1. Decisions in Business Areas Copyright 1994-1996 by Jerry Post Chapter 9

2. Decisions in Functional Areas Finance Models Accounting Models Production Models Marketing Models Human Resource Models Strategy Tactical Decisions Operations Company

3. Models as Objects §Model Attributes l Inputs l Outputs l Problem Characterization §Model Methods l Optimization l Prediction l Simulation l Analysis

4. Accounting

5. Accounting Models §Transaction Processing & Tactics l Accounting systems are models l Standards for reports l Decisions & Data §Control Systems l Accuracy l Fraud §Strategic Support l Information l Customization

6. Activity Based Costing Traditional Cost Accounting File: C09E01a.xls

7. Activity Based Costing Process Sales Orders Source Parts Expedite Supplier Orders Expedite Internal Processing Resolve Supplier Quality Reissue Purchase Orders Expedite Customer Orders Schedule Intra-company Sales Request Engineering Change Schedule Parts Resolve Problems Data Flow Diagram Identify Subsystems Assign costs to each subprocess by category (salaries, fixed costs...)

8. Finance

9. Balance Sheet for 1996 Cash33,562 Accounts Payable32,872 Receivables87,341 Notes Payable54,327 Inventories15,983 Accruals11,764 Total Current Assets136,886 Total Current Liabilities98,963 Bonds14,982 Common Stock57,864 Net Fixed Assets45,673 Ret. Earnings10,750 Total Assets182,559 Liabs. + Equity182,559 File: C09E02a.xls

10. Finance Income Statement for 1996 Sales$97,655 tax rate 199340% Operating Costs76,530 dividends 199360% Earnings before interest & tax21,125 shares out. 19939763 Interest4,053 Earnings before tax17,072 taxes6,829 Net Income10,243 Dividends6,146 Add. to Retained Earnings4,097 Earnings per share$0.42

11. Corporate Finance Results in a Circular calculation. Cash$36,918 Acts Receivable96,075 Inventories17,581 Net Fixed Assets45,673 Total Assets$196,248 Accts Payable$36,159 Notes Payabale54,327 Accruals12,940 Total Cur. Liabs.103,427 Bonds14,982 Common Stock57,864 Ret. Earnings14,915 Liabs + Equity191,188 Add. Funds Need5,060 Bond int. rate5% Added interest253 Balance Sheet projected 1997 Income Statement projected 1997 Sales$ 107,421 Operating Costs84,183 Earn. before int. & tax23,238 Interest4,306 Earn. before tax18,931 taxes 8,519 Net Income 10,412 Dividends 6,274 Add. to Ret. Earnings $ 4,165 Earnings per share$0.43 Tax rate 199745% Dividend rate 199760% Shares outstanding9763 Sales increase10% Operations cost increase10% Forecast sales and costs. Forecast cash, accts receivable, accts payable, accruals. Add gain in retained earnings. Compute funds needed and interest cost. Add new interest to income statement. 1 2 3 4 5 1 2 4 2 3 5 Total Cur. Assets150,576

12. Marketing

13. Marketing Data Sources §Internal l Sales l Warranty cards l Customer service l Coupons l Surveys l Focus groups §Purchase l Scanner data l Competitive market analysis l Mailing & phone lists l Subscriber lists l Rating services l Shipping records §Government l Legal documents l Drivers license l Marriage l Housing/construction Business/legal notices l Census l Income l Demographics l Regional data

14. Marketing §Research and Forecasting §Customer Service File: C09E03a.xls

15. Promotion Analysis Regression Results With no promotions: sales = 20,865 + 342 * consumer + 339 * week consumer survey average = 45 Promotion 1: sales = 42,370 - 62 * consumer - 211 * week consumer survey average = 47 Promotion 2: sales = 13,448 + 501 * consumer + 545 * week consumer survey average = 53 Promotion 3: sales = 44,808 + 98 * consumer - 2067 * week consumer survey average = 38

16. Promotion Results Graph -10000 0 10000 20000 30000 40000 50000 60000 $ sales 1357911131517192123 week No promopromo1promo2promo3 Ikimasu Promotion Options

17. Human Resources File: C09E04a.xls

18. Human Resources

19. Production

20. Production Models §Process Control §Inventories, MRP §Computer Integrated Manufacturing §Product Design Computers are used to track inventory levels, receipts, and shipments. Sophisticated warehouse information systems automatically route boxes to storage and switch conveyor systems to send packages to trucks waiting at the loading docks.

21. Integrated Manufacturing shipping packing production raw materials time Q forecast sales by product production schedule workers & materials optimize schedule Send EDI notices to suppliers. schedule changes Information & Control Suppliers Customers

22. Production File: C09E05a.xls

23. Production Example §Parameters l Number of backup machines l Number of repair workers l Mean time to failure l Mean repair time l Cost additional workers l Cost of lost production §Output: l Total costs §Objective: l Hire the number of workers that leads to the least cost

24. Geographic Models File: C09GISa.xls

25. Tampa Miami Fort Myers Jacksonville Tallahassee Gainesville Ocala Orlando Clewiston Perry 7000+ 6700 6400 6100 5800- 19801990 17,000 15,000 13,000 11,000 9,000 per capita income 1990 Hard Goods 1990 Soft Goods 1980 Hard Goods 1980 Soft Goods