Articles on Management Subjects for Knowledge Revision and Updating by Management Executives ---by Dr. Narayana Rao, Professor (Retd.), NITIE---3.80 MILLION Page Views--- Global Top Blog for Management Theory---Management for Effectiveness, Efficiency and Excellence.
November 30, 2011
Management Theory Review - Bilbliography
http://centres.exeter.ac.uk/cls/documents/mgmt_standards.pdf
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Competitiveness Theory
Momaya
http://una.co.in/downloads/Competitiveness%20fo%20Firms-%20Review%20of%20Theory,%20fw%20-%20Singapore%20Management%20Review%20Paper-%20Dr.%20Ajitabh.pdf
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Four ManagmentTheories
http://www.kernsanalysis.com/sjsu/ise250/history.htm
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Strategic Issue Managment - Theory Review
https://wiki.aalto.fi/download/attachments/7176236/Strategic_Issue_Management_Theory_review_Kunnas.pdf?version=1&modificationDate=1226694674000
Introduction to Engineering Economics
Engineers must decide if the benefits of a project exceed its costs, and must make this comparison in a unified framework. The framework within which to make this comparison is the field of engineering economics, which strives to answer exactly these questions, and perhaps more.
It seems peculiar and indeed very unfortunate that so many authors in their engineering books give no, or very little consideration to costs, in spite of the fact that the primary duty of the engineernig is to consider costs in order to obtain real economy- to get the most possible number of dollars and cents: to get the best financial efficiency.
O.B. Goldman, Financial Planning, John Wiley & Sons, New York, 1920.
It would be well if engineering were less generally thought of, and even defined, as the art of constructing. In a certain important sense it is rather the art of not constructing; or, to define it rudely but not ineptly, it is the art of doing that well with one dollar which any bungler can do with two after a fashion.
A.M. Wellington, The Economic Theory of the Location of Railways, John Wiley, New York, 1887
The subject confines of engineering economy were staked out in 1930 by Eugene L. Grant in his book 'Principles of Engineering Economy".
WHY DO ENGINEERS NEED TO LEARN ABOUT ECONOMICS?
Ages ago, the most significant barriers to engineers were technological. The things that engineers wanted to do, they simply did not yet know how to do, or hadn't yet developed the tools to do. There are certainly many more challenges like this which face present-day engineers.
But now, natural resources (from which we must build things) are becoming more scarce and more expensive. We are much more aware of negative side-effects of engineering innovations (such as air pollution from automobiles) than ever before.
For these reasons, engineers are asked more and more to place their project ideas within the larger framework of the environment within a specific planet, country, or region. Engineers must ask themselves if a particular project will offer some net benefit to the people who will be affected by the project, after considering its inherent benefits, plus any negative side-effects (externalities), plus the cost of consuming natural resources, both in the price that must be paid for them and the realization that once they are used for that project, they will no longer be available for any other project(s).
Simply put, engineers must decide if the benefits of a project exceed its costs, and must make this comparison in a unified framework. The framework within which to make this comparison is the field of engineering economics, which strives to answer exactly these questions, and perhaps more.
The Accreditation Board for Engineering and Technology (ABET) states that engineering "is the profession in which a knowledge of the mathematical and natural sciences gained by study, experience, and practice is applied with judgment to develop ways to utilize, economically, the materials and forces of nature for the benefit of mankind".
http://www.isr.umd.edu/~austin/ence202.d/economics.html
Engineering Economics, 4th Edition, James L. Riggs, David D. Bedworth, and Sabah U. Randhawa
McGraw Hill, New York, 1996
MIT Open Courseware
ESD.70J / 1.145J Engineering Economy Module, Fall 2008, Excel based course
http://ocw.mit.edu/OcwWeb/Engineering-Systems-Division/ESD-70JFall-2008/CourseHome/index.htm
A NEW FRAMEWORK FOR ENGINEERING ECONOMICS
Basic Engineering Economics - a PDH Online Course for Engineers
Article Originally posted in
http://knol.google.com/k/narayana-rao/introduction-to-engineering-economics/2utb2lsm2k7a/248
Engineering Economics or Economy - Typical Problems
Sppwf (32%, 3 years) = 0.435
2. By spending $30,000 for a conveyor, a factory expects to save $6,000 a year for the next 7 years in the cost of handling material. The conveyor belt will have zero salvage value at that end of 7 years. If the cost of capital for the project is 18%, should the company invest in this project?
Uspwf(18%,7 years) = 3.812
3. A company can overhaul a machine now for $2000. It can wait unit the end of the year also. But during the year it will suffer a cost $400 due to idle labor. If the cost of capital is 20%, what is the right decision?
Spfwf(20%,1year) = 1.2
4. A machine needs to be maintained at a cost of $500 at the end of the year, and this cost is expected to increase by $50 a year over its 10 years further life. A overhaul of the machine costs $2000$ and this will reduce the maintenace expenditure to $100 per year. Should the company go for the overhaul if its minimum rate of return required is 20%?
Uspwf (20%,10 years) = 4.193
5. A company can purchase a new special-purpose lathe for $7,500 installed cost. The annual cost of running this machine that includes labor, power, and maintenance, is $2,500. The other alternative is a general purpose machine that can be installed for $4,500 and the anual cost is $3,250 a year. The life of both the machines is expected to be 10 years and the salvage values are expected to be $750 and $500. If the company's minimum required rate of return is 15%, which machine should be recommended?
Sppwf (15%,10years) = 0.247; Uspwf (15%,10 years) = 5.019
Originally posted in
http://knol.google.com/k/narayana-rao/engineering-economics-or-economy/2utb2lsm2k7a/713
Time Value of Money
This topic explains the various concepts used to calculate future values or present values of a series of cash flows that result from engineering decisions to buy new equipment or replace old equipments.
Introduction
Single Payment Cashflow
Uniform Periodic Payments
Discounting of uniform series of cash payments
P = R [(1+i)n - 1]/[i 1+i)n ]
Where
P = Present Value
R = Uniform series of periodic payments
i = interest rate
n = number of periods of payments
These time value formulas are expressed in factors
A = P*Single payment future worth factor =P*Spfwf
P = A* Single payment present worth factor = A*Sppwf
S = R* Uniform series future worth factor = R*Usfwf
P = R*Unform series present worth factor = R*Uspwf
Two More Factors
Sinking Fund Deposit Factor
Sfdf = 1/Usfwf
Sinking fund is fund accumulated with periodic payments for incurring a lumpsum expenditure at the end of a long period. Sfdf gives the amount to be deposited at the end of each period for n period to accumulate one dollar at the end n periods.
Capital Recovery Factor
Crf = 1/Uspwf
Capital recovery factor gives the uniform payment to be received by you at the end period of n years to get recover back the investment you made today.
The factor tables are available and factors depend on interest rate i and term n.
Factors for a required rate of return of 10% and 5 years term.
Spfwf - 1.6105
Sppwf - .62092
Usfwf - 6.1051
Uspwf - 3.7908
Sfdf - 0.16380
Crf - 0.26380
References
Engineering Economics, 4th Edition, James L. Riggs, David D. Bedworth, and Sabah U. Randhawa, McGraw Hill, New York, 1996
Visit http://nraomtr.blogspot.com/ for Management Knols of Narayana Rao
http://knol.google.com/k/narayana-rao/time-value-of-money/2utb2lsm2k7a/ 249
Rate-of-Return Calculations
Internal rate of return (IRR) of an engineering decision can be compared with the minimum acceptable rate of return set by the organization.
IRR is calculated by equating the annual, or present, or future worth of cash flows to zero and solving for the interest rate that allows the equality
References
Engineering Economics, 4th Edition, James L. Riggs, David D. Bedworth, and Sabah U. Randhawa, McGraw Hill, New York, 1996
Online Resources
http://www.ie.bilkent.edu.tr/~ie342-3/Lecture%20No25.ppt
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Originally posted in
http://knol.google.com/k/narayana-rao/rate-of-return-calculations/2utb2lsm2k7a/ 252
November 29, 2011
Equivalent Annual-Worth Comparisons
With an annual worth method, all the receipts and disbursements occuring over a period of time due to an engineering alternative are converted to an equivalent uniform yearly payment. Such a calculation can give annual cost of various alternative engineering alternatives.
References
Engineering Economics, 4th Edition, James L. Riggs, David D. Bedworth, and Sabah U. Randhawa, McGraw Hill, New York, 1996
For more details
http://ise.tamu.edu/people/faculty/butenko/INEN303/chap6.pdf
Problems and Solutions on Equivalent Annual Worth
Originally posted in
http://knol.google.com/k/narayana-rao/equivalent-annual-worth-comparisons/2utb2lsm2k7a/ 251
Replacement Problem - Engineering Economy Analysis
A full sized machine can be purchased for $15,000 with operating disbursements of $7,600.
The economic life of all three machines is estimated to be 10 years with salvage values equal to 10% of the present values.
Compare the machines and determine the best option for the company.
Assume any data you need.
Reference
Taylor, George A., Managerial and Engineering Economy, Van Nostrand, 1964.
Originally posted in
http://knol.google.com/k/narayana-rao/replacement-problem-engineering-economy/2utb2lsm2k7a/596#
Machine Selection Problem for an Engineer - Engineering Economic Analysis
He has two alternatives.
The new machine costs Rs.3,33,800. At the end of each year of use its market value is estimated to be Rs. 2,75,000, rs.2,20,000, Rs.1,71,000, Rs.1,29,000, Rs.89,000, Rs.57,500, Rs.30,000 and Rs.20,000.
In the first year the operating cost will be Rs.30,000. In the subsequent years it keeps increasing to Rs.30,500, Rs,32,500, Rs.37,000, Rs,48,000, Rs.60,500, Rs.75,000 and Rs.92,500.
The alternaive is a second hand machine. it costs 1,29,000. Its resale value infuture years will be Rs.89,000, Rs.57,100, Rs.30,000 and Rs.20,000.
The operating cost will be 57,000 in the first year, and will be Rs.62,000, Rs.68,000 and Rs. 75,000 in future years.
What should be the recommendation of the engineer?
Originally posted in
http://knol.google.com/k/narayana-rao/machine-selection-problem-for-an/2utb2lsm2k7a/597#
Depreciation and Income Tax Considerations
Depreciation charges are not actual cash flows.
Engineering economic analysis needs to take into consideration the depreciation methods that can be used by the organization.
References
Engineering Economics, 4th Edition, James L. Riggs, David D. Bedworth, and Sabah U. Randhawa, McGraw Hill, New York, 1996
Originally posted in
http://knol.google.com/k/narayana-rao/depreciation-and-income-tax/2utb2lsm2k7a/256
Sensitivity Analysis
Sensitivity analysis provides a second look at an economic evaluation.
Lurking behind every decision are "what if" doubts?
What if sales are less than forecasts?
What if a new, far better challenger becomes available?
Sensitivity analysis involves repeated computations with different cash flow elements and analysis factors to compare results obtained from these substitutions with results from the most likely scenario incorporated into the original plan.
Sensitivity analysis gives an estimate of the risk of the proposed decision.
References
Engineering Economics, 4th Edition, James L. Riggs, David D. Bedworth, and Sabah U. Randhawa, McGraw Hill, New York, 1996
Orinigally posted in
http://knol.google.com/k/narayana-rao/sensitivity-analysis/2utb2lsm2k7a/258#
Industrial Engineering Knowledge Revision Plan - One Year Plan
January - February - March - April - May - June
Structural Analysis of Alternatives
Selection of engineering alternatives from a set of alternatives depends on the structure of the set.
Independent alternatives are those wherein the acceptance of one alternative has no effect on the acceptance of the any other alternative in the group.
In the dependent group of alternatives there may be mutually exclusive alternatives and contingently dependent alternatives.
Mutually exclusive alternatives means, when one alternative is selected, the other alternative cannot be employed.
In contingently dependent alternatives, if one is selected the other one or others have to implemented.
References
Engineering Economics, 4th Edition, James L. Riggs, David D. Bedworth, and Sabah U. Randhawa, McGraw Hill, New York, 1996
Originally posted in
http://knol.google.com/k/narayana-rao/structural-analysis-of-alternatives/2utb2lsm2k7a/253#
November 26, 2011
Private Equity - Business concept
an IPO,
a sale or merger of the company,
or a recapitalization.
Leading investment banks are committing their own capital or principal money to PE investments. Also various sponsors are floating PE funds to attract funds from HNIs into PE investments.
Most private equity funds require significant initial investment (usually upwards of $1,000,000) plus further investment for the first few years of the fund.
Limited partnership interest is the dominant legal form of private equity investments.
Once invested, money is locked-up in long-term investments which can last for as long as twelve years. Distributions are made only as investments are converted to cash; limited partners typically have no right to demand that sales be made.
If a private equity firm can't find good investment opportunities, it will not draw on an investor's commitment.
The risk of loss of capital is typically higher in venture capital funds, which invest in companies during the earliest phases of their development, and lower in mezzanine capital funds, which provide interim investments to companies which have already proven their viability but have yet to raise money from public markets.
Consistent with the risks outlined above, private equity can provide high returns, with the best private equity managers significantly outperforming the public markets.
The potential benefits of annual returns can range up to 30% for successful funds. It may not be the average return on PE funds.
PE Roots
The roots of PE and venture capital are same. In 1946, the American Research and Development Corporation (ARD) was formed to encourage private sector institutions to help provide funding for soldiers that were returning from World War II. They had an operating philosophy that was to become significant in the development of both private equity and venture capital: they believed that by providing management with skills and funding, they could encourage companies to succeed and in doing so, make a profit themselves. ARD succeeded in raising approximately $7.4 million, and they did have one rousing success; they funded Digital Equipment Corporation (DEC). By the 1970s such private participation had permeated into the private enterprise formation, but till in the late 1970s, the task was being largely carried out by investment arms of a few wealthy families, such as the Rockefellers and Whitneys. In the 1980’s, FedEx and Apple were able to grow because of private equity or venture funding, as were Cisco, Genentech, Microsoft, Avis, Beatrice Foods, Dr. Pepper, Gibson Greetings, and McCall Patterns.
Most private equity funds are offered only to institutional investors and individuals of substantial net worth. This is often required by the law as well, since private equity funds are generally less regulated than ordinary mutual funds. For example in the US, most funds require potential investors to qualify as accredited investors, which requires $1 million of net worth, $200,000 of individual income, or $300,000 of joint income (with spouse) for two documented years and an expectation that such income level will continue.
Books
Private Equity Funds: Business Structure and Operations,
By James M. Schell, Published 1999, Law Journal Press.
Gives attorneys, investment professionals, tax practitioners, and corporate lawyers the tools and guidance needed to handle various aspects of a private investment fund.
Private Equity: Fund Types, Risks and Returns, and Regulation
By Douglas Cumming
John Wiley, 2010
http://books.google.com/books?id=WPu3t_-RmLsC
Product Design Efficiency Engineering
Product design efficiency engineering is an activity of industrial engineers.
Industrial engineers are system efficiency designers. They evaluate the efficiency of various functional system designs proposed by functional designers and managers and wherever inefficiencies are found, will facilitate removal of them.
Product design efficiency engineering is an activity of industrial engineers. As a part of the method study, the techniques of methods efficiency engineering, industrial engineers examined the efficiency of design. The development of value engineering systematized the product design efficiency engineering process. L.D. Miles started the value engineering process and did an immense service to the society.
Efficiency of the designs is analyzed with respect to its functions, its features, subassembly design, component specifications including tolerances and fits, material specifications, use of standard boughtout parts, and manufacturing processes employed in value engineering. Value engineering practice has given immense savings in the product costs in various industrial sectors.
Knol: Part of Industrial Engineering Course Page -
Introduction to Industrial Engineering - Course at NITIE
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Web Page Related to Design Efficiency
Design Efficiency Will Keep Your Product From BOMing Out
http://electronicdesign.com/article/boards-modules-systems/design-efficiency-will-keep-your-product-from-bomi.aspx
Fitting Product Design to Production Efficiency
http://www.industryweek.com/articles/fitting_product_design_to_production_efficiency_15335.aspx
Shaping Efficiency Using CHiL Semiconductor Digital Algorithms
http://www.pddnet.com/editorial-david-williams-shaping-efficiency-using-chil-semiconductor-digital-algorithms-042310/
Palletisation efficiency as a criterion for product design
By Eberhard E. Bischoff
Journal: OR Spectrum, Issue Volume 19, Number 2 / April, 1997, Pages:139-145
Design Efficiency of Market Seeker Strategy and Marker Leader Strategy
http://www.idemployee.id.tue.nl/g.w.m.rauterberg/conferences/CD_doNotOpen/ADC/final_paper/153.pdf
INTELLIGENT DESIGN, EFFICIENCY, AND FUNCTIONALITY:
THE H1B BENT AXIS MOTOR ADVANTAGE
Bob Jensen, Technical Support Team Engineer, Sauer-Danfoss
December 14, 2009
http://www.sauer-danfoss.com/stellent/groups/public/documents/web_content/c019192.pdf
Industrial Engineering Knowledge Revision Plan - One Year Plan
January - February - March - April - May - June
Selling Process – Prospecting
Steps in selling process
1. Prospecting
2. Call planning
3. The visit – preliminaries
4. Presentation
5. Trial close
6. Listening to the objections
7. Objection handling
8. Trial close
9. Close
10. Follow-up and service
Prospecting
Prospecting identifies potential customers. Lead generation is a step prior to prospecting. A lead is also referred to as suspect. The term suspect indicates that a person is suspected of being a prospect. For every lead (or suspect), a salesman has to ask some questions and satisfy himself that there is chance that he may become a customer. Then that lead is categorized as qualified prospect.
The questions used in qualifying a lead as a prospect are:
1. Does the person need the products or services that I am offering?
2. Does the person perceive the need?
3. Does the person have sincere desire to fulfill his need?
4. Can this person’s need be converted into a want for the products that I am offering?
5. Does the individual have the ability to pay?
6. Will the transaction with this person be profitable?
The sales person will generate a list of prospects or qualified prospects for each period say for each day and make sales visits. Every salesman needs adequate list of prospects to earn his daily bread through sales.
How to generate leads and prospects?
The sources which provide leads can be categorized as follows:
· Cold calls
· Personal acquaintances
· Bird dogs
· People with influence in a locality
· Exhibitions and public events
· News paper and other media
· Lists and directories (telephone directory)
· Old accounts
Cold calling is door-to-door visit by the salesman to each house in a neighborhood to locate people with a need for the product he is offering.
Personal acquaintances can be the leads. They can also suggest their neighbors as leads.
Bird dogs are people, who know residents well such as real estate sales person, gas station attendant, medical shop person, etc. who can give some information.
People with influence in a locality like social workers, political leaders can be approached to get suggestions regarding persons who are likely to have the need for the product.
Exhibitions and public events can be used to attract leads. The salesman can distribution some literature or pamphlet or exhibit the product and the persons who approach him become the leads.
Newspapers and other media like internet can be gleaned to locate persons.
Telephone directory provides scope for cold calling through phone. Similarly other directories of various professionals etc. are a useful source for leads.
Old customers can be requested to suggest their friends who may have a need for the product.
Sales Process – Call Planning
Steps in Sales/selling process
1. Prospecting
2. Call planning
3. The visit – preliminaries
4. Presentation
5. Trial close
6. Listening to the objections
7. Objection handling
8. Trial close
9. Close
10. Follow-up and service
Step 2. Sales Call planning
Except in retail counter sales, and selling situations similar to this wherein the customer himself walks up to the salesman, salesman has to meet the prospect and interact with him to offer his product as a solution to the prospect’s need and want. Getting an opportunity to meet the prospect is the first step in this process. Cold calling can be tried, but for many items, the prospect may not be able to spare time at the instant the salesman barges in. the practice of making an appointment before calling on a prospect can save the salesperson hours in time wasted in traveling and waiting to see a person who is absent or busy.
Appointment making is often associated with a serious professional image, and it is treated as a gesture of respect toward a prospect. If the prospect gives an appointment, he will spare more time to interact with the salesperson and listen to his point of view, his presentation. A list of appointments aids a salesperson in allocating his day’s selling time. Appointments can be arranged by postcards & letters, telephone, emails, or during cold calls.
For making an appointment over telephone, it is advisable to plan and write down what is to be said. This will help in presenting the message concisely. The sales person has to identify himself clearly, state the purpose of the call and present interesting information about his product and seek the interview. The interview seeking sentence is preferably put forward as a question giving a choice of time to the prospect. Can I come today or is it more convenient to you tomorrow? Could it be in the morning or you prefer evening?
Appointments are easy to come by if your old satisfied customers talk to the prospect on behalf of you and arrange the interview.
A salesman has to believe in himself. You have a good offer for the prospect and he will benefit by accepting your offer. Confidence can be developed by knowing your products better and customer needs better. When you are seeking appointment, you have to be internally confident.
Successful salespeople make friends with people around the prospect. Car sales people speak to drivers as equals. The security persons of a building need to kept in good humor. They can make entry into the building easy and can even give some information on leads.
A salesperson need not waste time in endless waiting. Once an acceptable amount of waiting time has passed, he can inform that he has another appointment to make and can fix another time for the appointment.
The actually sales call needs to be planned. By planning the sales call the sales person becomes confident. As a part of the planning, an attempt is made to understand the need of the prospect. The prospect appreciates a salesman who shows an understanding of his need. A salesperson’s ability to be fluent in his interaction creates a professional image. This professional image increases sales.
The sales call plan has four components.
1. The call objective
2. The customer profile
3. The customer benefit plan
4. Presentation that takes into consideration the call objective, customer profile and the benefit plan.
The presentation that is planned must capture and maintain the prospect’s attention. It has to lead to prospect’s showing interest. It then has to increase his desire to own the product. Then only the action to buy will be undertaken by the prospect.
The salesperson has to ensure that the presentation/interaction that he has planned has statements, exhibits, and actions that result in attention, interest, desire and action on the part of the prospect. _____________________________
______________________________
Originally posted on Knol http://knol.google.com/k/ sales-process-call-planning#
Knol Number 33 Traffic rank 106
November 25, 2011
Trial Close
Closing is the process of helping people make a purchase decision that will benefit them. Salesmen help people make that decision by asking them to buy.
Closing a Sale
Closing is the process of helping people make a purchase decision that will benefit them. Salesmen help people make that decision by asking them to buy.
The very fact that a prospect is meeting a seller and having a conversation with him means the prospect has an interest to buy the product. Hence many times the prospect may be ready to make the buying decision very early in the meeting.
When to Try to Close the Sale
The simple answer is when the prospect is ready. To decide the point when the prospect is ready, salesmen have to observe for buy signals or willing-to-buy signals from the prospect.
Buy Signals
A buying signal or buy signal or willing-to-buy signal refers to anything prospects say or do to indicate that they are ready to buy.
Some of them are:
Prospect asks questions regarding price and delivery dates.
Prospect asks the opinions of others.
Prospect relaxes and becomes friendly.
Prospect pulls out the purchase order form.
Prospect looks carefully the product on offer
Trial Close after clarifying an objection
The salesman has to try to do the trial close as he gives a satisfactory response to an objection. Many objections come up only after the salesman tries trail close.
Risk Premium
Concept Definition and Explanation
Rate of return required on a security or asset has three components.
1. Pure time value of money.
2. Inflation premium
3. Risk premium
As securities are issued by corporate entitiies engaged in business activities, risk arises due to the following sources of risk.
1. Operating risk: Business organzations have fixed costs and as sales vary from year to year, in some years contribution from sales can be less than the fixed cost leading to reporting of loss by the company.
2. Financial risk: Many business organizations borrow to increase the capital employed in the business. This would lead to fixed interest cost commitment. In years when operating profits are low or small, the fixed interest cost will depress after-financial cost profit.
3. Liquidity risk or market risk: Securities are to be sold in the secondary market, and there are price fluctuations in the market depending on the liquidity conditions in the market.
Investors demand a risk premium to compensate them for the variability of return that arises due to various sources of risk of the security. This risk premium forms part of expected return as well as nominal return specified on fixed income securities.
References:
Reilly, Frank and Keith Brown, Investment Analysis and Portfolio Management
Research Papers
Equity Risk Premiums (ERP) : Determinants, Estimation and Implications: Empirical Study 2011 Edition by Aswath Damodaran
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1769064
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Concept Articles
Blog Post by Aswath Damodaran, February 25, 2011
http://aswathdamodaran.blogspot.com/2011/02/equity-risk-premiums-2011-edition.html
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Safety Stock Determination
One of the methods of determining safety stock to reduce the probability of stock out, is to assume that lead time will not vary, but the demand varies. The standard deviation of demand can be determined and a safety factor can be used based on normal distribution tables.
If safety stock is kept equal to one standard deviation of demand during lead time the service level (probability of stock being available during the time the item is on order) will go up to 84.13%. If the safety stock is made equal to two standard deviations of demand during lead time the service level (probability of stock being available during the time the item is on order) will go up to 97.72%.
Plossl and Wight advocate using mean absolute deviation (MAD) in the place of standard deviation. The standard deviation can be approximated as 1.25 times MAD.
Recent articles and research papers on the topic
Safety stock analysis: A tutorial
http://scm.ncsu.edu/scm-articles/article/safety-stock-analysis-inventory-management-models-a-tutorial
A new framework for safety stock management - Cognizant insight note December 2011
http://www.cognizant.com/InsightsWhitepapers/A-New-Framework-for-Safety-Stock-Management.pdf
Concepts for Safety Stock Determination under Stochastic Demand and Different types random production yield, February 2011
Working Paper, University of Magdeburg
http://www.fww.ovgu.de/fww_media/femm/femm_2011/2011_03.pdf
Originally posted on Knol: http://knol.google.com/k/narayana-rao/safety-stock-determination/2utb2lsm2k7a/ 594#
November 24, 2011
Scientific Approach, Engineering Approach, Management Approach
So scientific approach involves observation and recording of facts relating to a natural phenomenon. From these facts cause and effect relations are identified as theoretical conjectures and are converted into hypotheses. Theoretical conjecture building is inducting thinking and development of hypotheses is deducting thinking. From the various hypotheses deduced from a theoretical conjecture, some will be testable hypotheses. They will be tested using experimental data or field study data and the results are evaluated to assess whether they support the hypothesis. Any support to the hypothesis will be regarded as stengthening the case of the theoretical conjecture. A theoretical conjecture supported by a number of hypothesis tests can be used to get useful outputs or events from the nature.
Engineering is applied to invention, development and production, fabrication or construction of man made objects that satisfy the needs of people for food, shelter, entertainment, and security. Engineering approach to problem solving involves laboratory experimentation, sciences and mathematics. But the most distinguising feature of engineering is the amount of attention paid to detail and documentation[1]. A machine design is complete only when an assembly drawing supported by a drawing for each and every element required for the assembly is complete. Each and every element must have all the required dimenions and tolerances and the materials from which they are to be made. The design changes are to be properly documented in each drawing. Engineering approach inherently takes care of first identifying elements of a system that is the solution to a problem and the issues involved in combining the elements are also taken care of in engineering approach.
Management approach is more like an engineer repairing a machine rather than a engineer designing a machine. Managers have to come out with solutions that require the acceptance of people all the time and successful managers have a knack of understanding the people around them and the people affected by their decisions. Lee Iacocca said in his book, that Psychology courses that he has taken helped him a lot in his managerial career.
Stock Market Efficiency Theory and Implications for Financing Decisions
Stock Market Efficiency Theory and Implications for Financing Decisions
Financial Management Revision Article
Stock prices follow a distribution called random walk distribution.Authors
Random walk hypothesis of stock prices
Efficient market hypothesis/theory (EMH)
Empirical evidence
Market efficiency - Implications for corporate finance
References
Prasanna Chandra, Financial Management, 5th Ed., Tata McGraw Hill, 2001Brealey and Myers, Corporate Finance, Fifth Edition, Prentice Hall India, 2001
Copy posted to http://nraomtr.blogspot.com/2011/11/stock-market-efficiency-theory-and.html
Comments
System Design Principles
http://www.sysdesign.org/pdf/paper15.pdf
According to Spear and Bowen the design of Toyota Production System can be captured by the Four Rules:
Rule 1: All work shall be highly specified as to content, sequence, timing, and outcome.
Rule 2: Every customer-supplier connection must be direct, and there must be an unambiguous yes-or-no way to send requests and receive responses.
Rule 3: The pathway for every product and service must be simple and direct.
Rule 4: Any improvement must be made in accordance with the scientific method, under the guidance of a teacher, at the lowest possible level in the organization.
Interesting Ideas
Axiomatic design—a methodology that has been developed by Suh to provide a structured approach for the generation and selection of good design solutions.
Suh, N. P., 1990, The Principles of Design, Oxford University Press, New York, NY.
Industrial Engineering Knowledge Revision Plan - One Year Plan
January - February - March - April - May - June
Talent Management
What is Talent Management? - Definition and Scope
Often companies focus mainly on two HR interventions when defining their talent management strategy : i) Recruitment and ii) Retention. (Deloitte)
“The integrated set of resources, processes and values designed to attract and engage key talent to drive business priorities.” (Deloitte)
Talent management is a systematic process to secure general and targeted individual competencies (what people know, do and value) and organizational capabilities (just not person, the process) that creates sustainable value for multiple stakeholders (emplyees, customers, etc.). (Dave Ulrich)
Ulrich's definition includes development of talent also. If some people feel it does not, then we need to include the activity of developing competencies and capabilities in the definition of talent management.
I propose the following definition.
Talent management is a systematic process to secure, develop and utilize general and targeted individual competencies and organizational capabilities for creating sustainable value for multiple stakeholders.
Talent Management Activities
Making a case of talent management process in the HRM processes
Building teamwork among talented persons
Aligning the human resouce with strategy of the organization.
Assessment of talent periodically
Developing future talent (competencies and capabilities)
Providing space for diversity. Value diversity with unity.
Matching people with positions so that talent finds adequate role.
Building adequate human resource pool. Developing substitutes well in time.
Building technology competence and connectedness among human resources
Making human resources well versed in business processes
Measurement of results
Cooperating with line management and advising them in talent management issues.
References
Dave Ulrich, HR Transformation
Deloitte Touche, http://www.deloitte.com/view/en_LU/lu/services/consulting/hcas/press-release/465d483cc320e110VgnVCM100000ba42f00aRCRD.htm
Original Knol
http://knol.google.com/k/narayana-rao/talent-management/2utb2lsm2k7a/1673#
November 23, 2011
Variance Analysis, Flexible Budget and Management Control
Variance is the difference between an actual result and a budgeted amount. Variances assist managers in their planning and control decisions. Management by exception is facilitated by variance analysis. Management by exception is the practice of concentrating on areas not operating as anticipated as per plan and giving less attention to areas operating as per plan. Areas with sizable variances are given managerial attention.
Static Budgets and Flexible Budgets
in the case of flexible budgets, planned or budgeted expenses are the actual out multiplied by unit costs or expenses. Flexible budget recognizes that there can be fluctuations in output and hence expenses also vary in a month or a year. Static budget concept which was the older concept did not incorporate this idea. In a static budget, both operating figures, unit expenses and hence total expenses were kept the same during the plan period. But flexible budget concept recognized that, if output goes down, the manager of a department has to cut down his variable expenses and similarly if output goes up he has spend more.
Variance Analysis from Static Budget
Variances can be divided into favorable and unfavorable variances. Example of favorable variance is increased in revenue. Example of unfavorable variance is increase in cost.
Steps in the Preparation of Flexible Budget
1. Determine budgeted selling prices, budgeted variable costs per unit and budgeted fixed costs
2. Determine the actual quantity of output
3. Determine the flexible budget for revenues based on budgeted selling price and actual quantity of output.
Variance Analysis - Components
Sales-volume variance = Flexible budget amount (actual sales) - Static budget among
Price and Efficiency variances
Price variance = (Actual price of input - Budgeted price of input) * Actual quantity of input
Efficiency variance = (Actual quantity of input used - Budgeted quantity of input allowed for actual output) *
Budgeted price of input
Performance Measurement
Two attributes of performance are commonly measured:
1. Effectiveness: the degree to which a predetermined objective or target is met.
2. Efficiency: the relative amount of input used to achieve a given level of output.
For more details, the chapter in Cost Accounting by Horngren et al.
Cost Accounting - Horngren et al., Book Information and Review
Financial, Cost and Management Accounting - Review Notes List
Originally posted in
http://knol.google.com/k/narayana-rao/variance-analysis-flexible-budget-and/2utb2lsm2k7a/3141
What is Operations Management?
MIT's Explanation of Operations Management.
Operations Management deals with the design and management of products, processes, services and supply chains. It considers the acquisition, development, and utilization of resources that firms need to deliver the goods and services their clients want.
http://mitsloan.mit.edu/omg/om-definition.php
University of Strathclyde, Glasgow
Operations management is a value-adding area of an organisation concerned with innovation, production and distribution of goods and services to customers whilst ensuring that the use of organisational resources remains efficient and effective.
http://www.strath.ac.uk/siom/whatis/
Understanding Operations Management
Open University UK Note
http://openlearn.open.ac.uk/mod/oucontent/view.php?id=397333&direct=1
Slides on Operations Management
Slides based on book by Roberta Russell and Bernard W. Taylor
919 slides
http://www.slideshare.net/taquilla/operations-management-919-slides-presentation
Knol Number 5711
What is Strategy in Simple Terms?
Strategy is deciding a winning move.
What is winning? Achievement of objectives.
Whose objectives? Objectives of the group of which your are the leader or manager or CEO.
The decided winning move has to be converted into a broad direction, right people are to be put behind it and they are to be encouraged to continuously improve the delivery of the move till the product or service is delivered to the customer in a business context. Empowering an employee is to train that person to develop the ability to improve continuously and deliver exceptional output and motivate him to deliver it.
Some organizations may enfeeble their employees. They do not provide proper instructions, keep low expectations from them and then frustrate them with approval processes and criticism for every movement.
To develop strategy for the coming planning period the main issues to be considered are:
1. What are the drivers of growth and profitability for the business?
2. Who are the main customers and why do they buy our products and how do they buy?
3. What is the competitive landscape and where do we fit in?
4. What innovations or new moves that each competitor has done that significantly affected the competitive picture in terms of new products, technologies, distribution channels and human resources?
5. Have you lost customers and human assets or have you gained?
6. Think what your competitiors can do in the future.
Now decide what is your winning move. Strategy is resource allocation. The resource allocation defines the way you are positioning your resources for next period's game. Are you acquiring new companies, are you introducing new products, are you increasing marketing investments, are you increasing training of your human resources or you increasing your human resources? The decisions will lead to action. And the results tell you the effectiveness of your strategy.
Reference:
Jack and Suzy Welch, Strategy is about finding the big'aha!', Mint, 4 Jan 2010, Page 7.
You can watch videos of talks by Welchs in www.livemint.com/welchvideo
Knol Number 2128
Who is a Knowledge Worker?
Definitions
Reich: Symbolic analyst [1].
Rifkin: “Creators, manipulators and purveyors of the stream of information that makes up the postindustrial, post-service, global economy.” [2]
Frenkel et al.: “A knowledge worker as anyone who 1. has a high level of creativity in their work, 2. requires to make extensive use of intellective skills, and 3. makes use of theoretical rather than contextual knowledge.”[3]
Babson College Professor Thomas Davenport has this to say about the concept of knowledge worker:
I certainly think there's a lot of fuzziness, ambiguity, and imprecision about what a knowledge worker is, and it's not a term most managers use easily. They don't say, "Okay, these are my knowledge workers, these are my non-knowledge workers." So despite the fact that the term's been around for a long time, very few people have been comfortable using it as a managerial concept [4].
Some Occupations/Professions considered as Knowledge Workers
Lawyers
Consultants
IT and Software designers
Advertising people
Accountants
Scientists and engineers
Architects
Art directors
Teachers
Doctors
Equity analysts
Credit analysts
Newspaper editors
References
1. R. Reich, The Work of Nation: Preparing Ourselves for 21st –Century Capitalism, London, Simon Schuster, 1991.
2. J. Rifkin, The end of Work: The Decline of the Global Workforce and the Dawn of the Post Market Era, penguin, London, 2000.
3 .S. Frenkel, M. Korczynski, L.Donohue, and K. Shire, “Re-constituting Work: Trends towards Knowledge Work and Info-normative Control”, Work, Employment and Society, Vol. 9, No. 4, 1995, 773-96.
4. An interview in Ubiquity Magazine, available online at:
http://www.acm.org/ubiquity/interviews/v6i34_davenport.html
Knol Number 72
Communities of Practice
Communities of Practice - The Concept
‘Communities of practice’ is an important concept that developed in knowledge management literature. Communities of practice are informal groups of people who share some work related activity in common. ‘The communities of practice’ concept is closely associated with the practice based perspective on knowledge.
What are communities of practice? In brief, they're groups of people informally bound together by shared expertise and passion for a joint enterprise — engineers engaged in deep-water drilling, for example, consultants who specialize in strategic marketing or equity research analysts.
Process
Some communities of practice meet regularly — for lunch on Fridays for instance. Some are connected primarily by e-mail networks. People in communities of practice share their experiences and knowledge in free-flowing, creative ways that foster new approaches to problems.
Yahoo groups, Google groups etc. are facilitating many communities of practice.
Web References
http://hbswk.hbs.edu/archive/1317.html
http://hbswk.hbs.edu/archive/2855.html
Knol number 73
Audit Report
Audit Report
Management concepts knol Series
The management concept knols will have introduction to the concept, definition and brief explanation, links to various knols on the concept, books on the concept and research papers on the concept. Visitors are requested to add the research papers they are aware of and contribute to developing a good bibliography of research papers on the concept.Authors
Index of concepts
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8. Ha to Hz
9. Ia to Iz
10. Ja to Jz
11. Ka to Kz
12. La to Lz
13. Ma to Mz
14. Na to Nz
15. Oa to Oz
16. Pa to Pz
17. Qa to Qz
18. Ra to Rz
19. Sa to Sz
20. Ta to Tz
21. Ua to Uz
22. Va to Vz
23. Wa to Wz
24. Xa to Xz
25. Ya to Yz
26. Za to Zz
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Concept Definition and Explanation
In case there are uncertainties and disagreements, auditors qualify the report and explain their interpretation of the situation. So a qualified audit report is a report with auditors opinion differing from the opinion of management regarding reporting of financial transaction and the financial position of the company.
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Management Knowledge Revision Knols
Personal Power and Social Power
In contrast, people with social power thinking, are characterized by a concern for group goals, for finding the goals of the group, taking initiative in providing members of the group with the means of achieving such goals, and for giving group members the feeling of competence for working for those goals. McClelland's data collection showed that social power managers are quite effective.
Reference
Fred Luthans, Organizational Behavior
nifty tips
Markets dramatically change they their flow and no one exactly produce or expect 100% from their profits . Choosing the right indicator or analyzing software blended with human aspect gives better results.regards:- http://www.trade4target.com/
Nifty Tips - 30 Sep 2011