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CPA Exam (BEC B6) (1
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CPA Exam (BEC B6) (1
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CPA Exam (BEC B6)Approaches, Activities, and Techniques to Process-Management-Driven Businesses -
ANS-Approaches:
Business process mgmt (BPM) is a mgmt approach seeking to coordinate the functions of an
org toward a goal of continuous improvemt in customer satisfaction. Customers are
internal/external to org. Process mgmt seeks effectiveness/efficiency through promotion of
innovation, flexibility, and integration w/ tech. BPM tries to improve processes continuously. By
focusing on processes, org becomes more nimble/responsive than hierarchial orgs managed by
function.
Activities: 5 categories.
1. Design: ID of existing processes and conceptual design of how they should function after
improvement.
2. Modeling: introduces variables to conceptual design for what-if analysis.
3. Execution: design changes implemented, key indicators of success developed.
4. Monitoring: info gathered/tracked and compared to expected performance.
5. Optimization: use by process manager of monitoring data and orig design to continue to
refine process.
Techniques: General:
-define: orig process defined as baseline for current process functioning or process improvemt.
-measure: indicators that will show a change to process are determined (reduced time, incr
customer contact, etc.)
-analyze: sims/models used to determine targeted/optimal improvemt.
-improve: improvement selected/implemented.
-control: dashboards/other measuremt reports used to monitor improvemt in RT and apply the
data to the model for improvemt.
Process mgmt commonly peferred to as *PDCA*.
-*P*lan: design planned process improvemt
-*D*o: implement it
-*C*heck: monitor it
-*A*ct: continuously commit to process and reassess degree of improvemt
Measures and Benefits to Process-Management-Driven Businesses - ANS-Measures/process
metrics can be financial/nonfinancial and should correlate directly to the managed process.
Measures compared to expectations to monitor progress. Measures:
1. Gross rev: Financial. Approp measure for sales/measures of rev volume in sales-driven orgs.
2. Customer contacts: Leads. Used in sales-driven orgs.
3. Customer satisfaction: Complaints. Orgs using relationship mkting might consider these
measures.
,4. Operational statistics: Time. Mfg opps might use opp stats like throughput times, delivery
times, or logistical measures to determine process efficiency.
First one financial, all others nonfinancial.
The benefits of a studied/systematic approach to process mgmt allow co to monitor degree to
which process improvemts have been achieved. Benefits:
1. Efficiency: fewer resources used to accomplish org obj.
2. Effectiveness: obj accomplished w/ greater predictability.
3. Agility: responses to change faster/more reliable.
Shared Services, Outsourcing, and Offshore Operations - ANS-Shared services means seeking
out redundant services, combining them, and sharing them w/in a group/org. Creates efficiency
but could cause probs:
-service flow disruption: consol of work in 1 location can create waste in transition, rework, and
duplication as well as incr in time to deliver a service.
-failure demand: demand for a shared service caused by a failure to do something or do
something right for a customer. When a task has to be done 2nd time bc done wrong 1st time.
Outsourcing is contracting of services to an external provider. Payroll/call center. Contractual
relationship btw bus/service provider. Increases efficiencies, but can cause risks:
-quality risk: outsourced product/service C/B defective.
-quality of service: poorly designed service agreemts could impede quality of service.
-productivity: real productivity C/B reduced despite lower pay of service provider employees.
-staff turnover: experienced/valued staff whose functions were outsourced may leave.
-language skills: language barriers can reduce quality of service if outsource overseas.
-security: security of info w/ 3rd party C/B compromised.
-qualifications of outsourcers: credentials of service providers C/B flawed. Offshore degrees
might not be same as domestic ones.
-labor insecurity: increases when jobs move to external service provides or overseas.
Offshore ops relate to oursourcing services/bus functions to external party in diff country. Most
common types:
-IT outsourcing
-bus process outsourcing (Call centers, accting ops, tax compliance)
-software R&D (software developmt)
-knowledge process outsourcing (processes needing adv knowledge/specialized skill sets)
Sim bus risks to outsourcing, but greater emphasis on lack of controls bc of proximity and
language issues.
Selecting and Impementing Improvement Initiatives - ANS-Can select w/ rational/irrational
methods.
-irrational: intuitive/emotional. No structure/systematic eval. Based on fashion/fad/trend. May
come from immediate cost reduction need or very ST POV.
-rational: structured and systematic. Involve:
,(a) strategic gap analysis- external/environmental assessment and internal/org assessments to
create strategic gap analysis.
(b) review competitive priorities- review price, quality, etc.
(c) review production obj- review performance rqmts.
d) choose improvemt program- decide how to proceed for improvemt.
Key features for successful implementation activities:
1. Internal leadership: senior mgmt must provide direction and commit resources to
implementation.
2. Inspections: ongoing implementation must be monitored/measured.
3. Exec support: exec mgmt must visibly support initiative.
4. Internal process oship: indivs most deeply involved w/ process mgmt must be committed to
need for process improvement and have the resources to carry it out. Accountability.
Business Process Reengineering (BPR) - ANS-Techniques to help orgs rethink how work is
done to dramatically improve customer satisfaction/service, cut costs of ops, and incr
competitiveness. Developmt of sophisticated IT systems/networks have driven this. Not same as
BPM. BPM seeks incremental change, BRP radical.
Basic premise of BPR is "fresh start." Mgmt wipes slate clean and reassesses how bus is done
from ground up. Uses benchmarking/best practices to eval success.
BPR not as popular as when it was intro'd in the 90s bc of overagressive downsizing and
inability to produce benefits anticipated.
Just-in-Time (JIT) - ANS-Performance improvemt techniques/philosophies try to provide
highest-quality goods/services in most efficient/effective manner possible. Methods are JIT,
quality, lean mfg, demand flow, theory of constraints, and six sigma.
JIT mgmt anticipates achievemt of efficiency by scheduling the deploymt of resources JIT to
meet customer/production rqmts. Underlying concept is inv doesn't add value and keeping it on
hand produces wasteful costs. Benefits of JIT:
-synchronization of production scheduling w/ demand (pull)
-arrival of supplies at reg intervals throughout production day
-improved coordination/team approach w/ suppliers
-more efficient flow of goods btw warehouses/production
-reduced set-up time
-greater efficiency in use of employees w/ multiple skills
Overall reduces costs and incr quality.
Quality Philosophy - ANS-Product's ability to meet/exceed customer expectations. Cost of
quality incl costs assoc w/ conformace w/ quality stds (prevention) and opp costs or activities
, assoc w/ correcting nonconformance w/ quality stds (cure). As incr conf/non-conf costs, other
type will decr.
Cost of quality reports display the financial result of quality. Inverse relationship exists btw
conf/non-conf costs. Incr investmt in conf costs should result in decr in non-conf costs, and vice
versa. Acronym to remember the diff costs is *A PIE*.
Conformance costs are *A*ppraisal and *P*revention costs.
*A*ppraisal: incurred to discover/remove defective parts before they're shipped to customers or
next deptmt. Include:
-statistical quality checks
-testing
-inspection
-maintenance of laboratory
*P*revention: incurred to prevent production of defective units. Engineering costs incl. Includes:
-employee training
-inspection expenses
-preventative maintenance
-redesign of product
-redesign of processes
-search for higher-quality suppliers
Nonconformance costs are *I*nternal/*E*xternal costs. Hard to compute bc most of these costs
are opp costs like lost sales/rep damage.
*I*nternal failure: costs to cure a defect discovered before product is sent to customer. Include:
-rework costs
-scrap
-tooling changes (find where failure in process was)
-costs to dispose
-cost of lost unit
-downtime
*E*xternal failure: costs to cure a defect discovered after product is sent to customer. Include:
-warranty costs
-costs of returning good
-liab claims
-lost customers
-reengineering an external failure
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