1. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 1 OUTLINE Questions? Stories or experiences? Advice for the project Quiz on Wednesday Go over homework Chapter 14

2. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 2 Chapter 14 – Sourcing Decisions Assessing suppliers Selecting suppliers - Single or multiple Contracts Design Collaboration Procurement Process

3. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 3 CHAPTER 2 of Park - CATEGORIES OF RATIOS DEBT MANAGEMENT - HOW DO YOU GET YOUR CAPITAL LIQUIDITY - CAN YOU PAY YOUR DEBTS ASSET MANAGEMENT- INVENTORY AND RECEIVABLES MARKET VALUE - HOW REALISTIC IS THE VALUE OF THE STOCK PROFITABILITY - HOW WELL ARE YOUR INVESTMENTS GENERATING PROFITS

4. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 4 CHAPTER 2 of Park - DEBT MANAGEMENT DEBT RATIO = TOTAL DEBT / TOTAL ASSETS HAVE YOU BORROWED TOO LARGE A PART OF YOUR ASSETS? TIMES INTEREST EARNED RATIO = EARNINGS BEFORE INTEREST AND INCOME TAXES / INTEREST EXPENSE CAN YOU EARN ENOUGH TO PAY THE INTEREST?

5. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 5 CHAPTER 2 of Park - LIQUIDITY CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES DO YOU OWE MORE THAN YOU HAVE? QUICK RATIO = (CURRENT ASSETS - INVENTORIES) / CURRENT LIABILITIES HOW FAST CAN YOU PAY YOUR DEBTS?

6. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 6 CHAPTER 2 of Park - ASSET MANAGEMENT INVENTORY TURNOVER = SALES / AVERAGE INVENTORY BALANCE ARE YOU MOVING YOUR INVENTORY FAST ENOUGH? ACCOUNT RECEIVABLE TURNOVER (DAYS SALES OUTSTANDING) = RECEIVABLES / DAILY SALES ARE YOU COLLECTING FROM YOUR CUSTOMERS? TOTAL ASSET TURNOVER = SALES / TOTAL ASSETS ARE YOUR ASSETS GENERATING SALES?

7. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 7 CHAPTER 2 of Park - MARKET VALUE PRICE EARNING RATIO = STOCK PRICE / ANNUAL EARNINGS PER SHARE LIKE INTEREST (JUST A LOT LOWER) BOOK VALUE PER SHARE (TOTAL STOCK HOLDER EQUITY - PREFFERED STOCK) / SHARES OUTSTANDING USUALLY MUCH LOWER THAN THE STOCK PRICE

8. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 8 CHAPTER 2 of Park - PROFITABILITY PROFIT MARGIN ON SALES = NET INCOME / SALES HOW EFFECTIVE ARE YOUR SALES IN GENERATING INCOME? RETURN ON TOTAL ASSETS = (NET INCOME + TAXED INTEREST EXPENSE) / AVERAGE TOTAL ASSETS ARE YOUR INVESTMENTS GENERATING ENOUGH INCOME?

9. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 9 Contracts Objectives –Protect both parties –Reduce double marginalization –Reduce information distortion –Increase agent effort –Induce improvement in performance Types –Buyback or return –Revenue sharing –Quantity flexible

10. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 10 Design Collaboration Customers’ Requirements Suppliers’ specifications Design for manufacturability (DFM)

11. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 11 Procurement Process Placing orders Receiving orders Paying for orders Consider types of transaction when designing the process Separate direct from indirect purchases

12. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 12 Negotiations Reserve prices

13. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 13 Auctions Sealed Bids Highest Bid Dutch auction how much are you willing to pay for an item as the price is lowered from a very high price Stamp Auction -Highest bidder gets it at the second highest bid

14. FACILITIES PLANNING ISE310L SESSION 15 Chapter 14, March 7, 2016 Geza P. Bottlik Page 14 END ON A FUN NOTE _Bummer of a birthmark, Hal