Chapter 9 CONTROLLING

CONTROLLING – IS A PROCESS OF MONITORING PERFORMANCE

4 STEPS IN CONTROL PROCESS

A.) ESTABLISHING PERFORMANCE OBJECTIVES
B.) MEASURING ACTUAL PERFORMANCE
C.) COMPARING ACTUAL PERFORMANCE
D.) TAKING ACTIONS BASED ON COMPARISON

 1.) SALES TARGETS – WHICH ARE EXPRESSED IN QUANTITY OR MONETARY TERMS

 2.) PRODUCTION TARGETS – WHICH ARE EXPRESSED IN QUANTITY OR QUALITY
 3.) WORKER ATTENDANCE – WHICH ARE EXPRESSED IN TERMS OF RATE OF ABSENCES
 4.) SAFETY RECORD – WHICH IS EXPRESSED IN NUMBER OF ACCIDENTS FOR GIVEN
PERIODS
 5.) SUPPLIES USED – WHEN ARE EXPRESSED IN QUANTITY OR MONETARY TERMS FOR
GIVEN PERIODS
WAYS OF MAKING COMPARISONS
A.) HISTORICAL/RELATIVE/ ENGINEERING
B.) BENCHMARKING
TYPES OF ACTION
A.) HIRE ADDITIONAL PERSONEL
B.) USE MORE EQUIPMENT
C.) REQUIRE OVERTIME
TYPES OF CONTROL
A.) FORFORWARD CONTROL
B.) CONCURRENT
C.) FEEDBACK CONTROL
COMPONENTS OF ORGANIZATIONAL CONTROL SYSTEM
A.) 1.) STRATEGIC PLAN
B.) 2.) THE LONG-RANGE FINANCIAL PLAN
C.) 3.) THE OPERATING BUDGET
D.) 4.) PERFORMANCE APPRAISALS
E.) 5.) STATISTICAL REPORTS
F.) 6.) POLICIES AND PROCEDURES

STRATEGIC CONTROL SYSTEMS

A.) FINANCIAL ANALYSIS
B.) FINANCIAL RATIO ANALYSIS
LIQUIDITY RATIOS - THESE RATIOS ASSESS THE ABILITY OF A COMPANY TO MEET ITS CURRENT
OBLIGATIONS
TYPES OF LIQUIDITY RATIOS:
1.) CURRENT RATIO
2.) ACID TEST
EFFICIENCY RATIO - THESE RATIOS SHOW HOW EFFECTIVELY CERTAIN ASSETS OR LIABILITIES
ARE BEIING USED IN THE PRODUCTION OF GOODS AND SERVICES.
COMMON EFFICIENCY RATIOS:
1.) INVENTORY TURNOVER RATIO
2.) FIXED ASSET TURNOVER
FINANCIAL LEVERAGE RATIOS – THIS IS A GROUP OF RATIOS DESIGNATED TO ASSESS THE
BALANCE OF FINANCING OBTAINED THROUGH DEBT AND EQUALITY SOURCES
1.) DEPTH TO TOTAL ASSETS RATIO
2.) TIMES INTEREST EARNED RATIO
PROBABILITY RATIOS - THESE RATIOS MEASURE HOW MUCH OPERATING INCOME OR NET
INCOME A COMPANY IS ABLE TO ABLE TO GENERATE IN RELATION TO ITS ASSETS, OWNER’S
EQUITY
CHAPTER 10 MANAGING PRODUCTION AND SERVICE OPERATIONS
ORGANIZATIONS - are designed mainly to produce products or services.
OPERATIONS - refers to “any process that accepts inputs and uses resources to change those
inputs in useful ways”
EXAMPLE OF FINAL GOODS AND SERVICES:
1. Industrial chemicals
2. Services like those for the constructions.
3. Electrical products
4, Electronic products
5. Mechanical devices
THE PRODUCTION PROCESS:
1. INPUTS
2. TRANSFORMATION PROCESS
3. OUTPUTS

Aldag and Stearns - accurately defined operations management as “the process of planning ,
organizing and controlling operations to reach objectives efficiently and effectively”
EFFICIENCY - is related to “the cost of doing something, or the resource utilization involved
EFFECTIVENESS - refers to goal accomplishment.
OPERATION MANAGEMENT - must be performed with the other functions like those for
marketing and finance.
The ENGINEER MANAGER - is expected to produce some output at whatever management
level he is.
Types of transformation process:
1. Manufacturing process
2. Services process
Manufacturing processes - are those that refer to the making of products by hand or with
machinery.
Job shop - is one whose production is based on sales orders for a variety of small lots.
Batch Flow - process is where lots of generally own designed products are manufactured.
WORKER-PACED ASSEMBLY LINE - refers to a production layout arranged in a sequence to
accommodate processing of large volume of standardized products or services.
MACHINE-PACED ASSEMBLY LINE - is a type of production process produces mostly standard
products with machines playing a significant role.
CONTINUOUS FLOW - processing is characterized by the rapid rate at which items move
through the system.
Service process - are those that refer to the provision of services to persons by hand or with
machinery.
Service factory - offers limited mix of services which results to some economies of scale in
operations.
Service shop provides - a diverse mix of services.
Mass service company - provides services to a large number of people simultaneously.
Professional services - companies that provide specialized services to other firms or
individuals
Product design- refers to the process of creating a set of product specifications appropriate to
the demands of the situation.
SCHEDULING - is the phase of production control involved in developing timetables that
specify how long each operation in the production process takes.
Inventory control - is the process of establishing and maintaining appropriate levels of reserve
stocks of goods.
Work flow layout - is the process of determining the physical arrangement of the production
system.
Quality control - refers to the management of products or services against standards set by
the company.