1. Service and Manufacturing Operations Business Management

2. “Copyright and Terms of Service Copyright © Texas Education Agency. The materials found on this website are copyrighted © and trademarked ™ as the property of the Texas Education Agency and may not be reproduced without the express written permission of the Texas Education Agency, except under the following conditions: 1)Texas public school districts, charter schools, and Education Service Centers may reproduce and use copies of the Materials and Related Materials for the districts’ and schools’ educational use without obtaining permission from the Texas Education Agency; 2) Residents of the state of Texas may reproduce and use copies of the Materials and Related Materials for individual personal use only without obtaining written permission of the Texas Education Agency; 3) Any portion reproduced must be reproduced in its entirety and remain unedited, unaltered and unchanged in any way; 4) No monetary charge can be made for the reproduced materials or any document containing them; however, a reasonable charge to cover only the cost of reproduction and distribution may be charged. Private entities or persons located in Texas that are not Texas public school districts or Texas charter schools or any entity, whether public or private, educational or non-educational, located outside the state of Texas MUST obtain written approval from the Texas Education Agency and will be required to enter into a license agreement that may involve the payment of a licensing fee or a royalty fee. Call TEA Copyrights with any questions you have. 2 Copyright © Texas Education Agency, 2014. All rights reserved.

3. 3 Service Businesses Form Intangible, meaning that they cannot physically be touched Quality Created by the provider, which means it can vary from one provider to another Storage Because services are not products, they cannot be stored Availability Only made available from the provider Copyright © Texas Education Agency, 2014. All rights reserved.

4. 4 Manufacturing Businesses Form Tangible, can be touched Quality Determined by the manufacturing process, should not vary much Storage Can be stored, referred to as inventory Availability Wherever the buyer needs the product/ online, brick and mortar location, or other locations Copyright © Texas Education Agency, 2014. All rights reserved.

5. 5 Service Quality Standards SERVQUAL survey Franchising Meeting customer needs Copyright © Texas Education Agency, 2014. All rights reserved.

6. SERVQUAL Surveys Measures five areas of service quality that are important to customers: –Reliability – can the service be performed accurately and dependably –Responsiveness – prompt customer service –Assurance – trustworthy, knowledgeable employees –Empathy – individualized attention –Tangible – physical appearance of facilities, personnel, and equipment 6 Copyright © Texas Education Agency, 2014. All rights reserved.

7. Franchising What is franchising? –A fee is paid to be able to sell a company’s product or service Benefits for service business standards –Provided in many locations –Training provided ensuring consistency in quality and service levels 7 Copyright © Texas Education Agency, 2014. All rights reserved.

8. Meeting Customer Needs Offering extended hours Providing more locations Extending customer follow-up contact 8 Copyright © Texas Education Agency, 2014. All rights reserved.

9. Manufacturing Considerations 9 Copyright © Texas Education Agency, 2014. All rights reserved.

10. 10 Inventory Management Work in Progress Finished Goods Raw Materials Inventory- largest expense of a business Copyright © Texas Education Agency, 2014. All rights reserved.

11. Problem - High Inventory Levels Can be a result of: –Not being marketed properly –Incorrect pricing –Poor quality –Inadequate supply chain management 11 Copyright © Texas Education Agency, 2014. All rights reserved.

12. Problem - Inventory Storage Costs Costs associated with storing inventory: –Storage facility (for example, warehouses) –Insurance –Taxes –Depreciation –Labor –Loan costs if inventory purchased without using cash 12 Copyright © Texas Education Agency, 2014. All rights reserved.

13. Solutions Forecast sales more accurately Build relationships with suppliers Be realistic about inventory turnover goals Calculate actual inventory costs to get a realistic picture of costs Use up-to-date technology to assist with supplier information and point-of-sale data Educate employees on inventory control 13 Copyright © Texas Education Agency, 2014. All rights reserved.

14. Inventory Control Methods EOQ – Economic Order Quantity – the amount at which the amount of inventory ordered minimizes inventory costs Perpetual – maintaining a running count of inventory Periodic – no continuous records are kept, inventory physically counted periodically Visual – making a visual inspection of inventory to determine when inventory should be ordered ABC Method – concentrates on the items that generate the most sales Just in Time – maintaining the smallest amount of inventory needed to prevent out-of-stocks while being able to obtain stock as soon as it is needed 14 Copyright © Texas Education Agency, 2014. All rights reserved.

15. EOQ Economic order quantity depends upon: –Unit cost –Carrying costs (storage costs) –Costs to order products and raw materials Purpose is to determine an order quantity that minimizes cost 15 Copyright © Texas Education Agency, 2014. All rights reserved.

16. Perpetual Inventory Control AdvantagesDisadvantages Immediate inventory amountsIf items are re-stocked, an employee can forget to scan Universal Product Code (UPC) bar codes can make scanning inventory easier If a manual recording method is used, an employee could forget to record a sale Point-of-Sale (POS) systems can also maintain up-to-the-minute inventory counts Computerized systems can be costly 16 Copyright © Texas Education Agency, 2014. All rights reserved.

17. Periodic Inventory Control Inventory is physically counted Even when other methods of inventory control are used, periodically, or even at regular intervals, inventory should be counted to cross-check other methods Two counting methods: –Periodic – usually end-of-year inventory counts after sales –Cycle – counting a few types of items on a frequent basis instead of year-end 17 Copyright © Texas Education Agency, 2014. All rights reserved.

18. Visual Inventory Effective for lower-dollar items and smaller variety of merchandise Least effective for accuracy Can result in out-of-stock items Makes inventory forecasting more difficult 18 Copyright © Texas Education Agency, 2014. All rights reserved.

19. ABC Inventory Control The relatively small amount of higher-dollar volumes A The amount of average- dollar volumes B The lower-dollar volume items C 19 Copyright © Texas Education Agency, 2014. All rights reserved.

20. ABC Inventory Control (continued) Need the most control over the amount of inventory for the higher-dollar, high-volume (A) items (A) items lean toward a more perpetual, ongoing control of the inventory/ control system costs more with these items (B) items can use periodic counting of inventory/ control system costs less (C) items require the least complicated/ less costly control method 20 Copyright © Texas Education Agency, 2014. All rights reserved.

21. Just in Time Inventory Control Reduces inventory costs Keeps very little inventory on hand Requires close relationships with suppliers to be able to get products as soon as needed Usually requires updated technology to keep inventory activities in real time to coordinate with the suppliers 21 Copyright © Texas Education Agency, 2014. All rights reserved.

22. Independent Practice Assignments Tour Guide Assignment #1 – Present the students with the following scenario: they live in the Florida Keys and are looking to start a tour guide business. They plan on offering tours around the particular island on which they live. Students are to imagine their own details for these tours. The assignment is to create a survey to assess the quality of their service, that is, the tours they offer. They should use the guide at the http://web.stcloudstate.edu/brklemz/servqual- 1.doc website. Students should create this survey manually or in a word- processing program.http://web.stcloudstate.edu/brklemz/servqual- 1.doc Inventory Control Document Assignment #2 – Have students select five stores that they know carry inventory. The will create a document such as a table, diagram, or other type of document that will identify the name of the store; the type of inventory control method they think would be most appropriate (and an explanation of why they think that way); and finally a statement from an owner, manager, or other employee of the companies they have selected regarding what type of inventory control method they actually do use. They should also include a statement somewhere on their document regarding how their suggestion compares to the actual method used. 22 Copyright © Texas Education Agency, 2014. All rights reserved.

23. Independent Practice Assignments (continued) Inventory Control Shrinkage Report Assignment #3 – Shrinkage is an issue concerning inventory that businesses must deal with. Shrinkage is the difference between the amount of inventory that is recorded and the actual amount of inventory on hand. Students will create a one-page on the causes and consequences of inventory shrinkage. They should detail at least three types or causes of shrinkage and explain the consequences of shrinkage. Proper writing conventions should be followed. 23 Copyright © Texas Education Agency, 2014. All rights reserved.