Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Inventory Products and components of products sold Average inventory level is basis for productivity measurement. Inventory turnover is most common productivity measure. Exhibit 2.3 Daily orders vs Monthly Orders to Meet !00 unit/ Month Demand
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Example 2.1: Average Inventory Calculations Deliveries of 800 cases weekly Cases are valued at $265 What is average level of inventory? What is average level of inventory if change to daily delivery?
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Example 2.1: Average Inventory Calculations Solution: cases, $106, cases, $21,200 Excel Tutor 2.1
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Workforce The employees Labor costs high in some industries, low in others. Productivity measured as output/input
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Example 2.2: Calculating Productivity Measures
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Example 2.2: Calculating Productivity Measures Solution Excel Tutor 2.2
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Capacity Capability to produce output in a given amount of time. Utilization: Actual running time/time available. ReelVideo 2.1
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Example 2.3 Utilization Calculation What is the utilization of the new robot, given the observations in Exhibit 2.6? Excel Tutor 2.3
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Example 2.4 Efficiency Calculation What is the efficiency of the check clearing operation using the data in Exhibit 2.7? Excel Tutor 2.4
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Facilities Buildings used to house all aspects of a business. Expensive, long-term investments. Output per square foot of facilities is common productivity measure.
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Customer Relationships The longer a customer stays with a business, the more profitable the customer. Advances in technology enable businesses to manage customer relationships as an investment.
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Measurement Improvement Increase output (numerator), decrease input (denominator), or both. For profitability, increase net income or decrease costs (or assets) or do both.
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Decision-Making Tools: Breakeven Analysis Identification of best among alternatives, given fixed and variable costs, by comparing total cost curves. Interactive Model 2.1
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Example 2.5: Breakeven Analysis Complete the breakeven analysis for the alternative software providers in Exhibit 2.8
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Example 2.5: Breakeven Analysis Exhibit 2.9 Call Management Software Cost Comparison
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Example 2.5: Breakeven Analysis Solution 360, n = 224, n 136, n = 0.97n 136,000 = 0.59n 230,508 = n 480, n = 360, n 120, n = 0.38n 120,000 = 0.31n 387,097 = n Excel Tutor 2.5
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. The Balanced Scorecard Measuring performance beyond financial measures. Financial objectives Customer outcomes Internal business processes Learning and growth