Three factors that affect management’s decisions on the degree of centralization

Many factors are considered when deciding to what degree authority should be centralized. The cost of a decision, uniformity of policy, competency levels, control mechanisms and environmental factors all affect the how much centralization of authority is needed for an area of decision making. The cost of a decision determines how much authority one must have to make it. Uniformity of policy comes into play for leaders who need consistency. 

 

Competency levels refers to the need of decentralized organizations to have an adequate supply of competent leaders and employees. Organizations having a high degree of competency levels may be willing to sacrifice small costs associated with employee mistakes for the valuable experience it yields. Control mechanisms are used to gauge the efficacy of individual divisions of an organization. Finally, environmental influences or external factors such as regulations will have an influence on the degree of centralization or decentralization.


Advantages of the network design include bringing together the special knowledge and skills of others to create value rather than hiring employees to perform this task; bringing together people with different insights into teams that work exclusively on a given project; working with a wide variety of different suppliers, customers, and other organization. 

 

Disadvantages include that other organizations in the network can fail to live up to the deadlines that were established; managers must constantly monitor the quality of work provided by those in other organizations; and employees in the outsourced organization may not commit to the same values and sense of time urgency to which employees in the host organization are committed.

Organizational change approach used as a diagnostic tool in change efforts

Survey feedback is frequently used as a diagnostic tool to identify team, department, and organizational problems. Because of its value in organizational diagnosis, it is often utilized as part of large-scale, long-term change programs in combination with other approaches and techniques. Survey feedback consists of 

(a) collecting information (usually by questionnaire) from members of an organization, department, or team, 

(b) organizing that information into an understandable and useful form, and 

(c) feeding that information back to the employees who provided it. Some or all of the employees then use this information as a basis for planning actions to deal with specific issues and problems. 

 

The primary objective of survey feedback is to improve the relationships among team members or between departments through the discussion of common problems, rather than to introduce a specific change, such as a new computer system. Survey feedback thus typically follows the action research process, and may help in the unfreezing step of organizational change by helping organization members to recognize issues and problems that need to be addressed. Students should be able to identify an example of a circumstance in which survey feedback could be helpful. 

 

One of the most obvious would be the classroom setting, wherein both the students' and the professor's responses to questions about the learning experience could be fed back to the group to facilitate identification of issues of concern to either or both parties, and thus used as a basis for collaborative problem solving. Numerous other examples from either the school or work setting could be equally appropriate.

3 things need to be accurately diagnosed before planned change can be successful

Organizational diagnosis is the process of assessing the functioning of the organization, department, team, or job to discover the sources of problems and areas for improvement. An accurate, valid diagnosis of current organizational functioning, activities, and problems is an essential foundation for effective organizational change. Information needed to diagnose organizational problems may be gathered from questionnaires, interviews, observation, and company records.

Any planned change also requires a careful assessment of individual readiness for change. Two important aspects of individual readiness for change are the degree of employee satisfaction with the status quo and the perceived personal risk involved in changing it. When employees are dissatisfied with the current situation and perceive little personal risk from change, their readiness for change probably would be high. In contrast, when employees are satisfied with the status quo and perceive high personal risk in change, their readiness for change probably would be low. Employee expectations regarding change should be positive and realistic. If people expect that nothing of significance will change, regardless of the amount of time and effort they might devote to making it happen, this belief can become a self-fulfilling prophecy. And when employee expectations for improvement are unrealistically high, unfulfilled expectations can make matters worse.

Also, the organization's capacity for change must be accurately assessed. If the organization has few resources and its members don't have the time or opportunity to implement the needed changes, the attempt will likely fail.

Finally, potential resistance to change must be diagnosed. Individual may resist change because of their perceptions or personalities. In addition, habits, fear of the unknown, economic insecurities, and threats to established power and influential relationships may generate further resistance to change. Organizational resistance to change may be caused by organizational structure and culture, resource limitations, and interorganizational agreements. Force field analysis can help managers and employees diagnose and overcome resistance to change. Resistance can also be reduced through open communication and high levels of employee participation in the change process.

Method and Guidelines for Process Costing

Lost units are always shown with other whole units under “Units accounted for” in the cost of production report.

Continuous Normal Loss
1. Lost units are not extended to EUP schedule.
2. All good production (both fully and partially completed) absorbs the cost of the lost units through higher per-unit costs.

Continuous Abnormal Loss
1. All units are appropriately extended to EUP schedule.
2. Cost of lost units is assigned as a period loss.

Discrete Normal Loss
1. Normal loss is appropriately extended to EUP schedule.
2. Determine whether ending inventory has passed an inspection point.
a. If no, cost of lost units is assigned only to the good production that was transferred.
b. If yes, cost of lost units is prorated between units in ending WIP Inventory and units transferred out based on (1) (weighted average) total costs contained in each category prior to proration, or (2) (FIFO) current costs contained in each category prior to proration.

Discrete Abnormal Loss
1. All units are appropriately extended to EUP schedule.
2. Cost of lost units is assigned as a period loss.

Normal Rework
1. (Actual cost system) Add rework costs to original material, labor, and overhead costs and spread over all production.
2. (Normal and standard cost systems) Include cost of rework in estimated overhead when determining standard application rate. Assign actual rework costs to Manufacturing Overhead.

Abnormal Rework
Accumulate rework costs separately and assign as a period loss.

Accretion in Successor Departments
An increase in units requires that the per-unit transferred-in cost be reduced in the successor department based on the new, larger number of units.

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Theorems in linear programming

 There are two two linear programming Theorems : The trial and error and simplex methods are based on the concept of slack variables and theorems described below:

Extreme point theorem : It states that an optimal solution to a LPP occurs at one of the vertices of the feasible region. This should be obvious from the discussion on the graphical method. Now the vertices are defined by the intersection of equations. The first step of the method is, therefore, to convert the inequalities into equalities by the addition (or subtraction) of the slack (or surplus variables) depending on the direction of the inequality.

It is to be noted that the system of equations (A) above has more variables than the number of equations. Such a system of equations has an infinite number of solutions; yet it has finite and few vertices, the co-ordinates of which can be determined by applying the Basis theorem. 

Basis theorem : It states that for a system of m equations in n variables (where n > m) has a solution in which at least (n-m) of the variables have value of zero as a vertex. This solution is called a basic solution.

Extreme point theorem can be extended to state that the objective function is optimal at least at one of the basic solutions. Some of the vertices may be infeasible in that they have (-)ve coordinates and have to be dropped in view of the non-negativity condition on all variables including the slack and surplus variables.

Key points under Graphical Method of linear programming

(i) Formulating the linear programming problem, i.e.,expressing the objective function and constraints in the standardised format.

(ii) Plotting the capacity constraints on the graph paper. For this purpose normally two terminal points are required. This is done by presuming simultaneously that one of the constraints is zero. When constraints concerns only one factor, then line will have only one origin point and it will run parallel to the other axis.

(iii) Identifying feasible region and coordinates of corner points. Mostly it is done by breading the graph, but a point can be identified by solving simultaneous equation relating to two lines which intersect to form a point on graph.

(iv) Testing the corner point which gives maximum profit. For this purpose the coordinates relating to the corner point should put in objectives function and the optimal point should be ascertained.

(v) For decision – making purpose, sometimes, it is required to know whether optimal point leaves some resources underutilized. For this purpose value of coordinates at the optimal point should be put with constraint to find out which constraints are not fully utilized.

5 steps to follow under graphical solution to a linear programming

steps to be followed under graphical solution to a linear programming problem.

Step1. Determine the region that satisfies the set of given inequalities.

Step 2. Ensure that the region is bounded*. If the region is not bounded, either there are additional hidden conditions which can be used to bound the region or there is no solution to the problem.

Step 3. Construct the matrix E of the extreme points, and the column vector C of the objective function.

Step 4. Find the matrix product EC. For maximization, determine the row in EC where the largest element appears; while for minimization, determine the row in EC where the smallest element appears.

Step 5. The objective function is optimized corresponding to the same row elements of the extreme point matrix E.

If the slope of the objective function be same as that of one side of feasible region, there are multiple solutions to the problem. However, the optimized value of the objective function remains the same.

What are FMSs and CIMs?

Flexible Manufacturing Systems and Computer-Integrated Manufacturing

Many manufacturers have changed their basic manufacturing philosophy in the past few decades. Causes of  change  include:  (1) automated equipment and a  cellularplant layout, (2) computer hardware and software technology, and (3) new manufacturing systems and philosophies such as JIT and activity-based management.

Traditionally, most manufacturing firms employed long production runs to make thousands of identical models of the same products; this process was encouragedby the idea of economies of scale. After each run, the machines would be stoppedand a slow and expensive setup would be made for the next massive production run to begin. Now, an entirely new generation of manufacturing known as flexible manufacturing systems (FMSs) is being developed.

An FMS involves a network of robots and material conveyance devices monitored  and  controlled by  computers  that  allows  for  rapid production  and  responsiveness  to  changes  in production needs. Two or more FMSs  connected  via  a host computer and an information networking system are generally referred to as computer-integrated manufacturing (CIM). The dimensions  of  a  traditional manufacturing  system with  an  FMS. Although  an  FMS  is typically associated with short-volume production runs, many companies  have also begun to use CIM  for high-volume  lines.

What is Design for manufacturability (DFM)?

Design for manufacturability (DFM) is a process that is part of the project management  of  a  new product. DFM  is  concerned with  finding  optimal  solutions  to minimizing product failures and other adversities in the delivery of a new product tocustomers. Objectives of DFM include optimizing customer satisfaction, cost to thecustomer of owning and using the product over its life for the customer, and cost, time, effort, and ease of producing and delivering  the product  to customers.

Cross-functional teams seeking advice from customers and assistance from suppliers  gather  and  manipulate  information  to  determine  the  material,  methods, processes and their trade-offs that will best meet their objectives. This process involves activity analysis to minimize the presence of non-value-added activities and to streamline the performance of value-added activities.

Working methodology of critical path analysis.

The working methodology of Critical Path Analysis (CPA) which includes both CPM and PERT, consists of following five steps:

1. Analyse and breakdown the project in terms of specific activities and / or events.

2. Determine the interdependence and sequence of specific activities and prepare a network,

3. Assign estimates of time, cost or both to all the activities of the network.

4. Identify the longest or critical path through the network.

5. Monitor, evaluate and control the progress of the project by re-planning, rescheduling and reassignment of resources.

4 common implications which characterize a project,

A project can be defined as a set of activities or jobs that are performed in a certain sequence determined logically or technologically and it has to be completed within (i) a specified time, (ii) a specified cost and (iii) meeting the performance standards. Examples of a project from fairly diverse fields could be cited. Some of them are given below:
1. Introducing a new product in the market.
2. Construction of a new bridge over a river or construction of a 25 – storied building.
3. Executing a large and complex order on jobbing production.
4. Sending a spacecraft to the mars.
All these projects are characterized by the following set of common implications, although they pertain to widely different fields.
(i) The Large-scale characteristic: These projects are generally unusually large and complex. Thousands of suppliers, workers and other categories of persons are involved and their efforts have to be coordinated for completion of the project.
(ii) The non-recurring characteristic: These projects are generally of a one-time nature. Neither in the past, nor in the future they are likely to undertaken substantially in the same form.
(iii) Uncertain and critical dates: During of the various activities involved in such projects are usually uncertain. Further in such type of projects, many critical dates exits by which operations must be completed in order to complete the entire project on schedule.

(iv) Completion dead line: The fourth distinct feature of these projects is that there is dead line for the completion of the entire project. In case of any delay in the completion of the project, some penalty is levied for such delay beyond the dead line.

Distinction between PERT and CPM.

Distinction between PERT and CPM: The PERT and CPM models are similar in terms of their basic structure, rationale and mode of analysis. However, there are certain distinctions between PERT and CPM networks which are enumerated below:
(1) CPM is activity oriented i.e. CPM network is built on the basis of activities. Also results of various calculations are considered in terms of activities of the project. On the other hand, PERT is even oriented.
(2) CPM is a deterministic model i.e. it does not take into account the uncertainties involved in the estimation of time for execution of a job or an activity. It completely ignores the probabilistic element of the problem. PERT, however, is a probabilistic model. It uses three estimates of the activity time; optimistic, pessimistic and most likely, with a view to take into account time uncertainty. Thus, the expected duration for each activity is probabilistic and expected duration indicates that there is fifty per probability of getting the job done within that time.
(3) CPM laces dual emphasis on time and cost and evaluates the trade-off between project cost and project item. By deploying additional resources, it allows the critical path project manager to manipulate project duration within certain limits so that project duration can be shortened at an optimal cost. On the other hand, PERT is primarily concerned with time. It helps the manger to schedule and coordinate various activities so that the project can be completed on scheduled time.
(4) CPM is commonly used for those projects which are repetitive in nature and where one has prior experience of handling similar projects. PERT is generally used for those projects where time required to complete various activities are not known as prior. Thus, PERT is widely used for planning and scheduling research and development project.

Characteristics of the dual problem.

Characteristics of the dual problem:
1. For any linear programming model called primal model, there exists a companion model called the dual model.
2. The number of constraints in the primal model equals the number of variables in the dual model.
3. The number of variables in the primal problem equals the number of constraints in the dual model.
4. If the primal model is a maximization problem then the dual model will be of the form less than or equal to, “≤” while the restrictions in the dual problem will be of the form-greater than or equal to, “≥”.
5. The solution of the prima; model yields the solution of the dual model. Also, an optimal simplex table for the dual model yields the optimal solution to the primal model. Further, the objective functions of the two optimal tables will have identical values.
6. Dual of the prima’s dual problem is the primal problem itself.
7. Feasible solutions to a primal and dual problem are both optimal if the complementary slackness conditions hold, that is, (value of a primal variable) x (value of the corresponding dual surplus variable) = 0 or (value of a primal slack variable) x (value of the corresponding dual variable) = 0.
If this relationship does not hold, than either the primal solution or the dual solution or both are no optimal.
8. If the primal problem has no optimal solution because of infeasibility, then the dual problem will have no optimal solution because of unboundedness.
9. If the primal has no optimal solution because of unboundedness, then the dual will have no optimal solution because of infeasibility.

Why Balanced Scorecards sometimes fail to provide for the desired results

The following are some reasons why Balanced Scorecards sometimes fail to provide for the desired results;
• The use of non financial measures leads managers to think that they have a Balanced Scorecard already working for strategic purposes.
• Senior executives misguidedly delegate the responsibility of the Scorecard implementation to middle level managers.
• Company’s try to copy measures and strategies used by the best companies rather than developing their own measures suited for the environment under which they function.
• There are times when Balanced Scorecards are thought to be meant for reporting purposes only. This notion does not allow a Business to use the Scorecard to manage Business in a new and more effective way.

It may be noted that the above-mentioned difficulties refer to the internal use of the Scorecard. It remains a matter of debate whether a Balanced Scorecard is applicable to external reporting. Critics argue that if the Scorecard is indeed a relevant driver of long term performance.

Idea behind theory of constraints (TOC)

The idea behind TOC is that raw materials is the only variable cost. Labour & variable overhead are consider as fixed cost.
The theory of constraints (TOC) describes methods to maximize operating income under bottleneck situation.

The three measurements:
1. Calculate Throughput contribution = sale - direct materials cost of the goods sold.
2. Investments = Sum of materials costs in direct materials, work – in – process, and finished goods inventories; R & D costs; and costs of equipment and buildings.
3. Operating costs equal all costs of operations (other than direct materials) incurred to earn throughput contribution. Operating costs include salaries and wages, rent utilities, and depreciation.

The objective of TOC is to increase throughput contribution while decreasing investments and operating costs. TOC considers a short – run time and assumes that operating costs are fixed costs.

The important concept behind TOC is that the production rate of the entire factory is set at the pace of the bottleneck resource. Hence, in order to achieve the best result TOC emphasises the importance of removing bottlenecks or limiting factor.

What is Theory of Constraints?

During the 1980s Goldratt and Cox (1989) advocated a new approach to production management called optimized production technology (OPT). OPT is based on the principle that profits are expanded by increasing the throughput of the plant. The OPT approach determines what prevents throughput being higher by distinguishing between bottleneck and non-bottleneck resources. This approach advocates that bottleneck resources/ activities should be fully utilized while non bottleneck resources/activities should not be
utilized to 100% of their capacity since it would result in increase in inventory.
 

OPT is based on the principle that profits are expanded by increasing throughput of the plant i.e. rate at which raw material are turned into sales. The most widely recognized management accounting system developed for this purpose is known as throughput accounting (TA). The concept behind the system was first formulated and developed by Goldratt and Core (1986) in USA. Goldratt developed the concept and eventually gave it the name the Theory of Constraints (TOC). The theory was picked up and inducted into an accounting system in the UK where it is known as Throughput Accounting (TA).

The theory of constraint focuses its attention on constraints and bottlenecks within the organisation which hinder speedy production. The main concept is to maximize the rate of manufacturing output i.e. the throughput of the organisation. This requires to examine the bottlenecks and constraints which are defined was:
A bottleneck is an activity within the organisation where the demand for that resource is more than its capacity to supply. A constraint is a situational factor which makes the achievement of objectives/throughput more difficult then it would otherwise be. Constraints may take several forms such as lack of skilled employees, lack of customers orders or the need to achieve a high level of quality product output. Using above definition, therefore, a bottleneck is always a constraint but a constraints need not be a bottleneck. Let the customers due date performance i.e. meeting the delivery schedule for customers orders is the major constraint in the organisation. The bottleneck in such a case may be certain machine in the factory. Throughput thus related directly to the ability to cope with the constraint and to manage the bottleneck.

This focus on throughput forced management to examine both the constraints and the bottleneck in order to increase throughput.

What is BPR?

Business Process Re-engineering involves examining business processes and making substantial changes in the day to day operation of the organisation. It involves the redesign of work by changing the activities.

A business process consists of a collection of activities that are linked together in a coordinated and Sequential manner to achieve goal & objective.
For example, material handling might be classed as a. scheduling production,

b. storing materials,
c. processing purchase orders,
d. inspecting materials and
e. paying suppliers.

The aim of business process re-engineering is to improve the key business process in an organisation by focusing on

a. simplification,
b. cost reduction,
c. improved quality and
d. enhanced customer satisfaction