Factor productivity.- Factor productivity = Output quantity of a product : Input quantity of a factor
Example.- Calculate the labour productivity if the firm needs 20 man-hours, to produce 100 chairs
Labour productivity = 100 : 20 = 5 chairs per hour
Global productivity.- Restrictions.- As we refer to all the output, where different types of products can exist; and to all the factors, we can’t work only whith quantities, but we must blend them, in monetary terms, through their prices
Normally, we compare the productivities from different years so we must use constant prices (the prices from the base year) to avoid inflation
Global productivity for the base period.- GP0 = (P1Q1 + P2Q2 + ... PnQn) : (f1F1 + f2F2 + ... + frFr)
GP0 = (100 x 24 + 20 x 36) : (100 x 18 + 700 x 0.9) = 1.28
Global productivity for the following period.- GP1 = (P1Q'1 + P2Q'2 + ... PnQ'n) : (f1F'1 + f2F'2 + ... + frF'r)
GP1 = (120 x 24 + 15 x 36) : (90 x 18 + 650 x 0,9) = 1.55
Project management; PERT model.- PERT model.- (click here to know more about PERT) Working.- Critical path.- The PERT describes the critical path. It’s the path that takes the longest to complete. In this path we can’t admit delays
Explanation.- In this example the activities A and C admit a delay of six minutes ((8 + 2) – (1 + 3)), because we need the lettuces after to cook and to chop the eggs (that last ten minutes). The activities B and D admit a delay of five minutes. The activities E, F and G don’t admit any delay because they are in the critical path.
Critical path.- The critical path is EFG
Length.- We finish the salad in twelve minutes
Gantt chart.- Precedent.- It’s a precedent of PERT method
Salad.- The Gantt chart of the salad would be:
Problem.- The activities C and D follow the activities A and B but we don’t know if the activity C follows the activity A or the activity B
Six minutes.- This method allows us to know what the process is. So, if we like to know what is the process when the time is six minutes:
Finished activities: A, B, C, and D totally and E (75%)
Activities that still haven’t started: E (25 %) and F and G totally
Competitiveness and quality.- How can we achieve the competitiveness?.- We must achieve the costs that allow good prices, but there are two problems:
The market sets the prices, not the firm
We can’t reduce the costs by reducing the quality
The quality.- How can we measure it?.- By means of the degree of adjustment to the manufacturing program and by seeing if we have the attribute or the atributtes that satisfy the customers’ needs in the best way
Total quality.- All the firm departments have the responsibility of achieving the quality
How can we achieve the quality?.- We must set a standard and we must stablish controls
TECHNOLOGICAL INNOVATION IMPORTANCE: R, D & i.- 4th factor of production.- In the economy of knowledge and business development produced since the end of the 20th Century, people consider that technology and science (what has been called R&D -Research and Development- or even R, D&i -Research, Development and Innovation-) is a 4th factor of production that characterizes more and more the production in the industrialised countries. At the same time, the concept of physical capital or financial capital is added to the concept of human capital or intellectual capital, even social capital, as a way of explaining the improvement of the productivity that isn't due to the other factors
Ways to obtain technology.- We can buy it from other firms or countries.- In this way we depend technologically from others and we can’t develop freely
We can discover new technologies.- We need R + D + I departments. These departments are expensive and only the big firms can have them
The technological matrix.- The technological matrix helps us to decide the best technology for our firm and it also indicates to us if we must buy it or if we must invest in a R + D + i department
Technological innovation, intellectual property and customers’ defense.- The states create norms to defend the technological innovation. So the states create norms to defend the intellectual property
Main forms of intellectual property.- Patents.- A patent is a set of exclusive rights granted by a state (national government) to an inventor or their assignee for a limited period of time (in Spain 20 years) in exchange for a public disclosure of an invention.
Utility model.- An utility model is very similar to the patent, but usually has a shorter term (in Spain 10 years) and less stringent patentability requirements
Trademarks.- Definition.- A trademark or trade mark is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or services from those of other entities.
Maintained.- Trademarks rights must be maintained through actual lawful use of the trademark. These rights will cease if a mark is not actively used for a period of time, normally 5 years in most jurisdictions (in Spain 10 years)
BUSINESS COSTS: CLASSIFICATION AND CALCULATION.- Cost’s definition.- It’s the value of production factors that have been used up to produce something
Types of costs.- According to the way they are charged to the project or to the product.- Direct costs.- Definition.- They are those for activities or services that benefit specific projects, e.g., salaries for project staff and materials required for a particular project. Because these activities are easily traced to projects, their costs are usually charged to projects on an item-by-item basis.
Costs usually charged directly.- Project staff, Consultants, Project supplies, Publications, Travel, Training, etc.
Indirect costs.- Definition.- They are those for activities or services that benefit more than one project. Their precise benefits to a specific project are often difficult or impossible to trace. For example, it may be difficult to determine precisely how the activities of the director of an organization benefit a specific project.
Costs usually allocated indirectly.- Utilities, Rent, Audit and legal, Administrative staff, Equipment rental, etc.
Costs either charged directly or allocated indirectly.- Telephone charges, Computer use, Project clerical personnel, Postage and printing, Miscellaneous office supplies, etc.
Direct/Indirect.- It is possible to justify the handling of almost any kind of cost as either direct or indirect. Labor costs, for example, can be indirect, as in the case of maintenance personnel and executive officers; or they can be direct, as in the case of project staff members. Similarly, materials such as miscellaneous supplies purchased in bulk—pencils, pens, paper—are typically handled as indirect costs, while materials required for specific projects are charged as direct costs
According to their dependence of the volume of activities.- Fixed costs.- They are business expenses that are not dependent on the activities of the business . They tend to be time-related, such as salaries or rents being paid per month.
Variable costs.- They are volume-related (and are paid per quantity)
BREAK-EVEN POINT.- Overview.- In economics & business, specifically cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain. A profit or a loss has not been made, although opportunity costs have been paid, and capital has received the risk-adjusted, expected return.
Example.- If a business sells less than 200 tables each month, it will make a loss, if it sells more, it will be a profit. With this information, the business managers will then need to see if they expect to be able to make and sell 200 tables per month.
Application.- If they think they cannot sell that much, to ensure viability they could:
Fixed costs.- Try to reduce the fixed costs (by renegotiating rent for example, or keeping better control of telephone bills or other costs)
Variable costs.- Try to reduce variable costs (the price it pays for the tables by finding a new supplier)
Price.- Increase the selling price of their tables.
Any.- Any of these would reduce the break even point. In other words, the business would not need to make so many tables to make sure it could pay its fixed costs.
Computation.- In the linear Cost-Volume-Profit-Analysis model, the break-even point (in terms of Unit Sales (Q)) can be directly computed in terms of Total Revenue (TR) and Total Costs (TC) as:
TR = TC
Technical costs.- Obsolescence.- Technical obsolescence may occur when a new product or technology supersedes the old, and it becomes preferred to utilize the new technology in place of the old. Historical example of superseding technologies causing obsolescence include CD-ROM over floppy disk which allowed for greater storage capacity and speed
Opportunity cost.- It’s the next-best choice available to someone who has picked between several mutually exclusive choices
Financial cost.- It’s the interest that I have to pay for the loan that I’ve applied to buy the warehouse
The warehouse renovation cycle and the security stock.- Stock breaking.- When we don’t have any goods
S/T = Average depletion of the stock (number of sold unities per day)
Sm = Stock level to do a new order
d = Delivery date, in days, used by the suppliers = (Sm – Ss) : S/T
Ss = Security stock (it allows to continue working when there are delays in the delivery dates)
Average stock in the warehouse = Ss + ½ S
Example.- Knowing that the order quantity is 500 chairs, the time of replacement is five days, the security stock is 300 chairs and the delivery date used by the suppliers is three days. Calculate; The average depletion of the stock, the stock level to do a new order and the average stock in the warehouse
Solution.- Average depletion of the stock = S/T = 500/5 = 100 chairs per day
If we sell 100 chairs per day, the delivery date used by the suppliers is three days and the security stock is 300 chairs; the stock level to do a new order will be: (100 x 3) + 300 = 600 chairs
Average stock in the warehouse = Ss + ½ S = 300 + ½ 500 = 550 chairs
Wilson Model.- (click here to know more about Wilson Model)