Develop key performance indicators for financial targets

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Reference no: EM13835102

Diploma of Management

Manage operational plan

INSTRUCTIONS

Required Skills and Knowledge

This section describes the skills and knowledge required for this unit. Required skills literacy skills to access and use workplace information and to write a succinct and practical plan technology skills to use software to produce and monitor the plan against performance indicators planning and organisational skills coaching skills to work with people with poor performance numeracy skills to allocate and manage financial resources. Required knowledge models and methods for operational plans budgeting processes alternative approaches to improving resource usage and eliminating resource inefficiencies and waste.

Assessment Part A Develop operational plan

Performance objective

The candidate will demonstrate skills and knowledge required to develop operational plans in consultation with key stakeholders.
Specifications You must:

? participate in three role-plays:

? Sales and Marketing Manager

? Technology consultant

? present resourcing proposal for approval ? submit planning portfolio, including:

? action plans

? performance indicators for operational and financial targets (amended operational plan; balanced scorecard for e-commerce customer service representative) ? proposal for resourcing.

Your assessor will be looking for:

? literacy skills to access and use workplace information and to write a succinct and practical plan.

? technology skills to use software to produce plans ? planning and organisational skills.

? numeracy skills to allocate and manage financial resources.

? knowledge of models and methods for operational plans.

? knowledge of budgeting processes.

? knowledge of alternative approaches to improving resource usage and eliminating resource inefficiencies and waste.

Adjustment for distance-based learners

? Interview or electronic role-play as arranged.

? A follow-up interview may be required (at the discretion of the assessor).

? Documentation can be submitted electronically or posted in the mail.

Assessment description

In response to a simulated business scenario, you will research resource requirements and develop an operational plan in consultation with relevant stakeholders. As a part of the development of your plan, you will set performance indicators, plan for contingencies, and obtain approval in accordance with organisational requirements.

Procedure

  1. Read the BBQfun simulated business information provided in Appendix 1 of this task.
  2. Research resource requirements for implementation of e-commerce strategy.
  3. Consult with relevant personnel to determine resourcing needs:
    1. Human resourcing requirements - Sales and Marketing
    2. Physical resourcing requirements - Technology to development of e-commerce website.
  4. Using appropriate word processing or project management software, develop an action plan for the implementation of the e-commerce strategy. Include:
    1. physical resourcing (all major steps for resourcing, including procurement of different types of resources, but not to the detail of including all procurement steps for each resource type)
    2. human resourcing (all major steps, e.g. recruiting, training, communication)
    3. timelines and milestones for implementing ecommerce strategy
    4. consultation and communication (ensure all affected staff are informed and engagement is encouraged for all stakeholders)
      1. an example action plan template is provided
      2. ensure plans adhere to organisational requirements such as policies and procedures.
    5. Develop key performance indicators (K.P.I.) for operational and financial targets and amend existing operational plans to include KPIs and financial targets related to e-commerce strategy.
    6. Develop balanced scorecard for e-commerce sales and customer service representative including three KPIs and associated targets.

Note: The current budget and operational plan for BBQfun is located in Appendices 2 to 3 of this task.

  1. Identify at least three risks
    1. Include at least one risk due to inefficiency or wastage.
    2. Include at least one risk due to employee underperformance.
  2. Submit a portfolio of your implementation documents as outlined in the specifications below.

Specifications

You must:

  • submit planning portfolio, including:
    • Proposal for resourcing. (Human resource, Physical resource like technology to development of e-commerce website)
    • action plans
    • performance indicators for operational and financial targets (amended operational plan;
    • balanced scorecard for e-commerce customer service representative)
    • Risks control

Your assessor will be looking for:

  • literacy skills to access and use workplace information and to write a succinct and practical plan.
  • technology skills to use software to produce plans
  • planning and organisational skills.
  • numeracy skills to allocate and manage financial resources.
  • knowledge of models and methods for operational plans.
  • knowledge of budgeting processes.
  • knowledge of alternative approaches to improving resource usage and eliminating resource inefficiencies and waste.

Appendix 1: Scenario - e-Commerce strategy

Background to scenario

The BBQfun Board of Directors and CEO have decided to implement an e-commerce strategy to maintain or increase market share and revenue and satisfy customer needs in line with company strategic directions.

Under the strategy, BBQfun would offer all products in an online store. Stock could be stored at no extra cost at existing stores. Customers would cover delivery costs.

Currently, BBQfun has a website, but this website lacks e-commerce functionality. The website would need to be redeveloped to incorporate this functionality in line with relevant technical specifications. Existing infrastructure, such as office and store configurations, would need to be adapted to the new strategy. Additionally, assets, such as delivery vehicles would need to be acquired. New staff would need to be recruited and existing staff retrained or informed of the e-commerce strategy and associated operational and performance targets.

All resourcing must be acquired and operations undertaken in accordance with relevant external standards, such as legislation and codes of practice, and internal standards, such as organisational policies and procedures.

Preliminary approval has been given to amend existing budget and operational planning to incorporate this strategy.

It is now 30 June 2015 and e-commerce operations are expected to be underway by 1 October 2016.

Scenario task

You will need to determine physical and human resourcing. Review organisational documentation and undertake preliminary research on e-commerce. Consult with relevant personnel to determine resourcing needs:

  • Sales and Marketing Manager
  • Technology consultant.

You will then need to plan physical and human resourcing and establish associated performance measures and targets. You may consider the Management Team of BBQfun, including team leaders in warehouses, to be resources for the implementation. Use description of their roles in operational planning when assigning responsibilities.

Finally, you will need to propose resourcing and associated operational changes to the Operations General Manager, who will, in consultation with the CEO and Board of Directors, provide approval.

Resourcing and budget: e-Commerce strategy

After consulting with the management team at BBQfun, you determine:

  • eight online sales and customer service people will be needed to manage increased online customers
  • since stores are overstaffed, need for four online people could be met from drawing from existing employees at the two stores
  • no current staff have any online customer service skills
  • management would like to develop people through re-training rather than hire new staff to handle online sales
  • six delivery trucks needed to enable distribution
  • e-commerce website will take 50 days to develop
  • three forklifts are needed
  • four additional warehouse workers are needed
  • six additional drivers are needed
  • office space will need to be reconfigured.

The following operational costs are associated with e-commerce business strategy.

Costs: e-Commerce strategy (initial investment)

Resources

Costs

Plant and equipment

?      Delivery trucks $50,000 x 6 = $300,000

?      Forklifts $10,000 x 3 = $30,000

Promotional costs

$300,000

Website developers

Contractors $2,000 x 50 = $100,000

Staff training

Online customer service training $3,000 per staff member = $24,000

Recruitment costs

30,000

Management change leadership training for store managers and team leaders

$3,000 each = 1 Brisbane store manager, 4 Brisbane team leaders, 1 Gold Coast store manager and 3 Gold Coast team leaders x $2,000 = $27,000

Warehouse and office reconfiguration

$50,000

Total

$861,000

In addition, ongoing staff costs will be incurred.

The expected life of the initial investment is expected to be three years.

Costs: e-Commerce strategy (ongoing)

Resources

Costs

Additional staff

$40,000 year average = (4+4+6 ) x $40,000= $560,000 per year for 3 years =$1,680,000

The following expenses should be incurred in the 2013 financial year and be included in associated financial targets for spending:

Additional staff

$400,000

Additional marketing

$300,000

Additional training

$51,000

Recruitment

$30,000

Benefits to business

According to financial projection prepared by the CFO, the business expects the proposed strategy to be profitable over three years.

Profitability index over three years

 

Profitability index (PI) =

Present value (PV) of future cash flows

Present value (PV) of initial investment

PI>1 indicates project should be undertaken


2013

2014

2015

Cash flow from operations (minus ongoing operational costs associated with ecommerce such as additional staffing)

$200,000

$500,000

$800,000

Present value of future cash flows (discounted future cash flows with respect to opportunity cost, inflation)

$180,000 +$420,000+$600,000 = $1,200,000

Present value of initial investment

$861, 000

Profitability index

1.39

The expected additional profit for 2013 would be $200,000. This figure should be added to targets.

Risks to implementation

After consulting with stakeholders at BBQfun, you determine:

  • medium risk of poor online sales
  • high risk of customer service quality problems for online customers
  • high risk of staff misunderstanding changes and considering online sales as threat to jobs
  • medium risk of not being able to recruit fully trained online staff
  • medium risk of wastage due to overstocking product in anticipation of increased online sales.

All additional costs associated with contingency planning will be approved in accordance with BBQfun policies and procedures.

Appendix 2: Example budget summary

BBQfun 2012-2013 Approved budget by activities to be undertaken

Income:



Sales

$11,000,000

Barbecues and related equipment.

Investment income

$1,567,000

Real estate investment income and rental of office space.

Cost of goods sold (COGS)

$5,890,000

Cost of provision of goods, purchase of stock, distribution.

Gross profit

$6,677,000

Gross profit.




Expenses:



Wages, salaries and on costs

$2,567,890

Wages, salaries, superannuation, work cover insurance, payroll tax.

Consultancy fees

$50,000

Project management: WHS management system; change management.

Communication expenses

$42,000

Telephone, ISP costs, IT support.

Marketing

$920,000

Cost of staff travel and associated costs for sales, etc.

Premises expenses

$1,000,000

Rent, electricity, maintenance, cleaning.

Insurance

$120,000

Liability insurance

Depreciation and amortisation

$177,569

Computers and capital equipment that is depreciated.

Office supplies

$65,068

Printing and stationery, postage, amenities.

Training

$62,187

Sales training: leadership, WHS, ethical/legal training.

Total expenses

$4,884,714


Net profit

$1,792,286

Net income before tax.

Appendix 3: Example operational plan

General operating hours

BBQfun operates Monday to Friday from 9 am to 5 pm. BBQfun will be operational year-round except legislated holidays.

Human resources

Pat Mifsud, CEO

Pat is responsible for working with the Board of Directors to oversee the business, set overall strategic directions, manage risk, and authorise large financial transactions.

Riz Mehra, Chief Financial Officer

Riz is responsible for preparing quarterly financial statements and overall budgeting. Riz is also responsible for overseeing budgets for cost centres and individual projects. At completion of financial quarters and at the end of projects, Riz is responsible for viewing budget variation reports and incorporating information into financial statements and financial projections.

Kim Chen, Operations General Manager

Kim is responsible for the day-to-day running of the company. Kim oversees the coordination of all operations. Kim is responsible for sponsoring projects that affect operations of the organisation as a whole. Kim works with the HR Manager to coordinate systems and projects to achieve company-wide synergy.

Les Goodale, Human Resources (HR) Manager

Les is responsible for the productive capacity and welfare of people at BBQfun. With the Operations General Manager, Les works to coordinate projects and management systems, such as performance management, recruitment and induction.

Sam Lee, Marketing Manager

Sam is responsible for the management of all aspects of marketing. Sam manages the activities of the Marketing Team.

Pat Sweeney, Manager: Brisbane (Kenmore)

Pat is responsible for the management of all aspects of the Brisbane store.

Alex Mitchell, Manager: Gold Coast

Alex is responsible for the management of all aspects of the Gold Coast store.

A summary of human resources at each of the two locations appears below:

Brisbane: Head office

?      Employees:

?     30 full-time and casual sales and customer service people, check-out staff trained in use of POS (integrated with ERP and CRM software system)

?     senior management team (five) + one store manager

?     four sales team leaders

?     one delivery truck driver

?     one warehouse worker.

Gold Coast operation

?      Employees:

?     30 full-time and casual sales and customer service people, check-out staff trained in use of POS (integrated with ERP and CRM software system)

?     one store manager

?     three sales team leaders

?     one delivery truck driver

?     one warehouse worker.

Office requirements

The office space is leased and will accommodate the necessary office equipment, such as computers, fax machine, photocopier and other engineering equipment.

Brisbane: Head office

?      Location: Kenmore.

?      Size: 15,000 square metres (50% warehouse, 50% display area). Warehouse area used at 45% of capacity, but poorly configured to accommodate heavy increase in distribution traffic.

?      Large mezzanine office space (used to be occupied by online retailer, currently subdivided and occupied by Management Team).

?      Loading bay with large capacity (most of area incorporated into customer display area, could be easily and cheaply reconfigured to accommodate extra distribution).

Gold Coast operation

?      Location: Robina.

?      Size: 12,000 square metres (50% warehouse, 50% display area). Warehouse area used at 50% of capacity, but poorly configured to accommodate heavy increase in distribution traffic.

?      Large mezzanine open-plan office space with separate access (was previously rented out to a telemarketing company).

?      Lots of spare office space.

?      Loading bay with large capacity.

Operating capital requirements

BBQfun requires approximately five million dollars in working capital to sustain and ensure the business meets all opening and ongoing financial obligations.

The company may experience financial pressures during slow sales periods.

A long-term strategy to maintain a positive cash flow during these periods will be to diversify the company's product range and develop business opportunities such as e-commerce to boost sales and sales capability overall.

Operational expenses

Wages, salaries and on-costs

$2,567,890

Consultancy fees

$50,000

Communication expenses

$42,000

Marketing

$800,000

Premises expenses

$1,000,000

Insurance

$120,000

Depreciation and amortisation

$177,569

Office supplies

$65,068

Training

$62,187

Total Expenses

$4,884,714

Insurance requirements

BBQfun will have to incur costs for business liability insurance. The estimated cost for this requirement is $100,000 per year.

Operational workflow

  1. Conduct market research to determine needs.
  2. Negotiate with suppliers.
  3. Receive and warehouse products.
  4. Provide service and information to warehouse customers.
  5. Receive payment.
  6. Arrange delivery of items (if required).

BBQfun accepts cash, EFTPOS and major credit cards. Credit terms are available for trades.

Reference no: EM13835102

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