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Modern Business Environment

Modern Business Environment. Management Level – Paper P2 Advanced Managemen t Accounting. Lecture - 06. Vidya Rajawasam ACMA CGMA MBA. Modern Business Environment. In the previous lecture we have discussed Throughput accounting and theory of constraints. Kaizen Costing

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Modern Business Environment

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  1. Modern Business Environment Management Level – Paper P2 Advanced Management Accounting Lecture - 06 Vidya Rajawasam ACMA CGMA MBA

  2. Modern Business Environment In the previous lecture we have discussed • Throughput accounting and theory of constraints. • Kaizen Costing • Business process re-engineering

  3. Modern Business Environment In this lecture we will discuss • Supply chain management • Outsourcing • Gain sharing arrangements

  4. Modern Business Environment Supply chain management The supply chain management is oftenexplained with the Portersvaluechain and valuesystems. Basically a supply chain consists of network of customers and suppliers which the businessdeals with.

  5. Modern Business Environment Supply chain management Supply Chain Management (SCM) is an essential element of operationalefficiency. SCM can be applied to customersatisfaction and businesssuccess.

  6. Modern Business Environment Supply chain management The world has become a one big supply chain and it touches many areas of global businessenvironments. This includes; • A rapid growth of multinationalcorporations and strategicpartnerships, • A globalexpansion of business activities and sourcing of products and services.

  7. Modern Business Environment Supply chain management Some of the SCM issues have dramatically affects corporatestrategy and business bottomlines. Because of these emerging trends, SCM has become the mostcriticalbusinessdiscipline in the world today.

  8. Modern Business Environment Supply chain management The impact that SCM has on business is significant and exponential. Two of the main ways SCM affects business include: • Boosts Customer ServiceSCM impacts customerservice by making sure the right productassortment and quantity are delivered in a timely fashion.

  9. Modern Business Environment Supply chain management The impact that SCM has on business is significant and exponential. Two of the main ways SCM affects business include: • Boosts Customer ServiceAlso, those products must be available in the location that customers expect. Customers should also receive qualityafter-sale customer support.

  10. Modern Business Environment Supply chain management • Improves Bottom LineSCM has a tremendous impact on the bottomline. SCM decrease the use of largefixedassets such as plants, warehouses and transportation vehicles in the supply chain. Also, cashflow is increased because if delivery of the product can be expedited, profits will also be received quickly.

  11. Modern Business Environment Supply chain management SCM helps streamline everything from day-to-dayproductflows to unexpected naturaldisasters. With the tools and techniques that SCM offers, the firm will have the ability to properly diagnose problems, workaround disruptions and determine how to efficiently move products to those in a crisissituation. 

  12. Modern Business Environment SCM tools & techniques Planning techniques / tools Planning the SCM operation is critical to the successful implementation of SCM; • Understanding and identifyingRoles and responsibilities of SCM. • Modeling and designing global supply chain networks.

  13. Modern Business Environment SCM tools & techniques Planning techniques / tools • Measuring the SCM processes for further improvements. • Planning Businesstransformation – processes and priorities for success

  14. Modern Business Environment SCM tools & techniques Sourcing / Procurement tools Sourcing/ procurement/ purchasing focuses on better, faster, more reliable supplier services. • Strategicsourcing and supplier relationship management • Sourcing and savings analysis

  15. Modern Business Environment SCM tools & techniques Sourcing / Procurement tools • Landedcostmodels and globaltrade management • Reverseauctions as a strategy to improved purchasing and procurement • Risk management processes

  16. Modern Business Environment SCM tools & techniques Delivery process tools   Customers require fast, reliable, accurate and predictable delivery solutions. • Warehouse and transportation management systems • Tools to improve warehouse and transportation efficiency and effectiveness

  17. Modern Business Environment SCM tools & techniques Delivery process tools   • Benefits of AS/RS (automated storage and retrieval systems) • Scorecarding and dashboards • Carrierselection and transportation bid optimization

  18. Modern Business Environment Review MCQs The benefits of Supply Chain management are? • Supports operational efficiency • Improves customer satisfaction • Supports traditional absorption costing. • Supports marginal costing

  19. Modern Business Environment Review MCQs The benefits of Supply Chain management are? • Supports operational efficiency • Improves customer satisfaction • Supports traditional absorption costing. • Supports marginal costing

  20. Modern Business Environment Review MCQs What statement is true with regard to Supply Chain Management techniques ? • Modeling and designing global supply chain networks. • Not too costly to implement • Does not require additional resources. • Provides techniques for sourcing suppliers.

  21. Modern Business Environment Review MCQs What statement is true with regard to Supply Chain Management techniques ? • Modeling and designing global supply chain networks. • Not too costly to implement • Does not require additional resources. • Provides techniques for sourcing suppliers.

  22. Modern Business Environment Outsourcing In today’s modern business environment, governments and business organizations focus on their corecompetencies and outsource major noncorefunctions to specialized, efficient service providers. Traditionally, outsourcing/ in-sourcing decisions based on make or buy decisions in manufacturing setups.

  23. Modern Business Environment Outsourcing Within the last decade, we have witnessed a rapidgrowth in Business process Outsourcing (BPO) in many areas; Humanresource management, accounting, manufacturing, Information technology, productdesign etc…

  24. Modern Business Environment Outsourcing The goal of BPO is typically longer-term and focuses on the realization of overall businessbenefits, whether enhancing an organization’s competitive position in the marketplace or improving shareholder returns.

  25. Modern Business Environment Outsourcing The difference between an outsourcingarrangement and any other business arrangement is that the transfer of ownership of an organization’s businessactivities (processes or functions) or the responsibility for the businessoutcomes flowing from these activities to an outsideserviceprovider.

  26. Modern Business Environment Outsourcing In a typicaloutsourcingarrangement, the people, the facilities, the equipment and the technology (the Factors of Production) are also transferred to the serviceprovider, which then uses the Factors of Production to provide the servicesback to the organization. The people are oftentransferred to the service provider, but this is notalways the case.

  27. Modern Business Environment Outsourcing In a typicaloutsourcingarrangement, the people, the facilities, the equipment and the technology (the Factors of Production) are also transferred to the serviceprovider, which then uses the Factors of Production to provide the servicesback to the organization. The people are oftentransferred to the service provider, but this is notalways the case.

  28. Modern Business Environment Outsourcing An outsourcing arrangement can be either “tactical” or “strategic.” An outsourcing is tactical when it is driven by a desire to solve a practicalproblem. For example, a company may find that its payrollclerk is not able to processpayroll changes, cheques, tax returns and make the required accounting entries on time.

  29. Modern Business Environment Outsourcing The company outsources the payroll process (including the clerk), and ends up with all of the payroll work done on time and at a lowercost. As a result, it achieves a net gain in operationalefficiency. Similarly, if an organization outsources its ITinfrastructure so it can save 5% to 10% on the cost of operating that function, the outsourcing is purelytactical.

  30. Modern Business Environment Outsourcing The company outsources the payroll process (including the clerk), and ends up with all of the payroll work done on time and at a lowercost. As a result, it achieves a net gain in operationalefficiency. Similarly, if an organization outsources its ITinfrastructure so it can save 5% to 10% on the cost of operating that function, the outsourcing is purelytactical.

  31. Modern Business Environment Outsourcing “Strategic” outsourcing, on the other hand, is notdriven by a problem-solving mentality. Instead, it is structured in a such a way that it is aligned with the company’slong-term strategies.

  32. Modern Business Environment Outsourcing The changes that organizations expect from strategicoutsourcing vary and can include; (a) achieving a gain in competitiveadvantage, (b) spending more time on those activities that are trulycentral to the success of the organization,

  33. Modern Business Environment Outsourcing The changes that organizations expect from strategicoutsourcing vary and can include; (c) repositioning the organization in the marketplace. (d) achieving a dramatic increase in shareprice.

  34. Modern Business Environment Gain sharing arrangements Gain-sharing is a management technique used by businesses to increaseprofitability of an organization by motivatingemployees to improve their performance through involvement and participation. As the employees performanceimproves, they share financially in the gain (improvement).

  35. Modern Business Environment Gain sharing arrangements Gain-sharing is a management technique used by businesses to increaseprofitability of an organization by motivatingemployees to improve their performance through involvement and participation. As the employees performanceimproves, they share financially in the gain (improvement).

  36. Modern Business Environment Gain sharing arrangements’ characteristics • Establish mutual interdependence and trust between the employees and the organization. (instead of having blame cultures). • Identification of common goals for success. • Agreed decisionmaking and problemsolving procedures.

  37. Modern Business Environment Gain sharing arrangements’ characteristics • Commitment to continuous improvements. • Team working down the entireproduct and supply chain. • Gain-share and pain-share arrangements established in advance.

  38. Modern Business Environment Gain sharing arrangements’ characteristics • Openbook accounting • Performancetargets focus on continuous measurable improvements.

  39. Modern Business Environment Gain sharing arrangements’ examples Many hospitals offer physicians the opportunity to share in organizational savings achieved through standardization of deliveringservices and efficient use of supplies. These arrangements benefithospitals because they encourage the efficient use of resources without compromisingpatientcare. .

  40. Modern Business Environment Gain sharing arrangements’ examples Physicians also benefit, because they receive compensation for the services they provide to enhance the hospitals’ efficiency.

  41. Competitor Analysis Review MCQs What are the benefits of outsourcing arrangements ? • Provides support to gain competitive advantage • Provides information related to products. • Allows management to focus on core competencies. • Provides after sales service.

  42. Competitor Analysis Review MCQs What are the benefits of outsourcing arrangements ? • Provides support to gain competitive advantage • Provides information related to products. • Allows management to focus on core competencies. • Provides after sales service.

  43. Competitor Analysis Review MCQs What is true related to Gain sharing arrangements ? • Ideal for public sector organizations only. • Supports quality assurance programs . • Provides a return for employees for cost saving activities carried out. • Non of the above

  44. Competitor Analysis Review MCQs What is true related to Gain sharing arrangements ? • Ideal for public sector organizations only. • Supports quality assurance programs . • Provides a return for employees for cost saving activities carried out. • Non of the above

  45. Competitive Advantage Lecture Summary We have discussed the • Supply chain management • Outsourcing • Gain sharing arrangements

  46. Modern Business Environment Management Level – Paper P2 Advanced Management Accounting Lecture - 06 Vidya Rajawasam ACMA CGMA MBA

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