THE NUTS AND BOLTS
Questions you’ll answer:
- How do manufacturing, selling, hiring, and training processes work?
- How do I design these processes from scratch?
- What does it cost to run each individual process within my business?
Dilemmas you’ll face:
- How can I manage a process profitably?
- How will changing a process affect my revenue?
- How do I track the costs and determine which parts of a process generate value in excess of cost?
Topics you’ll cover:
- How do I analyze production processes?
- How do I interpret financial statements in terms of production costs?
- What is a value-added process and how do I recognize one?
Business is mainly about the design and management of processes – processes for manufacturing, selling, serving customers, hiring and training people, and so on. Some processes add value by transforming material inputs into more desirable outputs. Others provide people with useful skills or information.
A value-added process turns resources (like labor, materials, energy and equipment) into a good that an entrepreneur can sell at a profit – that is, at a price that covers the costs of all resources used to produce it. To manage a process profitably, an entrepreneur must track these costs and determine which parts of the process generate value in excess of cost – and which parts do not. The entrepreneur also needs tools for predicting how changing the process will affect revenue, costs and profit.
In Operations and Costs, students get comfortable with thinking about processes: manufacturing, service delivery, and screening. Understanding processes – how they work and what they cost to run – is half the challenge of understanding business.
AFEE’s Operations and Costs course prepares students to:
- Analyze production processes.
- Draw flow charts of processes so they can discuss them with others.
- Design processes from scratch.
- Modify processes to improve performance.
- Anticipate the effects of variability and uncertainty on process performance.
- Determine the cost of production associated with a given process.
- Report a firm’s costs of production in terms that others will understand.
- Interpret financial statements in terms of production processes.
- Predict how revenue, costs and profit will change when you modify a process.