Managing Resources In Farhan Co. By Farhan Salim.

Management of Resources in FARHAN CO.

Management of Resources in FARHAN CO.

By Farhan Salim

Managing Resources 27 May 2009

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Management of Resources in FARHAN CO.

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Table of Contents: I. Executive Summary

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II. Company Background

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III. Key Resources

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IV.

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Role of Accounting A.

Effectiveness

6 B.

Accounting Software

7 C.

Interaction of Accountants

7 V. Financial Accounting Analysis A.

Financing

8 B.

Working Capital Management 9

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Management of Resources in FARHAN CO. C.

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Profitability Trends

9 D.

Key Ratios

10 E.

Comparison with Competitors 11

F.

Footnotes

11 G.

Requirement of Financial Statements 11

H.

Auditing 12

I. Ethical Issues

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VI. Management Accounting Analysis

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A.

Budgets 13

B.

Budgeting System

14 C.

Participative Budgeting 14

D.

Variances

Management of Resources in FARHAN CO.

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15 E.

Costing Structure

16 F.

ABC Costing

16 G.

Break Even Analysis

17 H.

Pricing Calculation

17 VII. Management Accounting Software A.

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Recent Changes

18 B.

Success Rate

18 VIII. Financial Management Analysis A.

Strategies

19 B.

Recent Changes 20

C. 21

Capital Budgeting

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Management of Resources in FARHAN CO. D.

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Financing of Capital Budgets

21 E.

Capital Rationing

21 F.

Success Rate

22 IX. Operations Management Strategies A.

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Recent Changes

25 B.

Success Rate

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Process Design Systems

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Integration

26 X. References

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XI. Appendices

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Management of Resources in FARHAN CO.

I. Executive Summary The purpose of this research was to determine the management resources in FARHAN CO.. The study looked at data gathered through research, personal observations and face-to-face interactions with the various department supervisors and management of the organization. The results showed that FARHAN CO. are a very well organized company that manages its resources efficiently and effectively. It has its entire financial and management structure organized through a strong ERP solution, which has played a significant role in the development and success of its strategies. II.Company Background

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Management of Resources in FARHAN CO.

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FARHAN CO. were established in 2003 with an office location in United Arab Emirates. It started of with staff strength of 30+ employees. The organization consisted of the Accounts, Sales, Operation and the Procurement departments all in one roof. FARHAN CO. adapted a matrix structure within a multi cultural environment as represented in the chart available in the appendix. The Objective of the company when it started was to go aggressive and concur the IT market in the region and slowly diversify into businesses related to IT and to hunt for more investing opportunities while exploring the market. The company’s main focus is towards outsourcing and IT communication. Their main concern is to build partnerships with renowned companies with strong communication products existing in the market and to introduce them side by side with their company. FARHAN CO. today are a leading IT firm with workforce strength of 200+. It has its operations and business development offices in Qatar, UAE, Bahrain, Kuwait and Oman. The organization follows a top down design with technology-based infrastructure. “FARHAN CO. are a technology, media & telecommunications company that uses disciplines of outsourcing, human resource management and knowledge management to optimize operations and profitability.” (FARHAN CO., 2007) III.Key Resources FARHAN CO. has strong key resources in the shape of its 200+ professional staff that have proven success records in the relative fields with motivation to grow and achieve their objectives. Another key resource of FARHAN CO. is its strong financial position and large capital

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that helps it to take advantage of new opportunities arising in the market. FARHAN CO. are always on the hunt for business ventures and investment opportunities. IV.Role of accounting FARHAN CO. follow a centralized accounting structure where its management and financial accounting are monitored by a single accounting department consisting of 10+ professional accountants. Both the functions of financial and management accounting are united and handled by the same team. Since auditing is a major part of an organizations check and balances, hence annually FARHAN CO. outsource its annual audit to one of the top-auditing firms in the UAE to monitor its credibility and strength. A. Effectiveness In my opinion, the accounting role is every effective as it has played a significant role in the development of the organization. It has been effective as well as resourceful. The Inventory is handled by a separate division of logistics within the procurement department where as the financials and management accountings are taken care of by the group of accountants. It is already under the process of improvement as a highly advance ERP (Enterprise resource planning) solution has already been implemented recently to further systemize the accounts as well as all the other divisions. B. Accounting software FARHAN CO. have adopted the SAP platform to manage all its organizational resources including finance and accounting. This application was chosen for its dynamic flexibility to produce customized reports, form translations, easy to use graphical interface, network linking and much more. Also their old system was standalone and was non customizable

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according to the companies requirements which in other words was outdated. The new ERP solution is in its initial stages of implementation and till date has proven to be effective. The Organization has no plans in the near future to make any changes in its ERP solution because of its proven success and also because of the high cost that the company has incurred in investing in this software. C. Interaction of accountants In FARHAN CO. meetings are held on a quarterly basis through conference calls and face-to-face meetings on a yearly basis with senior management. Only when the company is to make a major decision or announcement do they have a meeting set by the Chief Executive Officer (CEO). The accounts department on every weekend interact with vendors to payoff the pending payments and to discuss any issues relating to payments. Also, when an external audit is held do the accountants interact with third party auditors. V.Financial Accounting Analysis Understanding the financial details of your organization can mean the difference between failure and success. To tell whether a business is surviving or is healthy and growing, the first place we must look at is its balance sheet. The Balance sheet shows us what a company owes and what it owns. The first place we look at in the balance sheet is the company’s current assets (which are expected to turn into cash within a year) and current liabilities (which are expected to be paid within a year). For a business to survive it is crucial that the current assets surpass the current liabilities with a good margin. This

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shows that there is sufficient liquidity to enable the business to survive and avoid any cash crunch, which in its worse form can even lead firms to bankruptcy. The working capital (current assets minus current liabilities) signifies the amount that is left clear and unused after all current debts are cleared. Now when we look at the Balance Sheet of FARHAN CO., we see that the current ratio (current assets divided by current liabilities) stands at 2.45, which means that for every AED 1 of current liabilities, there is AED 2.45 in current assets to support it. Also the working capital shows a sufficient amount leftover after the paying of all current debts. This signifies that FARHAN CO. is progressing and is healthy. Actual figures cannot be shown due to confidentiality, privacy issues and are non permissible by the higher management of FARHAN CO.. A. Financing Financing plays an important role in the expansion of any business. Like most businesses in the United Arab Emirates (UAE) the owners of the company provide maximum finance and a minimum loan is taken up due to the high interest rates charged on corporate loans. Since FARHAN CO. are a service provider, they require less capital than a manufacturing company. Therefore the company is majorly self-financed than through bank financing. In the case of FARHAN CO., finance is taken majorly to buyout a company, to diversify or to launch an extensive marketing campaign. Since, over financing increases the longterm liabilities of the company it is very vital to take extremely calculated finance to

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avoid over-financing than is required which tends to lead to loss. Currently FARHAN CO. have invested 87% from its own and 13% is borrowed from the bank for the reasons mentioned above. Actual figures cannot be shown due to confidentiality, privacy issues and are non permissible by the higher management of FARHAN CO.. B. Working capital management As stated above FARHAN CO.’s working capital management is very sound and sufficient to meet its debts and liabilities. The company is currently progressing with its strong capital and is on the incline since it was established. FARHAN CO. have increased their working capital ratio by an average of 9% over the past three years and are gradually increasing it every year. The working capital has helped FARHAN CO. develop its business and increase its workforce to control its business volume. C. Profitability trends There are two types of trend analysis and i.e. past years compared to current year analysis and cross section analysis which compare ratios of competitors to your own. In past year’s trend analysis “financial ratios are compared over time, typically years. Year-to-year comparisons can highlight trends and point up the need for action. Trend analysis works best with five years of ratios.” (Venture Line, 1999) “The second type of ratio analysis, cross-sectional analysis, compares the ratios of two or more companies in similar lines of business.” This type of analysis is not possible as in the UAE there is no law that stipulates companies to show their performance, The trend analysis of FARHAN CO.’s profitability ratio over the past years show a

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gradual rise in crucial ratios like the current ratio, Quick asset ratio and a gradual decline in debt to equity ratio. These ratios indicate that FARHAN CO.’s profitability trends are positive and favorable for the company. This is also proven by their regular rise in their profits over the years. D. Key ratios Besides the current ratio and the working capital, other key ratios can also be calculated and interpreted by looking at the financial statements. One key ratio that can be calculated as well as interpreted accordingly is the debt to equity ratio. Debt to equity ratio tells us whether the organization is extensively using debt for financing. The Debt to equity ratio can be calculated by dividing the total liabilities by the total equity. Ideally, companies maintain to keep this ratio as low as possible, to maintain debt at a level, which is below the investment level of the owners. FARHAN CO. maintain a debt to equity ratio below 0.85. Actual figures cannot be shown due to confidentiality, privacy issues and are non permissible by the higher management of FARHAN CO.. E. Comparison with Competitors FARHAN CO. run its business operations in the Middle East and are Head Quartered in the United Arab Emirates (UAE). Since it is not mandatory for companies to reveal their financial statements to the public, companies rarely have proper audits done. Also the companies that do reveal their performance, it is hard to evaluate the accuracy and authenticity of them. It is because of this, there is not enough sufficient data available that can be used to calculate industry averages. Similarly because of the lack of authenticity it is also not possible in the UAE to compare one company to another. The only exceptions

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to this rule are banks and companies listed in the local stock exchanges. Although, FARHAN CO. goes through and annual audit it is neither a bank nor listed in the local stock exchanges. F. Footnotes “The footnotes are used by some companies as a convenient place to "bury" unpleasant information that they are required to disclose but hope the average reader won't read.” (The National Association of Online Investors, 2009) One interesting notes that was noticed was in the Inventory valuation method used. Being a service based organization, the company does not have much inventory but it uses the FIFO method (First In, First Out). By using FIFO the cost of the oldest inventories are reflected in the income statement. During inflationary times, this is an important concern because FIFO tends to overestimate profits. G. Requirement of Financial Statements Although FARHAN CO. operate in the UAE, It is not mandatory by law to for them to produce financial statements and have them audited as well. Unlike a company listed in the stock exchange, FARHAN CO. do not have shareholders besides the actual owners of the company. FARHAN CO. still maintain their financial statements and also have them audited by an international auditing firm because it helps in easily securing bank facilities like overdraft and corporate loans at a lower interest rate. Also, the statements come in hand when FARHAN CO. go for Joint Ventures with associates’ in the market. During a Joint Venture the other party is mostly interested in the organizations annual

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return on the total capital available to the company. H. Accounts auditing A reputed international auditing firm annually audits FARHAN CO.’s accounts and has identified no major discrepancies. The audited statements also help the owners of the business to make sure that there is no false reporting and no tampering in the accounting books. I. Ethical Issues There is no labor law in the UAE governing minimum wage. Due to the lack of this law many companies take undue advantage of the workforce in the UAE by paying them lesser salary than the industry norms. On top of that there exists a law in the UAE that restricts workforce from migrating to different jobs within a span of twelve months. “What might be a common scene in other countries is a novelty in the United Arab Emirates where, until recently, a restrictive labor law and fear of deportation combined to prevent a largely expatriate workforce from organizing and winning concessions from their employers.” (Negus, 2008) Due to this many companies when they hire employees refuse to give any increments to workers within the first year of employment. Also, UAE restricts forming of the worker unions, which further encourages companies to discriminate against there employees. Moreover, there is a minimum wage for the nationals of the country, which is above the industry averages. The nationals of the country only occupy 5% of the UAE’s workforce. “Migrants, mostly of south Asian origin, constitute 95% of the UAE’s workforce and are subject to a range of human rights abuses. Workers typically arrive in debt to recruitment

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agents from home countries and upon arrival are often made to sign a new contract in English or Arabic which pays them less than had originally been agreed.“ (Keane & McGeehan, 2008) FARHAN CO. are equal opportunities service providers that do not deprive its employees from their legal benefits. VI.Management Accounting Analysis FARHAN CO. has a good structured management accounting system in place with all its relevant financial and managerial information being passed on to their relevant heads in various departments so that It can provide them with enough information to make appropriate and relevant business decisions. This also permits them to better prepare their control and management functions. A. Budgets In FARHAN CO. budgets are prepared regularly on an annual basis. The whole process takes 3-4 months from preparation to implementation. The budgeting process has many stages. The budget preparation is divided into two main areas i.e. revenue generation and cost allocation. The revenue as well as the expenses is assessed as a mark up of the current revenues and expenses in the current year by the finance and accounts department. The Finance and accounting department coordinates the overall budget making process. The department keeps the relevant departmental heads informed and seek directions from them time to time whenever necessary. Based on the input received from various departmental heads a revised estimate of cost and revenue is prepared.

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Finally, when the budget is prepared it is forwarded to the Chief Financial Officer (CFO) and Chief Executive Officer (CEO) for them to review and give approvals. After their approval the budget is shared with relevant department heads. B. Budgeting system FARHAN CO. have structured its budgeting system in an organized manner and it works in line with its Budget forecasting, Budget management, Budget planning, Budget procedures, budget implementation and budget administration. The budgets generated in FARHAN CO. during this process are cost of goods, sales budget, selling expenses budget, sold budget, income budget statement, administrative expenses budget and financial budget. The parts of financial budget include cash Budget, capital expenditure budget, cash flow budget and budgeted balance sheet. C. Participative budgeting Initially, when the draft budget is prepared by the finance and accounting department, it is only a markup of the current revenue generated and expenses incurred in the current year. This is then passed on to the relevant department heads that participate and coordinate with the finance and accounting department as well as their employees to finally come up with a revised budget. Participation is not limited to only the departmental heads neither within each department nor with the finance and accounting department. The views of the general employee are asked in the preparation of the budget. This is because “Participative budgeting allows the subordinates to bring his information to the task of specifying standards of performance and as such may lead to higher job performance and high job satisfaction.”

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(Young, 1985) D. Variances The many variances that occur are identified through variance analysis. “Variance analysis helps managers identify areas not operating as expected. The larger the variance, the more likely an area is not operating as expected.” (Chamberlain, n.d.) There are many of variances that can come up in the budgeting system. The two most common variances that arise are the sales-volume variance and the flexible budget variance. “The sales volume variance is the difference between the actual units sold and the budgeted quantity, valued at the standard profit per unit. In other words it measures the increase or decrease in standard profit as a result of the sales volume being higher or lower than budgeted.” (Brown, n.d.) The flexible budget variance evaluates the flexible budget to real results to find the effects that costs or prices have had on operations. From these, FARHAN CO. can make static and individual flexible budgets for any part of its operations. The variances are always categorized as either unfavorable or favorable. For example, if sales volume variance is favorable (static budget less than flexible budget), the company's sales will turn out to be more than predicted. Also, if the flexible budget variance were favorable (the variance effects ultimate cash flows positively) this would be a result of price or cost. By identifying where FARHAN CO. is doing better than predicted or falling short, their management can perform better in evaluating their performance and utilize this information effectively to improve their processes.

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E. Costing structure “Cost structures are simply the identification of how costs associated with the production of a good or service are distributed throughout the process. While some think of a cost structure as referring only to the finances utilized in the production process, a true cost structure will also take into consideration the use of all types of resources along the way. This can include costs such as labor and utilities, as well as back end costs like sales and marketing expenses.” (Tatum, n.d.) Since FARHAN CO. is a service sector specializing in outsourcing, it uses the traditional costing structure because it is much easier to implement and much less expensive. F. ABC costing “Activity-based costing (ABC) is a cost accounting method using the allocation of indirect costs to the actual activities that caused those costs. ABC examines the costs of each business process in order to allocate cost absorption as accurately as possible.” (AskJim, n.d.) Currently FARHAN CO. is not using the ABC costing structure mainly because it is not a manufacturing company neither a product selling company. Research proves that ABC costing structure is better than the traditional costing structure that is used by FARHAN CO.. “Numerous writers have suggested that activity-based accounting systems provide more accurate and relevant cost information. Managers, consultants, and academics generally accept the superiority of activity-based costing over traditional systems.” (Mishra & Vaysman, 2001)

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Based on this I believe this structure would be helpful for FARHAN CO. to properly define the cost of each activity. G. Breakeven analysis “CVP represent an application of marginal costing that seeks to study the relationship between cost, volume and profit at different activity levels and can be relied upon for short-term planning and decision making. Also referred to as break-even analysis, it represents the position where total cost will equate the total revenue.” (Adamu, 2008) Cost volume profit analysis (also known as BEP ‘break-even analysis’) is an exceedingly helpful tool for decision makers because of its concentration on basic business factors and its ease of use. Since, FARHAN CO. uses CVP analysis and Break Even Point (BEP) is an integral part of the CVP, break-even analysis is undertaken by them. BEP can be and is currently estimated through CVP analysis carried out by FARHAN CO. whenever there is an introduction of a new service. CVP is calculated in FARHAN CO. by using their ERP solution (SAP)

to find the optimum sales required for a project to be successful. The

sales department is in charge of this function in FARHAN CO. to report their findings to the Chief Operations Officer (COO) for approval before undertaking new projects.

H. Price calculation Prices are calculated at FARHAN CO. after studying the current market prices and trends and also by the size and loyalty of the clients. Since FARHAN CO. are the premiers of bringing outsourcing to the region and also one of the biggest outsourcing companies in the region they are the market leaders in setting up of prices. Also depending on the

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services being outsourced either internationally or locally the prices are evaluated on the basis of the products region. Generally speaking, locally outsourced jobs are charged less as compared to jobs outsourced from Europe or USA. VII.Management Accounting software FARHAN CO. have recently adapted to the SAP platform and so far it has proven successful for the organization. FARHAN CO. uses SAP as their management accounting software which has inbuilt functions which centralizes the communication and the resources are effectively managed through its functionality to generate relevant reports to the designated departments who then can properly manage their resources effectively. A. Recent changes Due to the implementation of SAP all communications within departments have been centralized and management is up to date on the progress of every job. Every job orders, quotations, invoices are generated through its integrated MIS. Due to the high cost of implementation of the SAP platform there are no further changes in the pipeline of the organization relating to management accounting systems. B. Success rate The management accounting system currently used by FARHAN CO. is every effective overall. The only changes that can be made to improve its efficiency are to better train the management on how to effectively use the tools available in the system. VIII.Financial Management Analysis “Financial Management Analysis deals with the calculated and predicted cash in-flow and outgoings. The analysis is directed towards the study of the effect of existent funds

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on managerial objectives. Financial Management handles everything from procuring the funds to effective utilization of the same. Dedicated Financial Management analysis handles procurement of funds from multiple sources and since the funds are from different sources, they naturally need to be addressed considering the difference with regards to the potential risk and control.” (Borade, 2008) Financial Management Analysis of an Organization provides for a good overview of how to measure the company’s performance and investment opportunities, and how this is can improve the management of a company, for example in general investments, takeover situations, etc. A. Strategies Financial management cannot be carried out without designing an effective strategy to ensure the optimal use of funds. This helps to avoid circumstances in which the finances remain unused or lack of profitable use of finances in hand. When utilizing finances for the business it is important to understand the risk factors and costs involved. Misuse of finance leads to consequences such as the long term and short term goal of the organization not being met and sometimes even leading towards a loss. Of the key financial management strategies of FARHAN CO. is their review of financial statements from time to time. This helps them to keep track of their finances and keeps them flowing in a single pipeline so that they can be utilized properly and profitably. The financial statements that are reviewed quarterly to evaluate the financial health and performance of the company based on their past results are income statement, balance sheet and statement of cash flows.

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The review takes a particular look at the major difference or changes that may have arise and may need to be taken under immediate consideration. This process is carried out by the senior accountants and forwarded to the finance and accounts head for review and action. A key part of the financial statement analysis includes the calculation of key financial ratios. The key financial rations include Current Ratio, Net Working Capital, Accounts Receivable Turnover, Total Asset Turnover, Debt-Equity Ratio, Times Interest Earned, Net Profit Margin, Return of Assets and Return on Equity. By calculating and keeping track of these ratios FARHAN CO. tends to identify the potential threats it could face in its operations. FARHAN CO. try to maintain a healthy balance in these ratios to keep it on track. Other Financial Management Strategies also employed by FARHAN CO. include SWOT and CVP analysis. B. Recent changes Since the current financial analysis has proven to be very effective which is shown by the continual rise of the company annually, FARHAN CO. does not plan on bringing about any new changes to their current strategy. C. Capital Budgeting “Capital budgeting refers to the process we use to make decisions concerning investments in the long-term assets of the firm. The general idea is that the capital, or long-term funds, raised by the firms are used to invest in assets that will enable the firm to generate revenues several years into the future. Often the funds raised to invest in such assets are not unrestricted, or infinitely available; thus the firm must budget how these funds are

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invested.” (Besley, 1999) “Capital budgeting is a required managerial tool. One duty of a financial manager is to choose investments with satisfactory cash flows and rates of return. Therefore, a financial manager must be able to decide whether an investment is worth undertaking and be able to choose intelligently between two or more alternatives. To do this, a sound procedure to evaluate, compare, and select projects is needed.” (Evan, 1999) FARHAN CO. undertakes its capital budgeting by going through many steps which include the estimation of the future cash flows from each investments, the risks involved in choosing each investment, selecting a suitable discount rate for each project, calculating the Net Present Value (NPV) and the Internal Rate of Return (IRR) of each project. Special care is taken in estimating the NPV and IRR to avoid the tendency to over estimate the amount of inflows as well as the timing of the inflows. D. Financing of capital budgets Like most companies in the UAE capital projects are financed through the owners own funds. Similarly FARHAN CO. finances most of its projects through Bank facility and owners equity. Currently FARHAN CO. have invested 87% from its own and 13% is borrowed from the bank on their current projects. E. Capital rationing “Capital rationing has to do with the acquisition of new investments. More to the point, capital rationing is all about the acquisition of new investments based on such factors as the recent performance of other capital investments, the amount of disposable resources

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that are free to acquire a new asset, and the anticipated performance of the asset. In short, capital rationing is a strategy employed by companies to make investments based on the current relevant circumstances of the company.” (Tatum, 2003) There are two types of capital rationing i.e. soft and Hard. Soft Capital Rationing deals with internal, management-imposed limits on investment expenditure whereas Hard Capital Rationing takes place when limitations are externally determined. “Business firms-perhaps most-do not use the firm's cost of capital to distinguish between acceptable and unacceptable investments but, instead, determine the magnitude of their capital budget in some other way that results in fixing an absolute dollar limit on capital expenditures” (Lorie & Savage, 1955) FARHAN CO. follows the same example as quoted above and sets a fixed amount at the start of the year that they will use for capital investments which is also called soft capital rationing. For example, FARHAN CO. last year had decided that they would invest a fixed amount for their capital investment and based on this amount this year they have taken over a distribution company who’s net worth was a little less then the amount FARHAN CO. had set for capital investments. Since most of the capital investment comes from the owners, FARHAN CO. basically look into its availability of liquidity to come up with the amount they would use for capital investments. FARHAN CO. is currently employing the diversification strategy and using capital rationing to help in this strategy. F. Success rate

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Since FARHAN CO. has a centralized Financial Management System, which is now recently being managed by SAP is so far proven to be successful. This is proven by FARHAN CO.’s continual growth annually in their sales and ventures. IX.Operations Management strategies “Operations management is a systematic process of managing routine and non-routine operation and maintenance tasks in order to achieve desired results” (Arasmith et al., 1999, p.153) "Companies that are successful in leveraging advantageous complexity and eliminating disruptive complexity in their business strategy are able grow market share while controlling their costs. In fact, our research shows that there is a direct correlation between the successful management of complex business operations and overall company performance." (Hoole, n.d.) There are many Operations Management Strategies in motion in FARHAN CO.. The most notable ones, which I have been able to identify, are as follows: 1. Routine Structural improvement of services offered FARHAN CO. on a routine basis enhance the service they provide to their clients by identifying the structure of the service that best fits the clients’ needs. Within the organization itself there is a routine quarterly check placed to identify any hierarchy or span of control issues that may arise that can have an effect on their services. FARHAN CO. have setup a dedicated quality management unit that monitors their services offered by within and outside the organization. 2. Routine quality check of service provided

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FARHAN CO. on a routine basis identify the loopholes and lags in their services by having a quality check with their clients. This is mainly done through surveys and interviews with clients before and after the service has been provided. 3. Enhanced communication strategies FARHAN CO. have introduced latest technologies to the clients as well as within the organization to enhance and keep up to date with the latest innovations and efficient technologies in communication. FARHAN CO. verify building of communication barriers within the various departments and outside the organization on quarterly basis and draws strategies to eliminate them. 4. Management of different projects in various locations. FARHAN CO. manage different projects in various locations at the same time by properly addressing the needs of the projects and the required team to accomplish it efficiently. 5. Human Resources FARHAN CO. has a well established and dedicated Human Resources department that takes care of all employee needs which include health insurance, visa processes, accommodation, transportation, wages and pensions. 6. Scheduling FARHAN CO. being a outsource and telecommunication company only takes on clients that it can cater to with its own resources and does not further outsource their work to other companies which enables them to meet clients requirements on time. Payments to employees (salaries) and vendors are scheduled in a fixed predetermined manner by the

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accounts department. 7. Maintenance FARHAN CO. maintain its internal systems and services to provide their employees with required tools to enable them to finish its scheduled tasks on time. All hardware and assets are routinely maintained and replacements are made available before the need arises by the procurement department. A. Recent changes FARHAN CO. started with two key focuses in mind i.e. efficiency and quality. If these two are not the main focus of any organization then it is more likely that the organization is heading towards a rise in loss and therefore a decline in profits. Later on as they grew, FARHAN CO. have added the other operations management strategies mentioned above to help in achieving these two main key focuses. FARHAN CO. are continually reviewing all their operations management strategies to help improve efficiency and quality. Any strategy that helps in achieving better efficiency and quality is adopted and improved and any that hinders this goal is dropped. B. Success Rate Based on FARHAN CO.’s continual growth over the years and good feedbacks from clients, I would suggest that the operations management system is highly successful. C. Process design systems FARHAN CO. have recently adopted the services of SAP to aid in their process design system. Since its implementation, SAP has greatly improved the efficiency and quality of services that FARHAN CO. provide. SAP is used “to design, visualize, and manage

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business processes ranging from workflows to automated business processes”. (Trickovic, 2008) Because of the high success rate of SAP for FARHAN CO., it does not at present see any room for further improvement. D. Integration of strategies Since, FARHAN CO. follow a centralized system of management and all its strategies are in line and integrated with the newly adopted ERP system (SAP) they are all interrelated and properly formulated. The entire strategy is well encapsulated to keep the structure together within one pipeline.

X.References Adamu, A. (2008) Management accounting: cost volume profit analysis. 1st ed. Nigeria: National Open University of Nigeria.

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Arasmith, S., Mason, G., DeRamus, H. & Stearns, R. (1999) Operations management. Albany OR: ACR Publications. AskJim (n.d.) Activity-based costing definition [Online]. Availabe from: http://www.askjim.biz/answers/activity-based-costing-definition_3361.php (Accessed: 29 April 2009) Besley, S. (1999) “Capital budgeting” [Online]. Available from: http://www.coba.usf.edu/departments/finance/faculty/besley/notes/capbud.pdf. (Accessed 4 May 2009) Borade, G. (2008) “Financial management” [Online]. Available from: http://www.buzzle.com/articles/financial-management.html (Accessed: 4 May 2009) Brown, G. (n.d.) Introduction to costs accounting: methods and techniques, Globusz Publishing [Online]. Available from: http://www.globusz.com/ebooks/Costing/00000015.htm (Accessed: 26 April 2009). Chamberlain, S. (n.d.) “Flexible budgets, variances, and management control” [Online]. Available from: http://www.uic.edu/classes/actg/actg326/ch07sol.pdf. (Accessed: 28 April 2009) Evans, H. (1999) “What is capital budgeting” [Online]. Available from: http://www.exinfm.com/training/capitalbudgeting.doc. (Accessed: 5 May 2009) Hoole, R. (n.d.) “Complexity-friend and foe” [Online]. Available from: http://www.prtm.com/strategiccategory.aspx?id=76&langtype=1033 (Accessed: 12 May 2009) Keane, D. & McGeehan, N. (2008) 'Enforcing migrant workers: rights in the united arab

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XI. Appendices

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