Planning Purchases Planning purchasing means buying at a low price and then selling for a profit. Purchasing: Buying all the materials needed by an organization.
Planning Purchases Model Inventory: Target inventory of what you think you will need to keep in stock. Vendors: Businesses that sell inventory.
Selecting the Right Quality Buying the Right Quantity Timing Your Purchases Choosing the Right Vendors Reliability Distance Service Number of Vendors Managing Purchases
Get the Right Price Discounts Terms Payment Methods Receiving and Following Up on Purchases Check the invoice: Itemized statement of money owed, with the purchase order and received shipment. Managing Purchases
Essential Question 1B What considerations must be taken in to account regarding inventory?
Inventory Management The purpose of inventory management is to find and maintain inventory levels that are neither too small nor too large.
Inventory Considerations Financing Costs: The interest you pay to borrow money to purchase inventory. Opportunity Cost: Loss of the use of money tied up in inventory. Storage Costs: The amount of money spent on renting or buying the space needed to store the inventory.
Inventory Considerations Insurance Costs: The amount spent to insure the inventory on hand against loss. Shrinkage Costs: Money lost when inventory items are broken, damaged, spoiled, or stolen. Obsolescence Costs: Money lost when products or materials become obsolete while in inventory.
Planning Inventory Calculating Supply: The number of months of inventory to keep on hand.
Planning Inventory Calculating Cost: Estimating the cost of the inventory on hand. Cost of Goods Sold —————————— = Inventory Cost Inventory Turnover Rate
Planning Inventory Inventory Average: Use the industry averages to help gauge your inventory management.
Essential Question 1C How is inventory maintained?
Keeping Track of Inventory Keeping tabs on how much inventory you have is the first step in controlling inventory levels.
Keeping Track of Inventory Visual Inventory Systems: Look at how much inventory is on hand and compare it to what you want on hand. Perpetual Inventory Systems: As inventory is sold, it is subtracted from the inventory list. As new inventory arrives, it is added.
Keeping Track of Inventory Partial Inventory Systems: A combination of systems. A perpetual system is used only for those items that account for a large share of sales. Just-in-time (JIT) Inventory Systems: The responsibility of inventory is shifted to the vendor and is delivered just before it is used.
Keeping Track of Inventory Regardless of the inventory system used, a physical count will help evaluate your system as well as determine lost, stolen or bad items.
Reordering To maintain proper inventory levels, you will have to decide when and how much to reorder. Periodic Reordering: Goods or products that are used often and reordered every: day, week, other week, month, etc.
Reordering Non-periodic Reordering: Inventory that is reordered on an as needed basis. Lead Time: The gap in time between placing the order and receiving the order. Usage Rate: How quickly the inventory will be used in a period of time. Safety Stock: The cushion of products or materials that keeps you from running out of inventory.
Essential Question 1D What other day to day operating policies need to be considered?
Definitions Policies: General statements of intent about how to run your business. Rules: Tell employees exactly what they should or should not do.
Operating Policies Return / Rework Policies: A fair policy regarding replacements, refunds, or repairs will help maintain customer goodwill. Delivery Policies: If you have a delivery policy, will there be charge? Will the area of delivery be limited? What does your competition do?
Operating Policies Handling Complaints: Most businesses use the policy, “The customer is always right.” Servicing What You Sell: If something you sell stops working, within a certain time limit, you fix it. Courtesy to Customers: Asking departing customers, “Did you find everything you were looking for?”
Operating Policies Shopping Climate: Maintaining certain lighting, air conditioning, or housekeeping standards. Provision of Restrooms: Will your restrooms be open to the public or locked and usable by customers only?
Operating Policies Response Time: How long is an acceptable amount of time required to fill a customer’s order? Warranties: Manufacturers usually guarantee the materials and workmanship that go into their products.
Operating Policies Hours of Operation: Hours of operation should be set to suit the customers.
Operating Policies Credit Policies: Credit: An arrangement in which a business or individual can obtain products in exchange for a promise to pay later. Three Cs of Credit: Character: Demonstrated responsibility in paying bills. Capacity: The ability to pay based on the customer’s income and expenses. Capital: Determination of the customer’s physical and financial assets.
Operating Policies Credit Policies: Credit Plans: Bank Credit Cards: Businesses accept bank credit cards. Requires a merchant account. Charge Accounts: The business gets it own credit card. Installment Plans: Businesses offer payment over time such as layaway. Financing: Businesses provide on site financing for major purchases.
Unit 6 Essential Question 2 What are the ethical, social, and environmental responsibilities of businesses?
Essential Question 2A What are social obligations of a business?
Social Responsibility – Social responsibility: A business's contract with society to make safe products, treat customers and employees fairly, and conduct business honestly A company has a duty to protect its customers from unsafe products and misinformation The Environmental Protection Agency (EPA), the media, and the public all promote environmentalism among businesses
Social Responsibility – Entrepreneurs can contribute to the community by: Donating products or services Encouraging employees to participate in community service Joining other companies to work on community projects
Essential Question 2B What is the ethical issues facing business and the ethical behavior needed to face them?
Ethics – Ethics: The moral code by which people live and conduct business – Ethical Behavior: Conduct that adheres to this moral code – An entrepreneur should develop a written code of ethics to reduce the chance of unethical behavior occurring in his or her business – Employees should be involved in developing the code of ethics
Ethics – Businesses often face ethical problems when: There are conflicts of interest: Clash between a person ’ s private interests and his or her responsibilities in a position of trust When their economic survival is threatened When doing business abroad (where ethical practices may differ)
Essential Question 2C What are the environmental concerns and issues that relate to the operation of a business?
Environment Concerns – Environmental Protection Agency: An independent federal agency established to coordinate programs and enforce regulations aimed at reducing pollution and protecting the environment Toxic and hazardous waste disposal Emissions and other pollutants Consumer concerns about the environment
Essential Question 2D What are the safety procedures and health procedures business operations need to be aware of?
Safety and Health Policies – Employee and Customer Safety: The financial costs of an on-site accident can ruin a small business – Train your employees in safety practices and procedures – Post warning signs to inform customers and keep them away from delicate or potentially damaging equipment
Safety and Health Policies – Make sure you are following regulatory practices from: OSHA EPA Health Department Fire Department - Check and test safety and security equipment regularly - Test company products under the most extreme conditions in which they will be used
Unit 6 Essential Question 3 What are the concepts, systems, and strategies needed to acquire and develop human resource needs for an entrepreneurial entity?
Essential Question 3A What are your business’ personnel procedures?
Organization Structure Each position on the organization chart requires a job description: A statement describing the objectives of the job and its duties and responsibilities. Each position on the organization chart requires a job description: A statement describing the objectives of the job and its duties and responsibilities.
Organization Structure Each job description requires a job specification: Description of abilities, skills, educational level, and experience needed by an employee to perform the described job. Each job description requires a job specification: Description of abilities, skills, educational level, and experience needed by an employee to perform the described job.
Personnel Policies Employee Standards: An employment policy statement which qualifies the desired traits of the people you hire. Employee Standards: An employment policy statement which qualifies the desired traits of the people you hire. Recruiting Employees: Recruits: Prospective employees, that can be reached by classified ads, employment agencies, placement offices, the internet, etc. Recruiting Employees: Recruits: Prospective employees, that can be reached by classified ads, employment agencies, placement offices, the internet, etc.
Personnel Policies Training and Development: New employees work better and more efficient if they receive training immediately. Training and Development: New employees work better and more efficient if they receive training immediately. Personnel Records: Establish and maintain a record on each employee for contact, training, performance, etc. information. Personnel Records: Establish and maintain a record on each employee for contact, training, performance, etc. information.
Essential Question 3B What is your business’ hiring and training process?
What plans, procedures, and policies must you have in place before hiring your first employee?
People Strategies Basic Hiring Criteria: You must hire the right people. Ensure your employees have the right qualifications and skill sets for the job. Basic Hiring Criteria: You must hire the right people. Ensure your employees have the right qualifications and skill sets for the job. Developing Employees: Developing Employees: Orientation is conducted first. This introduces the employee to the companies vision, plans and expectations.Orientation is conducted first. This introduces the employee to the companies vision, plans and expectations. Second, provide training employees need for the skills to be successful now and in the future.Second, provide training employees need for the skills to be successful now and in the future.
People Strategies Establish A Productive Environment: A place where employees are treated with respect and trust; empowered to make the right decisions; and made to feel a part of a productive team. Establish A Productive Environment: A place where employees are treated with respect and trust; empowered to make the right decisions; and made to feel a part of a productive team. Reward Your People: Recognize and reward employee contributions and achievements. Reward Your People: Recognize and reward employee contributions and achievements.
Essential Question 3C What are your business’ employee benefits?
Personnel Policies Pay and Benefits: In order to attract and keep the kind of employees you want, you will have to do two things: Pay and Benefits: In order to attract and keep the kind of employees you want, you will have to do two things: Pay a competitive wage, salary, or productivity rate.Pay a competitive wage, salary, or productivity rate. Productivity Rates:Productivity Rates: Piece Rate: Pay based on number of units produced. Piece Rate: Pay based on number of units produced. Commission: Pay based on a percentage of sales. Commission: Pay based on a percentage of sales. Offer competitive employee benefits.Offer competitive employee benefits.