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From a hardware standpoint, multimedia requires that a computer have adequate capabilities in three areas:

  • Sound Capability: The hardware should be able to play sound through an internal speaker or to route stereo sound through a pair of external speakers connected to the computer.
  • Appropriate video capability. Most of the computers sold today have video capabilities that can accommodate multimedia.
  • Adequate storage. Because audio and video require large amounts of storage, extensive multimedia requires a storage device that plays disks that are substantially identical to that CDs that you buy in a music store.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Overproduction


Overproduction is regarded as the most serious waste as it discourages a smooth flow of goods or services and is likely to  inhibit  quality and productivity. Such overproduction also tends to lead to excessive lead and storage times. As a result defects may not be detected early, products may deteriorate and artificial pressures on work rate may be generated. In addition, overproduction leads to excessive work-in-progress stocks which result in the  physical dislocation of operations with consequent poorer communication. This state of affairs is often encouraged by bonus systems that encourage the push of unwanted goods. The pull or Kanban system was employed by Toyota as a way of overcoming this problem.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Bounded Rationality


Bounded rationality involves neuro-physiological limits on the one hand and language limits on the other. The physical limits take the form of rate and storage limits on the powers of individuals to receive, store, retrieve, and process information without error … Language limits refer to the inability of individuals to articulate their knowledge or feelings by use of words, numbers, or graphics in ways  which permit them to be understood by others. Despite their best efforts, parties may find that language fails them (possibly because they do not posses the requisite vocabulary or the necessary vocabulary has not been devised) and they resort to other means of communications instead. Demonstration, learning-by-doing, and the like may be the only means of achieving understanding when such language difficulties develop. (Williamson).

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

 

Manufacturing Inventories


Manufacturing inventories depend on how much value has been incorporated by the firm:

  1. Raw materials
  2. Components/Subassemblies/Unfinished items
  3. Work-in-process
  4. End items/Finished goods

Raw materials are any inventories by a company which the company has not yet processed in any way. This would include such obvious raw materials as iron ore, sand or glass. However, by definition, it could include computer chips or other expensive items which have not yet been processed.

Components/Subassemblies/Unfinished items have been processed to some extent by the company, but are not yet finished. They may leave production area and be stored off the line, but will still not revert to being called raw material. They already have value added.

Work in process is similar to components, et al. it is actually a mixture of raw materials and components that are currently a part of the production process. So some raw materials may be part of work-in-process, and some components may not be.

Finished goods are simply goods which are finished and ready for sale. They are almost never left in the work area, but are moved out into final storage or packaging.

There is often some ambiguity about classification, since a company may sell some unpainted furniture but paint some for final sale. Is a given unpainted piece to be considered finished goods or not? Perhaps we need a new term for such goods.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Managing Inventory


Inventory is an area where financial managers can fine-tune the firm’s cash-flow. Inventory sitting on the shelf represents capital that is tied up without earning interest. Furthermore, the firm incurs expenses for shortage and handling, insurance, and taxes. And there is always a risk that the inventory will become obsolete before it can be converted into finished goods and sold.

The firm’s goal is to maintain enough inventory to fill orders in a timely fashion at the lowest cost. To achieve this goal, the financial manager tries to determine the economic order quantity or quantity of raw materials that, when ordered regularly, results in the lowest ordering and storage costs. The problem is complicated by the fact that minimizing ordering costs tends  to increase storage costs and vice versa. The best way to cut ordering costs is to place one big order for parts and materials once a year, while the best way to cut storage costs is to order small amounts of inventory frequently. The challenge facing the financial manager is to find a compromise that minimizes total costs.

That is why many businesses today are turning to just-in-time inventory control. Businesses—and even divisions within companies—link up through computers with their customers and suppliers, thereby automatically ordering only as much as is necessary for a given period of time.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Purchasing Information


Basic data that should be systematically collected include:

  • Purchase item number and description
  • Quantity required
  • Date item required
  • Date purchase requisition received or authorized
  • Purchase requisition or authorization number
  • Supplier(s) quoted
  • Date supplier(s) quoted
  • Date quotes required from supplier(s)
  • Supplier quote(s)
  • Supplier price discount schedule
  • Purchase order number
  • Date purchase order placed
  • Purchase price per unit
  • Quantity or percent of annual requirements purchased
  • Planned purchase price per unit
  • Supplier name
  • Supplier address
  • Supplier promise ship date
  • Supplier lead time (days or weeks for purchase item)
  • Date purchase item received
  • Quantity received
  • Purchase item accepted or rejected (unit/lot)
  • Storage location
  • Buyer
  • Work unit
  • Requested price change
  • Effective date of requested price change
  • Date price change approved
  • Ship to location

These basic transaction data are needed for purchasing decisions and management control systems, especially if these are computerized.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Managing Cash and Liquidity


In a turbulent environment, cash returns are important, if not more important, than reported profit returns. Cash returns lead to liquidity, and liquidity is a top priority consideration whenever risks and uncertainties surround a business situation, as they do in so many cases today. Cash and liquidity put any company in a better position to withstand a surprise blow, adapt to sudden changes, and capitalize on the narrower windows of opportunity that are commonplace in a turbulent environment.

This doesn’t mean that profits and profit growth are not important. The whole purpose of any business enterprise is to maximize profits and profit growth, but this objective will  not be achieved if business unit managers do not focus more time and attention on managing their cash and liquidity. Any entrepreneur that has lived through a start-up knows the importance of cash and liquidity. The entrepreneur knows from experience that a business can go bankrupt even while it is reporting profits. But it will never go bankrupt as long as its cash and liquidity positions are strong. Most corporate executives understand this point also, but many do not follow through to make sure it is sufficiently stressed or understood at the operating level. This is where the problem lies. Most business unit managers who operate under a corporate umbrella tend to overlook the importance of managing their own cash and liquidity and look instead to the corporation as a never ending source of funds.

The results are apparent in most corporations. Capital expenditure proposals tend to be a “wish list” often justified on project volume gains or cost savings that never occur. Working capital is allowed to build without adequate regard for carrying costs on the cash commitment. In short, overinvestment in plant and equipment, and working capital often serves as a buffer to cover sloppy business practices and control. These are practices that inevitably lead to an investment base that is too big for the business and to marginal profit returns.

Many operating managers in a corporation are not even aware of the costs incurred while excess capital is tied up in the business. This is not an exaggeration. Just ask any four or five business unit managers how much it costs to carry their inventory. Most of them will acknowledge an interest cost of, say 7—8 percent, but few will recognize that total carrying costs, which include storage, taxes, obsolescence, and shrink, actually run closer to 30 percent in today’s environment. We would also bet that none of them have such charges against their earnings, even though it is a very legitimate cost of doing business.

Not every company operates this way. Most corporate executives are not tough minded or rigorous enough in challenging cash commitments, and most business unit managers have more cash tied up in their business than required.

Ideally, every manager should think like a small business entrepreneur with his or her own money at risk. If this were the case, we would not see so many companies with bloated balance sheets and marginal returns. Left on their own, most business unit managers do not think this way, however. Life is not easier when you can draw almost at will on coroprate resources to meet the payroll, build inventories, and buy supplies, tooling and a lot of equipment. Under such conditions you don’t have to worry very much about how to make ends meet.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

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