Managerial control methods
Managerial Level and Timing Emphasis
Control systems tend to differ somewhat in the degree to which they are used by different managerial levels. Ex. Financial – primary control mechanism used by top-level management – ‘cause relate to overall financial wealth; quality – lower levels.
Timing: in regard to degree to which controls take place: before (feed forward), during (concurrent), or after (feedback).
Financial control:
Use of financial statements: a summary of a major aspect of an organization’s financial status.
Balance sheet: a financial statement that depicts an organization’s assets and claims against those assets at a given point in time.
Assets: the resources that organizations controls, fall into two main categories: current and fixed.
Current: cash and other assets that usually are converted into cash or are used within 1 year (marketable securities, accounts receivable, which are sales on credit, inventory)
Fixed: assets that have a useful life that exceeds 1 year (property, buildings, equipment)
Claims: liabilities and shareholders’ equity.
Liabilities: claims by non-owners against company’s assets (debts owed to non-owners, such as banks). Two categories: current and long-term.
Current: accounts typically are paid within 1 year (accounts payable current bills tha company must pay, short-term loans)
Long-term: debts usually paid over 1 year (bonds)
Shareholders equity: claims by owners against the assets; equal company’s assets minus liabilities.
In essence – the organization’s net worth; represented by stock and retained earnings (funds accumulated from the profits of the organization).
Income statement: a financial statement that summarizes the financial results of company operations over a specified time period, such as a quarter or a year.
Budgetary control
Budgeting: the process of stating in quantitative terms, usually currency, planned organizational activities for a given period of time.
Budgeting process: incl. projected incomes, expenditures, and profits.
Quality control
Quality: the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.
Total Quality Control: a quality control approach that emphasizes the organisationwide commitment, integration of quality improvement efforts with org. goals and inclusion of quality as a factor of performance.
Eight dimensions: Performance, Features, Reliability, Conformance, Durability, Serviceability, Aesthetics, Perceived quality (subjective assessments). Total quality control (TQC), HACCP, ISO
Inventory Control
Inventory: a stock of materials that are used to facilitate production or to satisfy customer demand
Major types of inventory
Raw materials inventory (inputs), Work-in-process (currently being used, transformed into a final product), Finished-goods (have been produced)
Inventory control methods:
The economic order quantity (EOQ): An inventory control method developed to minimize ordering plus holding costs, while avoiding stockout costs.
Just-in-time (JIT) inventory control: an approach to inventory control that emphasizes having materials arrive just as they are needed in the production process.