Control techniques

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Control techniques

  1. 1. COMMONLY KNOWN CONTROL TECHNIQUES BUDGET AS CONTROL TECHNIQUES FINANCIAL RATIO ANALYSIS OTHER FINANCIAL CONTROL TECHNIQUES E.V.A M.V.A B.E.P ANALYSIS BALANCED SCORECARD BENCHMARKING
  2. 2.  LINEAR PROGRAMMING GANTT CHART PROGRAM EVALUATION & REVIEW TECHNIQUES(PERT) INFORMATION TECHNOLOGY MANAGEMENT BY EXCEPTION VALUE CHAIN ANALYSIS INVENTORY MANAGEMENT
  3. 3. FINANCIAL RATIO ANALYSISRATIO-IN SIMPLE WORDS, RATIO MEANS COMPARISON OF ONE FIGURE WITH ANOTHER RELEVANT FIGURE OR FIGURES. IT MAY ALSO BE TERMED AS NUMBER EXPRESSED IN TERMS OF ANOTHER NUMBER.NO ANALYSIS IS POSSIBLE ON THE BASIS OF ABSOLUTE FIGURES. HENCE VARIOUD RATIOS ARE CALCUKATED FOR FINANCIAL ANALYSIS AND CONTROL.SOME OF SUCH IMPORTANT RATIOS ARE AS FOLLOWS:-
  4. 4. LIQUIDITY RATIOS 1) CURRENT RATIO CURRENT ASSETS CURRENT LIABILITIES 4) ACID TEST C.A- INVENTORIES C.LLEVERAGE RATIOS 1) DEBT TO ASSETS TOTAL DEBT TOTAL ASSETS 4) TIMES INT. PBIT EARNED TOTAL INT. CHARESACTIVITY RATIOS 1) INVENTORY SALES TURNOVER INVENTORY 3) TOTAL ASSETS SALES TURNOVER T.A
  5. 5. PROFATABILITY 1) PROFIT MARGIN NPATRATIOS ON SALES TOTAL ASSETS 3) ROI NPAT TOTAL ASSETS
  6. 6. OTHER FINANCIAL CONTROL MEASURESEVA- IT IS A TOOL FOR MEASURING CORPORATE AND DIVISIONAL PERFORMANCE. IT IS A WAY TO DETERMINE VALUE CREATED ABOVE THE REQUIRED RATE OF RETURN, FOR THE SHAREHOLDERS OF A COMPANY.FORMULA:- EVA= (r- c). K = NOPAT- c. KWHERE- r= NOPAT , called the return on invested capital. KNOPAT= net operating profit after taxC= weighted avg. cost of capitalK= capital employed
  7. 7. MVA- IT ADDS A MARKET DIMENSON SINCE IT MEASURES THE STOCK MARKET’S ESTIMATE OF THE VALUE OF A FIRMS PAST AND EXPECTED CAPITAL INVESTMENT PROJECTS. IT IS THE DIFFERENCE BETWEEN THE CURRENT MARKET VALUE OF A FIRM AND THE CAPITAL CONTRIBUTED BY INVESTORS.FORMULA:- MVA=V-KWHERE- V= market value of the firm, including the value of the firms equity and debts K= capital invested in the firm.
  8. 8. B.E.P ANALYSISBREAK-EVEN POINT IS DEFINED AS THAT LEVEL OF VOLUME AT WHICH REVENUE EXACTLY EQUALS TO THE TOTAL COST. THROUHGH A GRAPHIC REPRESENTATIONTHE BREAK-EVEN POINT PROVIDES A POINT OF CAPACITY WHERE OPERATIONS PASS FROM BEING PROFITABLE TO A LOSS OR VICE-VERSA. THIS HELPS MANAGEMENT IN DECIDING THE LEVEL OF OUTPUT AND SALES.
  9. 9. BUDGETING BUDGETING: THE FORMULATION OF PLANS FOR A GIVEN FUTURE PERIOD IN NUMERICAL TERMSSOME BUDGET DEVELOPMENT METHODS ARE AS FOLLOWS TOP-OWN BUDGETING BOTTOM-UP BUDGETING ZERO-BASED BUDGETING FLEXIBLE BUDGETING
  10. 10. ADVANTAGES OF BUDGETING• BUDGETING IS AN INSTRUMENT WHEREBY MANAGEMENT DECIDES THE FUTURE COURSE OF ACTION.• BUDGET IS ALWAYS RELATED TO A SPECIFIED PERIOD.• BUDGET IS EXPRESSED IN QUANTATIVE TERMS.• BUDGET IS ONLY AN ESTIMATED PLAN OF ACTION.• BUDGET PROVIDES STANDARD TO BE ACHIEVED.
  11. 11. LIMITATIONS• PROVES DANGEROUS WHEN BASED ON WRONG ESTIMATES.• SOMETIMES BUDGETRY CONTROL BECOMES COMBERSOME.• BUDGET OFTEN CONTROLS WRONG THINGS.
  12. 12. BENCHMARKINGBENCHMARKING: THE SEARCH FOR BEST PRACTICES AMONG THE COMPETITORS OR NON-COMPETITORS THAT LEAD TO THEIR SUPERIOR PERFORMANCE.BENCHMARK: THE STANDARD OF EXCELLENCE AGAINST WHICH TO MEASURE AND COMPARE. THE METHADOLOGY ADOPTED IS AS UNDER: IDENTIFY THE PROBLEM AREAS. IDENTIFY OTHER INDUSTRIES.
  13. 13.  IDENTIFY ORGANIZATIONS THAT ARE LEADERS IN THESE AREAS. SURVEY COMPANIES FOR MEASURE AND PRACTICES. VISIT THE “BEST PRACTICE” COMPANIES TO IDENTIFY LEADING EDGE PRACTICES. IMPLEMENT NEW AND IMPROVED BUSINESS PRACTICES.
  14. 14. BALANCED SCORECARDBALANCED SCORECARD: A PERFORMANCE MEASUREMENT TOOL THAT LOOKS AT FOUR AREAS- FINANCIAL, CUSTOMER, INTERNAL PROCESSES AND PEOPLE/ INNOVATION/ GROWTH ASSETS THAT CONTRIBUTES TO A COMPANIES PERFORMANCE. THE FOUR GENERAL PERSPECTIVE WHICH HAVE BEEN PROPOSED BY BALANCED SCORECARD ARE AS UNDER: FINANCIAL PERSPECTIVE CUSTOMER PERSPECTIVE
  15. 15.  INTERNAL PROCESSES PERSPECTIVE INNOVATION AND LEARNING PERSPECTIVE LIMITATIONS SCORES ARE NOT BASED ON ANY PROVEN ECONOMIC OR FINANCIAL THEORY. BALANCED SCORECARD DOES NOT PROVIDE A BOTTOMLINE SCORE.
  16. 16. LINEAR PROGRAMMINGACCORDING TO WILLIAM M. FOX “LINEAR PROGRAMMING IS A PLANNING TECHNIQUE THAT PERMITS SOME OBJECTIVE FUNCTION TO BE MINIMISED OR MAXIMISED WITHIN THE FRAMEWORK OF GIVEN SITUATIONAL RESTRICTIONS.”REPRESENTATION- AX1+BX2≤ZREQUIREMENTS-• OBJECTIVE FUNCTION.• CONSTRAINTS.• LINEARITY.• NONEGATIVITY.• FINITENESS.
  17. 17. ADVANTAGES• FACILITATES LOGICAL THINKING AND STUDY OF DATA.• ONE CAN EVALUATE THE COSTS AND BENEFITS OF DIFFERENT ALTERNATIVES.• HELPFUL IN MAKING ADJUSTMENTS IN THE PLAN.• CAN BE APPLIED TO A VARIETY OF MULTIDIMENSIONAL PROBLEMS.
  18. 18. LIMITATIONS SOLVES PROBLEM OF LINEAR NATURE. CANNOT PROVIDE SOLUTIONS TO PROBLEMS WHICH INVOLVE VARIABLES NOT CAPABLE OF BEING EXPRESSED QUANTITATIVELY. UNCERTAINTIES ARE NOT CONSIDERED. RESULT UNDER THIS TECHNIQUE ARE NOT NECESSARILY TO BE IN WHOLE NUMBERS.
  19. 19. GANTT CHART THIS CHART SYSTEM WAS DEVELOPED BY HENRY L. GANTT. GANTT CHART- A BAR CHART THAT SHOWS THE TIME RELATIONSHIPS BETWEEN THE “EVENTS” OF A PRODUCTION PROGRAM. MILESTONE BUDGETING OR MILEPOST- ADVANCED TECHNIQUE OF GANTT CHART MILESTONE BREAKS A PROJECT DOWN INTO CONTROLLABLE PIECES.
  20. 20. I GANTT CHARTABCD E J F M A M J JU A S
  21. 21. II GANTT WITH MILE STONEA 1 2 3 4B 5 6 7 8C 9 10 11 12D 13 14 E 15 16 17 18 19 J F M A M J JU A S
  22. 22. III GANTT WITH MILE STONES AND NETWORK OF MILESTONESA 1 2 3 4B 5 6 7 8C 9 10 11 12D 13 14 E 15 16 17 18 19 JAN FEB MAR APRIL MAY JUNE JUL AUG SEP
  23. 23. CRITICAL PATH METHOD(CPM) DEVELOPED BY M.R. WALKER OF USA IN 1956. IT IS USED FOR OPTIMISING RESOURCE ALLOCATION AND MINIMISING OVERALL COST FOR A GIVEN PROJECT. PROCEDURE-• BREAK DOWN THE PROJECT INTO VARIOUS ACTIVITIES SYSTEMATICALLY.• NUMBER ALL THE EVENTS AND ACTIVITIES.• CALCULATE THE EARLIEST START TIME, EARLIER FINISH TIME, LATEST START TIME AND LATEST FINISH TIME.• DETERMINE TOTAL FLOAT TIME.• IDENTIFY THE CRITICAL ACTIVITIES AND CONNECT THEM WITH DOUBLE LINE ARROW.• CALCULATE TOTAL DURATION OF PROJECT.
  24. 24. CPM NETWORK DIAGRAM 4 9 6 41 2 2 3 3 6 1 5 2 7 8 5 7 10
  25. 25. ADVANTAGES HIGHLIGHTS THE CRITICAL ACTIVITIES. PROVIDES A TECHNIQUE OF PLANNING AND SCHEDULING. GIVES COMPLETE INFORMATION OF ACTIVITY. HELPS TO IDENTIFY POTENTIAL BOTTLENECKS.
  26. 26. LIMITATIONS OPERATES ON ASSUMPTION OF PRECISE TIME. DOES NOT INCORPORATE STATISTICAL ANALYSIS IN DETERMINIG TIME ESTIMATES. FOR EVERY CHANGE INTRODUCED ENTIRE PROJECT EVALUATION HAS TO BE REPEATED. NOT SUITABLE FOR A SITUATION WHICH DOES NOT HAVE DEFINITE START AND FINISH TIME.
  27. 27. PROGRAM EVALUATION AND REVIEW TECHNIQUE(PERT) PERT- A TIME EVENT NETWORK ANALYSIS SYSTEM IN WHICH THE VARIOUS EVENTS IN A PROJECT OR PROGRAM ARE IDENTIFIED WITH A PLANNED TIME ESTABLISHED FOR EACH. METHODOLOGY PREPARATION OF THE NETWORK . NETWORK ANALYSIS. SCHEDULING. TIME COST TRADE OFFS. RESOURCE ALLOCATION. PROJECT CONTROL.
  28. 28. PERT FLOWCHART EVENTS(MAJOR MILESTONES OF PROGRESS) IN THE MAJOR ASSEMBLY OF AN AIRPLANE (1)ORDER PROGRAM GO AHEAD (2)INITIATE ENGINE PROCUREMENT(3)COMPLETE PLANS AND PROCUREMENT(3)COMPLETE SPECIFICATIONS (4)COMPLETE FUSELAGE DRAWINGS (5)SUBMIT GFAE*REQUIREMENTS (6)AWARD TAIL GFAE*REQUIREMENTS ASSEMBLY SUBCONTRACT (7)AWARD WINGS SUBCONTRACT (8)COMPLETE MANUFACTURE OF FUSELAGE MANUFACTURE(9)COMPLETE ASSEMBLY OF FUSELAGE ENGINE (10)RECEIVE WINGS FROM SUBCONTRACTORS (11)RECEIVE SUBCONTRACTORS TAIL ASSEMBLY FROM SUBCONTRACTOR (12)RECEIVE GFAE (13)COMPLETE AIRCRAFT AIRCRAFT *GFAE:GOVERNMENT FURNISHED AIRPLANE EQUIPMENT 102.1 2 9 17.3 10.0 17.3 56.0 4 8 12.3 10.3 40.0 1 3 8.0 13 7 10 12.0 8.6 40.6 8.6 11 18.6 6 52.0 12 5
  29. 29. ADVANTAGES FORCES MANAGER TO PLAN. FORCES PLANNING ALL THE WAY DOWN THE LINE. CONCENTRATES ATTENTION ON CRITICAL ELEMENT THAT MAY NEED CORRECTION. MAKES POSSIBLE A KIND OF FORWARD LOOKING CONTROL. ENABLES MANAGERS TO AIM REPORTS AND PRESSURE FOR ACTION AT THE RIGHT SPOT AND LEVEL IN THE ORGANISATION STRUCTURE AT THE RIGHT TIME.
  30. 30. LIMITATIONS TECHNIQUE IS NOT USEFUL WHEN THE PROGRAM IS NEBULOUS AND NO REASONABLE ESTIMATES OF SCHEDULE CAN BE MADE. PERT HAS ITS EMPHASIS ONLY ON TIME AND NOT COST. NOT PRACTICABLE FOR ROUTINE PLANNING OF RECURRING ACTIVITIES.
  31. 31. INFORMATION TECHNOLOGYTHE DEVELOPMENTS IN INFORMATION TECHNOLOGY GREATLY FACILITATES ORGANISATIONAL CONTROL AT A RELATIVELY LOW COST. INFORMATION TECHNOLOGY HAS PROMOTED THE DEVELOPMENT OF MANAGEMENT INFORMATION SYSTEM. MANAGEMENT INFORMATION SYSTEM- A FORMAL SYSTEM OF GATHERING, PROCESSING AND DISPERSING INFORMATION INTERNAL AND EXTERNAL TO THE ENTERPRISE IN A TIMELY, EFFECTIVE, AND EFFICIENT MANNER TO SUPPORT MANAGERS IN THEIR JOBS.
  32. 32. HOW MIS IS USED• MANAGERS NEED INFORMATION TO MONITOR ORGANISATIONAL PERFORMANCE AND TO CONTROL ORGANISATIONAL ACTIVITIES• 2. COMPUTERS ARE BEING USED TO COLLECT AND STORE INFORMATION FOR CONTROL PURPOSES.• USE TO MONITOR EACH EMPLOYEE’S COMPUTER USAGE TO MEASURE EMPLOYEE PERFORMANCE.
  33. 33. LIMITATIONS OF INFORMATION TECHNOLOGY CONTROL1. PERFORMANCE LIMITATIONS2. BEHAVIOURAL LIMITATIONS3. HEALTH RISKS
  34. 34. MANAGEMENT BY EXCEPTION CONCEPT OR POLICY BY WHICH MANAGEMENT DEVOTES ITS TIME TO INVESTIGATING ONLY THOSE SITUATIONS IN WHICH ACTUAL RESULTS DIFFER SIGNIFICANTLY FROM PLANNED RESULTS. ATTENTION IS GIVEN ONLY TO THOSE MATERIAL DEVIATIONS REQUIRING INVESTIGATION. THE TOOLS THAT FACILITATES THIS CONCEPT INCLUDE DECISION SUPPORT SYSTEM, PERFORMANCE REPORT ETC.
  35. 35. VALUE CHAIN MANAGEMENTVALUE CHAIN MANAGEMENT- PROPOSED BY MICHAEL PORTER OF H.B.S AS A COMPANY TOOL FOR IDENTIFYING WAYS TO CREATE MORE CUSTOMER VALUE. IT IS A PROCESS OF MANAGING SEQUENCE OF ACTIVITIES AND INFORMATION ALONG THE ENTIRE PRODUCT CHAIN. IT INVOLVES ANALYZING EVERY STEP IN PROCESS, RANGING FROM THE HANDLING OF RAW MATERIALS TO SERVICING END USERS, PROVIDING THEM WITH THE GREATEST VALUE AT LOWEST COST.
  36. 36. INVENTORY MANAGEMENTINVENTORY CONTROL IS CONCERNED WITH ADEQUATE CONTROL OVER THE COST, ACQUISITION, SAFETY AND HANDLING OF MATERIALS.THE MAIN TECHNIQUES OF INVENTORY MANAGEMENT ARE AS FOLLOWS:-4. ECONOMIC ORDER QUANTITY (EOQ)5. JUST IN TIME6. ABC ANALYSIS7. VED ANALYSIS
  37. 37. ECONOMIC ORDER QUANTITY- IT MEANS THAT QUANTITY WHICH SHOULD BE PURCHASED AT A TIME, BEING MOST ECONOMICAL.
  38. 38. CONCLUSION PLANNING IS SUICIDAL WITHOUT CONTROL AND VICEVERSA. ORGANISATIONS USE VARIOUS TOOLS FOR CONTROLLING. HOWEVER APPLICATION OF THESE CONTROL TECHNIQUES DEPEND ON SITUATION AND REQUIREMENTS OF THE ORGANISATION.
  39. 39. REFERENCES MANAGEMENT- HEINZ WEIHRICH, MARK V. CANNICE, HAROLD KOONTZ. MANAGEMENT- STEPHEN P. ROBBINS, MARY COULTER MANAGEMENT- STONER, FREEMAN, AND GILBERT. PRINCIPLES AND FUNCTIONS OF MANAGEMENT- J.K.JAIN. WWW.WIKIPEDIA.ORG. WWW.ASK.COM. WWW.GOOGLE.COM.
  40. 40. THANK YOU

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