Presentation on theme: "Introduction When you choose a restaurant for a meal, are you concerned with: The price of the meal How long you have to wait to be seated The quality."— Presentation transcript:
1IntroductionWhen you choose a restaurant for a meal, are you concerned with:The price of the mealHow long you have to wait to be seatedThe quality of the food that is served
2IntroductionIn order to be successful, managers must focus on factors other than financial performanceIs quality more important than cost?Is timeliness more important than meeting the budget?Is customer service more important than return on investment ?
3The Balanced Scorecard Uses financial and nonfinancial measures that relate to the critical success factors of the organizationHelps management focus on ALL of a company’s critical success factors, not just its financial onesHelps to keep short-term operating performance in line with long-term strategy
5The Balanced Scorecard Approach to Performance Measurement FINANCIAL PERSPECTIVEHow do we create value for our stakeholders?INTERNAL BUSINESS PERSPECTIVEAt what business processes must we excel?CUSTOMER PERSPECTIVEHow do customers view us?StrategyLEARNING and GROWTH PERSPECTIVEHow do we continue to improve, learn and grow?
6The Balanced Scorecard Financial PerspectivePrimary goal of every profit-making enterprise is to show a profitProfit is necessary to provide a return to investors, repay creditors, and compensate employeesBalanced scorecard looks at financial performance in the context of the company’s overall goals and objectives
7The Balanced Scorecard Customer PerspectiveA focus on meeting or exceeding customer needs; customers ultimately buy the company’s product or service and contribute to company profitsCritical success factors include increasing the quality of products and services, reducing delivery time, and increasing customer satisfaction
8The Balanced Scorecard Internal Business PerspectiveDeals with objectives across the company’s entire value chain—from research and development to post- sale customer serviceCritical success factors include productivity, manufacturing cycle time and throughput, and manufacturing cycle efficiency (MCE)
9The Balanced Scorecard Learning and Growth PerspectiveLinks the critical success factors in the other perspectives and ensures an environment that supports and allows the objectives of the other three perspectives to be achievedCritical success factors include efficient and effective use of employees, increasing information systems capabilities, and product innovation
10The Balanced Scorecard Key ConceptThe balanced scorecard approach requires looking at performance from four different but related perspectives: financial, customer, internal business, and learning and growth.
11Measuring and Controlling Quality Costs Meeting or exceeding customers' expectationsProduct performs as it is intendedProduct must be reliable and durableThese features are provided at a competitive price
12Measuring and Controlling Quality Costs ISO 9000A set of guidelines for quality management focusing on design, production, inspection, testing, installing, and servicing of products, processes, and services. Originally developed by the International Standards Organization (ISO) to control the quality of products sold in Europe.
13The Costs of QualitySince providing quality can be costly, a framework is necessary to compare the benefits of providing quality with the costs that result from poor qualityFour general categories of quality costs include:Prevention costsAppraisal (detection) costsInternal failure costsExternal failure costs
14Costs incurred to prevent product failure from occurring. The Costs of QualityPrevention CostsCosts incurred to prevent product failure from occurring.Incurred early in the value chain and include design and engineering costs, as well as training, supervision, and the costs of quality improvement projects.
15Appraisal (detection) Costs The Costs of QualityAppraisal (detection) CostsIncurred in inspecting, identifying, and isolating defective products and services before they reach the customer.Include costs of inspecting raw materials, testing goods throughout the manufacturing process, and final product testing and inspection.
16Internal Failure Costs The Costs of QualityInternal Failure CostsIncurred once the product is produced and then determined to be defective, but before it is sold to customers.Include the material, labor, and other manufacturing costs incurred in reworking defective products and the costs of scrap and spoilage.
17The Costs of Quality External Failure Costs Incurred after a defective product is delivered to a customer.Include the cost of repairs made under warranty, replacement of defective parts, product recalls, liability costs arising from legal actions against the seller, and eventually lost sales.
18Measuring and Controlling Environmental Costs The costs of producing, marketing, and delivering products and services—including post-purchase costs caused by the use and disposal of products—that may have an adverse effect on the environment.
19Environmental Costing Environmental Prevention CostsThe costs of activities carried out to prevent the production of contaminants and/or waste that could cause damage to the environment.
20Environmental Costing Environmental Detection CostsThe costs of activities executed to determine whether products, processes, and other activities within the firm are in compliance with appropriate environmental standards.
21Environmental Costing Environmental Internal Failure CostsThe costs of activities performed to eliminate and manage contaminants and waste that have been produced but not discharged into the environment.
22Environmental Costing Environmental External Failure CostsThe costs of activities performed after discharging contaminants and waste into the environment.
23Productivity Measures Productivity is simply a measure of the relationship between outputs and inputs.How many loaves of bread are baked per bag of flour?How many cars are produced per labor hour?How many calculators are produced per machine hour?How many customers are serviced per shift?
24Efficiency and Timeliness Customer Response Time: the time it takes to deliver a product or service after an order is placed.Customer Places OrderCustomer Receives ProductOrder Ready for SetupOrder is Set UpProduct CompletedOrder Waiting TimeOrder Manufacturing TimeOrder Delivery TimeOrder Receipt TimeTotal Customer Response Time
25Efficiency and Timeliness Measures Northern Lights Custom CabinetsManufacturer of approximately 30 custom cabinets each yearWait time = 12 hoursInspection time = 2 hoursProcessing time = 48 hoursMove time = 2 hours
26Northern Lights Custom Cabinets Manufacturing Cycle Time: the amount of time it takes to produce a good unit of product from the time raw material is received until the product is ready to deliver to customers.Wait time + Processing time + Inspection time + Move time== 64 hours= 64 / 8 hours per work day= 8 days
27Northern Lights Custom Cabinets Throughput: the number of good units that can be made in a given period of time.(Assume 50 weeks X 5 days = 250 work days)= 250 / 8 days manufacturing cycle time= units per year
28Northern Lights Custom Cabinets Value-Added Time: time spent actually manufacturing a productProcessing time = 48 hours or 6 daysNon-value-added Time: includes wait time, moving time, etc.Wait time + Inspection time + Move time== 16 hours or 2 days
29Northern Lights Custom Cabinets Manufacturing Cycle Efficiency (MCE): value-added time in the production process divided by the total manufacturing cycle time6 days / 8 days = 75%
30Marketing Effectiveness Marketing Measures are linked to the financial, customer, and learning and growth perspectives of the balanced scorecard.
31Marketing Effectiveness Key ConceptThe four perspectives of the balanced scorecard revolve around measures of quality, environmental management, productivity, efficiency and timeliness, and marketing effectiveness.