1 SMALL BUSINESS MANAGEMENT Chapter 11 Operations Management

2 Management of Internal Operations u Part of Physical Facilities Plan u Maintaining Quality and Control u Areas – cash flow, production costs, product quality, inventory management, physical facilities issues.

3 The Production Process u Converts Inputs – money, people, machines, inventories u Into Outputs – products and/or services u PERT = Priority Evaluation Review and Technique u Total Quality Management

4 Physical Facilities u Buildings - age, space, configuration, appearance, frontage, access u Interior utilization - floor space, room dimensions, ceiling heights, stairways, elevators, window space, utility services u Improvement potential - building exterior and interior,site, surrounding, streets, walks, access, expansion u Site and Environment - street and service areas setback and frontage, parking, surrounding businesses, area environment

5 Layout u Layouts for Manufacturing Firms – product layout, process layout, fixed position layout u Layouts for Retail Firms – selling vs. nonselling space, space among departments and/or products, classification of merchandise, display locations and product shelving F grid layout, free-flowing layout u Layouts for Service Firms

6 Purchasing and Controlling Inventories u Sources of Supply u Evaluating Suppliers – dependability, cost, services offered u Determining Order Quantities – order lead time, sales or production estimate, minimum inventory levels needed, inventory currently on hand, methods for determining order quantities, administration of the buying process (minimum turnover method, maxmin, opentobuy, eoq, abc analysis )

7 Purchasing and Controlling Inventories u Inventory Control – unit of control, – valuation, – monitoring, F periodic vs. perpetual – security of inventory

8 The Small Business-Supplier Relationship EXAMPLE OF POLICY u 1. Define clear, identifiable, and measurable objectives for your supplier management strategy. u 2. Be prepared to work with the supplier to identify and define the roles that each will perform. u 3. Attempt to employ technology to share data relating to forecasting, product movement, and financial evaluation. u 4. Evaluate suppliers regularly with an objective standardized framework that is both quantitative and qualitative.

9 Concept Checks u 1. What is the production process? u 2. Why is it important to continually monitor the state of the physical facilities? u 3. What are the three types of layouts used in the production process?

10 Concept Checks u 4. In planning the layout of a retail store, what key areas should be analyzed? u 5. What are the two types of layouts used by a retail store? u 6. What are the pros and cons of purchasing from one supplier?

11 Concept Checks u 7. What items of information are required to estimate the quantities of inventories to order? u 8. What specific methods can be used to determine order quantities? u 9. What are the three essential aspects of inventory control?