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Exam 3: Measuring Performance in Operations

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Question 31

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A retail store sells a popular cosmetic called Devine and the store manager was given $300,000 by the corporate office to improve store performance any way she thinks best. The "base case" information is a price of $30 per bottle, a contribution margin of 0.50, a customer defection rate of 20%, and a repurchase frequency of 3 times a year. If these improvement funds could be used to either a) increase the contribution margin to 0.60 or b) reduce the customer defection rate to 12% or c) increase the repurchase frequency to 4 times per year, what is the best way to spend these improvement funds? Assume all other variables remain at the base case level for each of the three improvement options.) VLC = P*CM*RF*BLC a. What is the value of a loyal customer VLC) for improvement option a)? b. What is the best way to use the $300,000 in improvement funds?

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Question 32

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What are the major categories of organizational performance measures? Provide an example measure for each category.

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*Financial - return on assets, earnings ...

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Reliability is the ability to perform a service dependably and accurately.

Good customer satisfaction measurement systems are designed to provide information about future buying behavior.

Errors in service creation and delivery are sometimes called service upsets.

Empathy is the caring attitude and individualized attention provided to customers.

Health care and educational organizations were eligible for the Malcolm Baldrige National Quality Award since its inception in 1987.

Explain the difference between goods quality and service quality, and how they are measured.

Employee satisfaction might be considered as a lagging indicator of employee turnover.

Which of the following would not be a typical organizational-level financial performance measure?

Consider the following information. $\begin{array} { l c c} & \text { First Quarter } & \text { Second Quarter } \\ \begin{array} { l } \text { Unit Selling Price } \\\text { Total Units Sold }\end{array} & \begin{array} { l } \$ 15.00 \\12,000\end{array} & \begin{array} { l } \$ 17.00 \\11.500\end{array} \\\\ \begin{array} { l } \text { Labor Hours } \\\text { Labor Cost/How }\end{array} & \begin{array} { l } 10,000 \\\$8.00\end{array} & \begin{array} { l } 9,500 \\\$ 8.00\end{array} \\\\ \begin{array} { l } \text { Material Usage lbs.) } \\\text { Material Cost/lb. }\end{array} & \begin{array} { r } 6,000 \\\$ 12.00\end{array} & \begin{array} { r } 5,500 \\\$ 11.50\end{array} \\\\ \text {Other Costs } & \$ 25,000 & \$ 23,000 \\\end{array}$ a. Which quarter, First or Second, had the higher labor productivity output quantity per labor dollar input)? b. Which quarter, First or Second, had the higher material productivity output quantity per material dollar input)? c. Which quarter, First or Second, had the higher total productivity dollar output per total dollar input)?

Measuring and reporting performance results can be a motivator for many workers.

Interlinking is the quantitative modeling of cause-and-effect relationships between

Jeff Camm, the president of Biometrics, Inc. has received the following data from his accountant: $\begin{array}{lllll}&\underline{\text { Year } 1} &\underline{\text { Year } 2} & \underline{\text { Year } 3} &\underline{\text { Year } 4}\\\text { Sales } & \$ 26,000 & \$ 15,000 & \$ 17,000 & \$ 20,000 \\\text { Material } & \$ 8,000 & \$ 5,000 & \$ 6,000 & \$ 6,000 \\\text { Labor } & \$ 10,000 & \$ 7,500 & \$ 8,000 & \$ 8,000 \\\text { Overhead } & \$ 4,000 & \$ 2,000 & \$ 2,500 & \$ 4,000\end{array}$ How is productivity changing in Jeff's firm?

Using the information below, determine the productivity measured as output per dollar input) for the each quarter and calculate the percentage change in productivity. $\begin{array}{lrr}& \underline{\text {First Quarter}}& \underline{\text {Second Quarter}}\\\text { Total Units Sold } & 12,000 & 11,500 \\\text { Labor Hours } & 10,000 & 9,500 \\\text { Labor Cost/Hour } & \$ 8.00 & \$ 8.00 \\\text { Material Usage lbs.) } & 6,000 & 5,500 \\\text { Material Cost/lb. } & \$ 12.00 & \$ 11.50 \\\text { Other Costs } & \$ 25.000 & \$ 23.000\end{array}$

The balanced scorecard is designed to be linked to an organization's strategy.

The value chain model is probably the dominant model for operations managers.

Although the award from the Malcolm Baldrige National Quality Award Framework receives the most attention, the primary purpose of the program is to provide a framework for performance excellence through self-assessment to understand an organization's strengths and weaknesses, thereby setting priorities for improvement.

Most of the five dimensions of service quality pertain to behavioral characteristics, which makes them easier to measure.

A computer manufacturer currently has a 15 percent customer defection rate. Their accounting department estimates the incremental contribution to profit and overhead as 30 percent. Customers purchase computers every four years at an average cost of $1,200.00. In an effort to reduce the defection rate, the company is improving both the quality of its computers and its post-sale service. Determine the increase in the average value of a loyal customer if the defection rate drops to 5 percent.