Service and Manufacturing Operations Business Management.

Service and Manufacturing Operations

Business Management

“Copyright and Terms of Service

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2Copyright © Texas Education Agency, 2014. All rights reserved.

3

Service Businesses

Form

• Intangible, meaning that they cannot physically be touched

Quality

• Created by the provider, which means it can vary from one provider to another

Storage

• Because services are not products, they cannot be stored

Availabili

ty

• Only made available from the provider

Copyright © Texas Education Agency, 2014. All rights reserved.

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Manufacturing Businesses

Form

• Tangible, can be touched

Quality

• Determined by the manufacturing process, should not vary much

Storage

• Can be stored, referred to as inventory

Availabili

ty

• Wherever the buyer needs the product/ online, brick and mortar location, or other locations


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Service Quality Standards

SERVQUAL survey

Franchising

Meeting customer needs


SERVQUAL Surveys

• Measures five areas of service quality that are important to customers:– Reliability – can the service be performed

accurately and dependably– Responsiveness – prompt customer service– Assurance – trustworthy, knowledgeable

employees– Empathy – individualized attention– Tangible – physical appearance of facilities,

personnel, and equipment


Franchising

• What is franchising?– A fee is paid to be able to sell a company’s

product or service • Benefits for service business standards

– Provided in many locations– Training provided ensuring consistency in quality

and service levels


Meeting Customer Needs

• Offering extended hours• Providing more locations• Extending customer follow-up contact


Manufacturing Considerations

9

Raw materials- supplies and

costs

Transportation- availability and

cost

Energy/utility costs

Land and building costs

Labor- hiring and training employees

Customers- locating and attracting

Legal/economic- taxes, zoning, environment


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Inventory Management

Work in Progress

Finished Goods

Raw Materials

Inventory- largestexpense of a business


Problem - High Inventory Levels

• Can be a result of:– Not being marketed properly– Incorrect pricing– Poor quality– Inadequate supply chain management


Problem - Inventory Storage Costs

• Costs associated with storing inventory:– Storage facility (for example, warehouses)– Insurance– Taxes– Depreciation– Labor – Loan costs if inventory purchased without using

cash


Solutions

• Forecast sales more accurately• Build relationships with suppliers• Be realistic about inventory turnover goals• Calculate actual inventory costs to get a

realistic picture of costs• Use up-to-date technology to assist with

supplier information and point-of-sale data• Educate employees on inventory control


Inventory Control Methods

• EOQ – Economic Order Quantity – the amount at which the amount of inventory ordered minimizes inventory costs

• Perpetual – maintaining a running count of inventory• Periodic – no continuous records are kept, inventory

physically counted periodically• Visual – making a visual inspection of inventory to

determine when inventory should be ordered• ABC Method – concentrates on the items that generate the

most sales• Just in Time – maintaining the smallest amount of

inventory needed to prevent out-of-stocks while being able to obtain stock as soon as it is needed


EOQ

• Economic order quantity depends upon:– Unit cost– Carrying costs (storage costs)– Costs to order products and raw materials

• Purpose is to determine an order quantity that minimizes cost


Perpetual Inventory Control

Advantages Disadvantages

Immediate inventory amounts If items are re-stocked, an employee can forget to scan

Universal Product Code (UPC) bar codes can make scanning inventory easier

If a manual recording method is used, an employee could forget to record a sale

Point-of-Sale (POS) systems can also maintain up-to-the-minute inventory counts

Computerized systems can be costly


Periodic Inventory Control

• Inventory is physically counted• Even when other methods of inventory control are

used, periodically, or even at regular intervals, inventory should be counted to cross-check other methods

• Two counting methods:– Periodic – usually end-of-year inventory counts

after sales– Cycle – counting a few types of items on a

frequent basis instead of year-end17Copyright © Texas Education Agency, 2014. All rights reserved.

Visual Inventory

• Effective for lower-dollar items and smaller variety of merchandise

• Least effective for accuracy• Can result in out-of-stock items• Makes inventory forecasting more difficult


ABC Inventory Control

• The relatively small amount of higher-dollar volumesA

• The amount of average- dollar volumesB

• The lower-dollar volume itemsC


ABC Inventory Control (continued)

• Need the most control over the amount of inventory for the higher-dollar, high-volume (A) items

• (A) items lean toward a more perpetual, ongoing control of the inventory/ control system costs more with these items

• (B) items can use periodic counting of inventory/ control system costs less

• (C) items require the least complicated/ less costly control method


Just in Time Inventory Control

• Reduces inventory costs• Keeps very little inventory on hand• Requires close relationships with suppliers

to be able to get products as soon as needed

• Usually requires updated technology to keep inventory activities in real time to coordinate with the suppliers


Independent Practice Assignments

• Tour Guide Assignment #1 – Present the students with the following scenario: they live in the Florida Keys and are looking to start a tour guide business. They plan on offering tours around the particular island on which they live. Students are to imagine their own details for these tours. The assignment is to create a survey to assess the quality of their service, that is, the tours they offer. They should use the guide at the http://web.stcloudstate.edu/brklemz/servqual-1.doc website. Students should create this survey manually or in a word-processing program.

• Inventory Control Document Assignment #2 – Have students select five stores that they know carry inventory. The will create a document such as a table, diagram, or other type of document that will identify the name of the store; the type of inventory control method they think would be most appropriate (and an explanation of why they think that way); and finally a statement from an owner, manager, or other employee of the companies they have selected regarding what type of inventory control method they actually do use. They should also include a statement somewhere on their document regarding how their suggestion compares to the actual method used.


http://web.stcloudstate.edu/brklemz/servqual-1.doc

Independent Practice Assignments (continued)

• Inventory Control Shrinkage Report Assignment #3 – Shrinkage is an issue concerning inventory that businesses must deal with. Shrinkage is the difference between the amount of inventory that is recorded and the actual amount of inventory on hand. Students will create a one-page on the causes and consequences of inventory shrinkage. They should detail at least three types or causes of shrinkage and explain the consequences of shrinkage. Proper writing conventions should be followed.


Service and Manufacturing Operations Business Management.

Documents

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