.­

6.1 Contribute To Planning Learning Arrangements.

6.2 Implement Effective Learning.

6.3 Assess Workplace Competence.

6.4 Monitor And Review Learning Processes And Effectiveness.

6.5 Record And Report Achievement Of Competency.
7.Manage Resources To Achieve Planned Outcomes.

7.1 Plan Resource Use.

7.2 Implement Plan For Use Of Resources.

7.3 Monitor Human Resource Performance.

7.4 Monitor Financial Performance.

7.5 Monitor Physical Resource Performance.

7.6 Review Resource Capability And Utilisation.

7.7 Record And Report Resource Usage.
8. Manage Quality Customer Service.

8.1 Prepare Implementation Schedule.

8.2 Deliver Products And Services.

8.3 Establish Monitoring Systems And Processes.

8.4 Monitor Progress And Adjust Performance.

8.5 Record And Report Results.
9. Implement And Monitor Quality And Continuous
Improvement Processes.

9.1 Implement Quality Improvement System.

9.2 Monitor Performance.

9.3 Consolidate Quality Improvements And Identify Opportunities
For Further Improvement.
10. Facilitate And Capitalise On Change And Innovation In A
Technological Environment.

10.1 Develop Creative And Flexible Approaches And Solutions.

10.2 Manage Work Group/Team Response To Emerging Challenges And Opportunities.

10.3 Implement And Monitor Change.
11. Develop And Maintain A Safe And Fair Work Environment.

11.1 Access And Share The Relevant Information.

11.2 Plan And Introduce Processes To Implement Workplace Requirements.

11.3 Monitor And Adjust Performance.

11.4 Investigate Non‑Conformance.
12. Create And Encourage A Learning Environment.

12.1 Plan Learning Strategies.

12.2 Plan And Review Assessment Of Workplace Competence.

12.3 Evaluate The Effectiveness Of Learning.
13. Plan And Develop Human, Physical And Financial Resource
Information For Decision Making.

13.1 Establish Human, Physical And Financial Information Requirements.

13.2 Collect, Analyse And Report Human, Physical And Financial Information.

13.3 Manage Information Systems.

13.4 Prepare Resource Proposals.

13.5 Monitor And Review The Management Of Information.
14. ‑Develop Plans To Meet Customer And Organization Needs.

14.1 Contribute To A Shared Vision And Values.

14.2 Contribute To Strategic Planning.

14.3 Research Customer Needs.

14.4 Identify Opportunities For Product And Service Enhancement.

14.5 Prepare Business Plans/Budgets.

14.6 Communicate The Outcomes Of The Planning Process.
15. Participate In Planning And Reviewing Quality And
Continuous Improvement Processes.

15.1 Contribute To Continuous Improvement Planning.

15.2 Review Results.
16. Influence The Development And Direction Of The Organization.

16.1 Develop The Organisation's Mission And Values.

16.2 Establish Goals, Objectives And Strategies.

16.3 Achieve Stakeholder Ownership.

16.4 Develop Individual Managers And Management Teams.
17. Influence And Monitor The Organization's Competitiveness.

17.1 Create Systems To Monitor Internal And External Environments.

17.2 Identify And Forecast Trends.

17.3 Identify Competitive Strengths And Weaknesses.

17.4 Improve Organizational Systems And Processes.

18. Manage Financial Planning And Performance.

18.1 Interpret The Organisation's Financial Status.

18.2 Prepare And Negotiate Budgets.

18.3 Monitor And Control Financial Performance.

18.4 Record And Report Financial Performance.

What are the Middle Manager Core Competencies?

Government of NewBrunswick Canada Website
There are five Middle Manager Core Competencies including:

Developing Others

Developing Others involves a genuine intent and passion to foster the long-term learning or professional development of others. 

Effective Interactive Communication Skills
Effective Interactive Communication implies the ability to transmit and receive information clearly and communicate effectively to others by considering their points of view in order to respond appropriately. It includes using tact, diplomacy, respect, openness and honesty in all communications as well as the ability to convey ideas and information in a way that brings understanding to the
target audience.

Organizational Commitment
Organizational Commitment consists of showing a genuine desire to align one’s own behaviour with the values, needs, priorities and goals of the organization. It may appear as putting an organization's mission before one’s own preferences and forcefully defending its integrity.

Results Orientation
Results Orientation is a genuine drive, focus and dedication for working towards obtaining results.
It is about knowing what results are important and focusing efforts and/or resources to achieve them, in alignment with the objectives of the team, work unit, branch, department and/or organization. Goal attainment activities are accomplished with a deep understanding of and respect for the values of the Public Service, the people involved, and for using resources in an efficient, effective and ethical manner.

Team Leadership
Team Leadership is the ability to step in and take a role as leader of a team or other group. It implies a desire to lead others and to instil in others a passion for their work, the mission and values of the organization, and the importance for acting with integrity, respect, impartiality, service and competence.

Blaenau Gwent UK List of Manager Competencies

College Managers - First Line - Middle and Senior Managers

Leading People 
Communicating the Vision 
Facilitating High Performance and Results 
Maximising Potential 
Making Informed Decisions 
Working Together 
Promoting a Citizen Centred Culture 
Working With Councillors 
Pushing the Boundaries 

Papers and Articles List

June Xuejun Qiao, Wei Wang, (2009) "Managerial competencies for middle managers: some empirical findings from China", Journal of European Industrial Training, Vol. 33 Iss: 1, pp.69 - 81

– First a questionnaire survey was distributed among MBA and EMBA students at a major university in China, and then two case studies were conducted to collect more in‐depth data.

– The findings of this study suggest that team building, communication, coordination, execution and continual learning are critical competencies for the success of middle managers in China. Implications for future research and practices are also discussed.

HBR Article - The skills leaders require at every levels

30 July 2014
Jack Zenger and Joseph Folkman

In descending order of importance

Inspires and motivates others
Displays high integrity and honesty
Solves problems and analyzes isssues
Drives for results
Communicates powerfully and prolifically
Collaborates and promotes teamwork
Builds relationships
Displays technical or professional expertise
Displays a strategic perspective
Develops others
Takes initiative
Champions change
Connects the group to the outside world
Establishes stretch goals
Practices self-development


The Pennsylvania State University The Graduate School
Department of Learning and Performance Systems


A Thesis in Workforce Education and Development
by Wei Wang
2006 Available on web
Has full questionairre