MGT613 Production / Operations Management GDB Solution Fall 2012

Case 1:

The sports industry of Pakistan was considered as one of the major contributor in GDP of the country, but nowadays the situation is different sports industry in Pakistan is having difficult times due to many domestic and international reasons. Sahgal Corporation have started their business in Pakistan in these difficult times, they are basically dealing with the manufacturing of sports items majorlyfootballs and their accessories.

Despite of the competitive nature of Pakistani sports industry and its challenges for the new investors, in just few years’ Sahgal Corporation is having great success in the market. Their sales are boosting up unlike other players in the market, they are also grabbing handsome market share and the company is progressing gradually.

Keeping in view the current situation of Pakistani sports industry; you are required to discuss the major factors, in terms of operations management, that the Sahgal Corporation has adopted to gain market success in few years. Also suggest that which areas they need to focus in order to maintain their current position and ultimately gain competitive advantage over its rivals.

Solution:

Good business management is the key to success and good management starts with setting goals. Set goals for yourself for the accomplishment of the many tasks necessary in starting and managing your business successfully. Be specific. Write down the goals in measurable terms of performance. Break major goals down into sub-goals, showing what you expect to achieve in the next two to three months, the next six months, the next year, and the next five years. Beside each goal and sub-goal place a specific date showing when it is to be achieved.

Business Management – Buying
Skillful buying is an important essential of profitable operation. This is true whether you are a wholesaler or retailer of merchandise, a manufacturer or a service business operator. Some retailers say it is the most important single factor. Merchandise which is carefully purchased is easy to sell.

Determining what to buy means finding out the type, kind, quality, brand, size, color, style -whatever applies to your particular inventory – which will sell the best. This requires close attention to salespeople, trade journals, catalogs, and especially the likes and dislikes of your regular customers. Analyze your sales records. Even the manufacturer should view the problem through the eyes of customers before deciding what materials, parts, and supplies to purchase.

The age of your customers can be a prime consideration in establishing a purchasing pattern. Young people buy more frequently than most older people. They need more, have fewer responsibilities, and spend more on themselves. They are more conscious of style trends whether in wearing apparel, cars or electronic equipment. If you decide to cater to the young trade because they seem dominate in your area, your buying pattern will be completely different than if the more conservative middle-aged customers appear to be in the majority.

Study trade journals, newspaper advertisements, catalogs, window displays of businesses similar to yours. Ask advice of salespeople offering you merchandise, but buy sparingly from several suppliers rather than one, testing the water, so to speak, until you know what your best lines will be.

Locating suitable merchandise sources is not easy. You may buy directly from manufacturers or producers, from wholesalers, distributors or jobbers. Select the suppliers who sell what you need and can deliver it when you need it. (Distributors and jobbers are used by most business people for quick fill-ins between factory shipments).

You may spread purchases among many suppliers to gain more favorable prices and promotional material. Or you may concentrate your purchases among a small number of suppliers to simplify your credit problems. This will also help you become known as the seller of a certain brand or line of merchandise, and to maintain a fixed standard in your products, if you are buying materials for manufacturing purposes.

When to buy is important if your business will have seasonal variations in sales volume. More stock will be needed prior to the seasonal upturn in sales volume. As sales decline, less merchandise is needed. This means purchases of goods for resale and materials for processing should vary accordingly.

At the outset, how much to buy is speculative. The best policy is to be frugal until you have had enough experience to judge your needs. On the other hand, you cannot sell merchandise if you do not have it.

To help solve buying problems, you should begin to keep stock control records at once. This will help you keep the stock in balance – neither too large nor too small – with a proper proportion and adequate assortment of products, sizes, colors, styles and qualities.

Fundamentally, there are two types of stock control – control in dollars and control in physical units. Dollar controls show the amount of money invested in each merchandise category. Unit controls indicate the number of individual items when and from whom purchased by category. A good stock control system can help you determine what, from whom, when, and how much to buy.

Business Management – Pricing
Much of your success in business will depend on how you price your services. If your prices are too low, you will not cover expenses; too high and you will lose sales volume. In both cases, you will not make a profit.

Many small firms are interested in knowing what industry markup norms are for various products. Wholesalers, distributors, trade associations and business research companies publish a huge variety of such ratios and business statistics. They are useful as guidelines. Another ratio (in addition to the markup percentage) important to small firms is the Gross Margin Percentage (GMP).

Business Management – Selling
Whether you operate a factory, wholesale outlet, retail store, service shop, or are a contractor, you will have to sell. No matter how good your product is, no matter what consumers think of it, you must sell to survive.

Direct selling methods are through personal sales efforts, advertising and, for many businesses, display – including the packaging and styling of the product itself – in windows, in the establishment, or both. Establishing a good reputation with the general public through courtesy and special services is an indirect method of selling. While the latter should never be neglected, this brief discussion will be confined to direct selling methods.

To establish your business on a firm footing requires a great deal of aggressive personal selling. You may have established competition to overcome. Or, if your idea is new with little or no competition, you have the extra problem of convincing people of the value of the new idea. Personal selling work is almost always necessary to accomplish this. If you are not a good salesperson, seek an employee or associate who is.

Business Management – Record Keeping
The keeping of adequate records cannot be stressed too much. Study after study shows that many failures can be attributed to inadequate records or the owner’s failure to use what information was available to him. Without records, the businessperson cannot see in advance which way the business is going. Up-to-date records may forecast impending disaster, forewarning you to take steps to avoid it. While extra work is required to keep an adequate set of records, you will be more than repaid for the effort and expense.

The following list may call your attention to records you can use to great advantage:

  • Inventory and Purchasing Records provide facts to help with buying and selling

  • Inventory Control Record

  • Item Perpetual Inventory Record

  • Model Stock Plan

  • Out-of-Stock Sheet

  • Open-To-Buy Record

  • Purchase Order File

  • Open To Purchase Order File

  • Supplier File

  • Returned Goods File

  • Price Change Book

  • Accounts Payable Ledger

  • Sales Records to help determine sales trends

  • Individual Sales Transactions

  • Summary of Daily Sales

  • Sales Plan

  • Sales Promotion Plan

  • Cash Records to show what is happening to cash.

  • Daily Cash Reconciliation

  • Cash Receipts Journal

  • Cash Disbursements Journal

  • Bank Reconciliation

  • Credit Records show who owes you money and whether they are paying on time.

  • Charge Account Application

  • Accounts Receivable Ledger

  • Accounts Receivable Aging List

  • Employee Records show legally required information and information helpful in the efficient management of personnel.

  • Employee Earnings and Amounts Withheld

  • Employees’ Expense Allowances

  • Employment Applications

  • Record of Changes in Rate of Pay

  • Record of Reasons for Termination of Employment Employee Benefits Record

  • Job Descriptions

  • Crucial Incidents Record

  • Fixtures and Property Records list facts needed for taking depreciation allowances and for insurance coverage and claims.

  • Equipment Record

  • Insurance Register

  • Bookkeeping Records, in addition to some of the above, are needed if you use a double-entry bookkeeping system.

  • General Journal

  • General Ledger

For efficient business operation, use information from records to keep inventory stock in line with sales, to watch trends, and for tax purposes. Use records to plan. A well thought-out business plan as a guide will strengthen your chances for success.

A record showing the data for your business plan is the budget. Work up a budget to help you determine just how much increase in profit is reasonably within your reach. The budget will answer such questions as: What sales will be needed to achieve my desired profit? What fixed expenses will be necessary to support these sales? What variable expenses will be incurred? A budget enables you to set a goal and determine what to do in order to reach it.

Compare your budget periodically with actual operations figures. With effective records you can do this. Then, where discrepancies show up you can take corrective action before it is too late. The right decisions for the right corrective action will depend upon your knowledge of management techniques in buying, pricing, selling, selecting and training personnel, and handling other management problems.

You probably are thinking you can hire a bookkeeper or an accountant to handle the record keeping for you. Yes, you can.
But remember two very important facts:

  • Provide the accountant with accurate input. If you buy something and don’t record the amount in your business checkbook, the accountant can’t enter it. If you sell something for cash and don’t record it, the accountant won’t know about it. The records the accountant prepares will be no better than the information you provide.

  • Use the records to make decisions. If you went to a physician and he told you you were ill and needed certain medicine to get well, you would follow his advice. If you pay an accountant and he tells you your sales are down this year, don’t hide your head in the sand and pretend the problem will go away. It won’t.

Business Management – Personnel Selection
If your business will be large enough to require outside help, an important responsibility will be the selection and training of one or more employees. You may start out with family members or business partners to help you. But if the business grows – as you hope it will – the time will come when you must select and train personnel.

Careful choice of personnel is essential. To select the right employees determine beforehand what you want each one to do.

Then look for applicants to fill these particular needs. In a small business you will need flexible employees who can shift from task to task as required. Include this in the description of the jobs you wish to fill. At the same time, look ahead and plan your hiring to assure an organization of individuals capable of performing every essential function. In a retail store, a salesperson may also do stockkeeping or bookkeeping at the outset, but as the business grows you will need sales people, stockkeepers and bookkeepers.

Once the job descriptions are written, line up applicants from whom to make a selection. Do not be swayed by customers who may suggest relatives. If the applicant does not succeed, you may lose a customer as well as an employee.

Some sources of possible new employees are:

  • Recommendations by friends, business acquaintances.

  • Employment agencies.

  • Placement bureaus of high schools, business schools, and colleges.

  • Trade and industrial associations.

  • Help-wanted ads in local newspapers.

Business Management – Personnel Training
A well-selected employee is only a potential asset to your business. Whether or not he or she becomes a real asset depends upon your training. Remember:

  • To allow sufficient time for training.

  • Not to expect too much from the trainee in too short a time.

  • To let the employee learn by performing under actual working conditions, with close supervision.

  • To follow up on your training.

Business Management – Personnel Supervision
Supervision is the third essential of personnel control. Good supervision will reduce the cost of operating your business by cutting down on the number of employee errors. If errors are corrected early, employees will get more satisfaction from their jobs and perform better.

Business Management – Motivating Employees
Small businesses sometimes face special problems in motivating employees. In a large company, a good employee can see an opportunity to advance into management. In a small company, you are the management. One thing you may wish to consider is to give good employees a small share of the profits, either through partownership or a profit-sharing plan. Someone who has a “share of the action” is going to be more concerned about helping to make a success of the business.

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