Category: Featured

Capacity Utilisation

May 11th, 2016
Capacity utilisation within a business can be easy or hard to calculate, for a printing shop, it is easy to calculate how many sheets they can produce per hour for example and in a metal fabricators, it is easy to calculate how many sheets of metal they can produce per hour, however for a company that has varied demand, it can be very hard to predict how much the business should utilise its capacity, a clearly noticeable example would be an understaffed restaurant, although they have staff working the shift, it is clear that they did not account for the demand that the customers require.

Capacity Utilisation = Actual level of output / Maximum possible output x 100

Productivity = Total output / Number of workers

Capacity utilisation should never be at 100%, as this could mean that if something were to fail, the business may not be able to fulfil the orders, Companies may choose to ask multiple ‘what if?’ questions that may indicate if the business may want to reconsider its utilisation levels.
- What if the employment rate fell?
- What if workers were too highly skilled?
- What if forecasts are not conservative?
- What if costs increased?
- What if minimum wage increased further?
The Impact on EU Trade Imports and Exports vs Capacity Utilisation

For UK Businesses, there is a handy acronym when working with exchange rates, SPICED. ‘ strong pound imports cheap, exports dear ‘. This applies to any companies in the UK who may wish to export or import goods from elsewhere.

If the UK were to leave the EU, the cost of imports/exports could be greater/lesser depending on the trade deals we could secure with countries.
- Specialised workers would find it harder to move freely into the UK.
- Tariffs are not imposed in the EU, tariffs could cost businesses money, however it could be argued that they increase competition.
- The Common Market could potentially be lost.
- The work ethic of some foreign national employees could change.
These factors could all affect the overall capacity utilisation of UK companies.
Advantages and Disadvantages of Capital and Labour Intensive Production

May 10th, 2016
In Business, production generally has two techniques;
- Labour Intensive Production aims to use a large workforce to complete work by hand, this usually employs a lot of people to create a product. Some products may be seen to have more value if they were manufactured by hand.
- Capital Intensive Production aims to create a product using as little people as possible, the process could be entirely or partially automated and can sometimes be used to assist individuals in manufacture, such as a custom robotic factory worker that moves parts of a product to assembly, or a robot that screws in multiple screws at once. The aim of these tools is to make the job simple or quicker than manual labour, in order to product multiple product in a given time. Production machinery may be very expensive, but aims to be cheaper than labour intensive production in the long run.
Labour Intensive Production

Labour costs are higher than capital intensive production, however they can vary. If the task is simple then automation may not be necessary. Labour Intensive production will generally have lower running cost than capital intensive production, as workers will perform most of the tasks. Firms can benifit from access to low-cost labour as the job will likely be low skilled.
- Businesses can benefit from premium pricing for ‘hand crafted’ goods.
- There is generally better quality if it is not a fast process.
- Labour costs can be lower if businesses hire on temporary contracts. Individuals will not need to operate specialised machinery.
- Some businesses can use a flexible workforce to make sure that locations are staffed efficiently.
- Labour Intensive production allows for improvement easily compared to capital intensive production.
- Observation is easier.
- Lower Break-even output.
- Labour intensive production is often associated with low tech repetative processes.
Capital Intensive Production
- There is generally a better consistency than manual labour.
- Businesses can loose competitiveness as they are stuck in the same production technique.
- Machinery may become obsolete.
- You can’t make businesses such as a restaurant or hotel capital intensive as customers may feel that their stay was devalued by it.
- May generate resistance from labour workforce when implementing.
- Kanban systems are easier to implement.
- There may be a greater loss if there is a fault.
- Programmed machines do not loose skill and there is no skill shortage for machines.
- Potentially High labour costs if individuals need to maintain complex machines.
- Firms can benefit from access to long term financing.
- Labour is more specialised so individuals are good at their job.
- There is usually longer term benefits.
- Robots do not require pay.
- Costs are mainly fixed.
- There is therefore usually a higher break-even output.
Kanban Systems in Lean Manufacture

May 10th, 2016
Kanban systems in business allows them to effectively manage their stock internally, essentially for businesses that require large amounts of stock, such as small parts, screws or trolley-based workstations, they will likely use a Kanban system to effectively manage their stock. A typical Kanban asset tag will have the item description, part number and sometimes will include the cost of the unit, should the business want to try to regulate the use of the item.

What is the purpose of Kanban?
- A Kanban system ensures that employees always have access to the tools they need and JIT systems can be implemented easily.
- A Kanban system also allows a business to measure the amount of parts that they do not use when producing a product, and may be able to go to a smaller or higher quantity when ordering.
- The tag system can also work with a three bin system, one on the factory floor, one in the re-stock room, and one at the supplier. This ensures that the bins are always stocked.
- This system can also link in with other elements of lean production.
- Defective products never make it to factory floor as they would not be stocked by the stock control system.
- Some implementations have plates with the items needed laid out so workers can simply pick up the tools they need and assemble to product without having to move or find the item.
- Some implementations also have the production line move along at the pace of the ordered quantity, making staff work harder to keep up with the product. (usually for production lines like planes or cars)
Kanban Asset Tag

Some businesses use the Average cost per unit to judge their effectiveness and efficiency, as Kaizen systems recommend ‘Continuous Improvement’ the average cost per unit provides a metric for them to calculate if they are more or less efficient.

Total production costs in period / Total output in period (units) = Average cost per unit

The rise of E-commerce (electronic commerce) and M-commerce (mobile commerce) has made the re-ordering process of these parts much more accessible for a company.

Sources of Finance

May 8th, 2016

What are Sources of Finance

There are three different sources of finance, Short Term, Long Term and Medium Term. The most popular way of attaining funds for a business is through equity (money flowing into the business) with over 39% of businesses using this method, examples of this would be retained profit or capital from shares.

Short Term (30 days or less)	Medium Term (less than 6 months)	Long Term (6 months+)
Sale of assets, selling business assets, such as product stock or vehicles. Overdrafts Lease-Back, Selling company property, then leasing it back. similar to rent to own, however the business owned it previously, but sold it to use the cash. This is usually very extreme and would only happen when a company is becoming insolvent. Sometimes can be longer than 30 days. Sponsorship, sometimes sporting companies can sponsor businesses. Trade Credit, retrieving goods and delaying payment for up to 30 days, usually this is enough time to sell the finished product, so prevents bad cash flow. Debt Factoring, Selling debt to companies, for less than its worth, allowing them to chase up debtors. Can be instant Could be cheaper than perusing the debt. Could generate a bad reputation if they are harsh. Short Term Sources of finance usually are less than they are worth, and usually allow a business to continue trading and prevent insolvency.	Family Loans, does usually not require payback for a long time. Returns can also be small. Donations Crowd Sourcing Government Grants Leasing Collateral.	A Bank Loan Stocks and Shares Personal Finance Venture Capitalists Business Angels Generally they come to a business, rather than the other way around. Generally they do not inter-fear with the business. They may not want payback. Floatation requires $50,000 Mortgage Debentures/Bonds Very Long term Usually a significant amount of money Fixed rate of interest Reduces Collateral Interest is payable Companies may have invested interest Retained Profit You have to have money to make money. May cause insolvency Needs time to re-build prevents investment in other areas

Sources of Finance in IT

Some Sources of finance can be de-facto, because it is easier. examples would be the IT industry, it is easier to lease IT equipment because it can allow for no capital outlay, meaning that they do not have to pay in full to have the equipment, but can pay in instalments.

Peer-to-Peer Funding is also becoming increasingly popular, whereby companies borrow money from large businesses and cut out banks to save cost on interest.

What is the Role of the Entrepreneur? Advantages and Disadvantages of Corporate Think Tanks

May 8th, 2016
What is an Entrepreneur?

An Entrepreneur is someone who sets up a business, who is willing to take risks, in the hope of reward. An Entrepreneur may either succeed or fail at their own personal objectives, or may find that through divorce of ownership, they loose control of a business they started. Essentially an entrepreneur is someone who is willing to take risks. The type of business an entrepreneur sets up may depend on the goals that they want to achieve.

Not everyone wants to make money, some people may have other goals, such as individuals who want to make people feel better. Examples would be medical apparatus, some people invest lots of money into medial apparatus, cancer research or rehabilitation centres to help people who need it.

Some businesses have insider entrepreneurs, who work within a business as though they were on their own, with the resources of the business they are able to accomplish more than they would alone, and therefore they and the business profit from that. Examples would be Eduardo Saverin, although he is an entrepreneur, he briefly worked with Facebook in order to accelerate their growth. He is an example of an Insider Entrepreneur.

Insiders allow a business to setup a corporate think tank, that allows them to come up with ideas through blue sky thinking and creative thinking.

Advantages and Disadvantages of a Corporate ‘Think Tank’
- An objectivised think tank may not actually produce any good ideas, although they may seem good, they may not be possible due to financial or time constraints. Examples would be features on software development, it may be good to have a certain feature, but it may not be possible to implement. (See SMART)
  - This may also lead to income constraints, as time is invested in producing these ideas, it can take lots of their time to do research and development.
  - It also means the entrepreneurial roles they should be doing are put aside. Examples would be excessive meetings or wasting employee time waiting for information.
- They may be all over the world, and may have never worked together before, so the ideas could vary and the results could be poor.
- A think tank relies on a good reputation or ideas may never take off from the ground. Research into pointless topics could be expensive.
- Having a think tank requires experts who may cost a lot of money. CTO’s and CFO’s could have a good reputation and cost a lot of money to get a project off the ground for start-ups.
- It also requires trust, as some employees may not be willing to bare the blame for a failed project.
- Employees may not be motivated to do blue sky thinking or may not want to help the business earn profits that they do not get a part of, salary can de-motivate employees.
- A gap in the market may be hard to find. Especially Saturated Markets.
- Think Tanks can also be Cheap.
- Loyal Customers may be able to contribute to Think Tanks, examples would be the hospitality industry. Surveys and Questionnaires could shed light on what customers really want.
- There can be high financial risk.
Be SMART

There is an acronym that can help when dealing with think tank blue sky thinking. SMART!
- Specific. Vague. Broad topics can not make much sense. Making a website ‘pop’ isn’t a good way of asking a web designer to improve a website.
- Measurable. It can be useful to collect statistics or data before taking a calculated risk.
- Achievable. Some goals may not be possible because they are not what a company is about.
- Realistic. Some goals may not be possible because they are too optimistic.
- Time-frame. Some goals may not be possible because of the manpower a business has.
Liquidity Ratios

May 6th, 2016

There are different ratios that are used in business. A current ratio is a formula that shows the relationship between what the business has payable, and what they have as liquidity. It may be easier to think of current liability as current payables.

Formulas for Liquidity Ratios

The formula for the current ratio is

Current assets / current liabilities = current ratio

The current ratio shows if the company has enough potential cash to pay any debts that they owe. The current ratio is usually based off of a year and should be above or between 1-1.25, below this number would indicate that the business does not have enough cash to pay off its debts.

The acid test ratio is a stripped down version of the current ratio. It uses the most liquid assets. Why does it use the most liquid assets? The acid test ratio uses liquid assets, such as cash, receivables and short term investments, as they can be turned into cash instantly to pay off debts.

Cash + Short Term Investments + Receivables / Current liabilities

Working capital is the money used in a business for day-to-day processes, The formula is

Current assets - Current liabilies

Liquidity Ratios are another planning tool that a company can use to ensure that they are liquid, this is particularly useful for companies such as a bank, where their main asset is money, they can be sure to maintain a constant positive ratio. A company that deals with large amounts of stock, such as a supermarket or online shop, may be able to have a poor acid ratio as they have plenty of assets that are liquid, and can usually sell as soon as they need to.

The current and acid tests may be stored on a business balance sheet, which is a statement of the assets, liabilities and capital of a business at a particular point in time, It will detail the balance of income and expenditure over a given period and is sometimes presented in large business annual reports.
Lean Production Techniques

May 6th, 2016
Lean production methods such as Kaizen and Kanban allow a business to motivate staff to use less waste and treat resources as a finite resource.

Lean Production for Expansion

Most businesses that are doing well consider expanding, when they do they need to use more effective methods of production in order to survive, this means cutting cost on waste and optimising lead times and output. Lean production is about continuously checking that the business processes are as fast as possible.
- Just In Time – Just In Time (JIT) requires a good relationship with suppliers who are going to deliver when you need them, this saves on storage cost. This also means that a business will have better cash flow if they can tie this together with trade credit.
- Total Quality Management – In TQM, Each Item is checked for consistency and to meet standards, although it may be expensive and time consuming, it could mean that the business has less waste.
Businesses may want to consider increasing machinery capacity or staff work overtime during expansion. Walking, waiting time and bad quality are eliminated or minimised in a lean production.

Lean Production Techniques

Pull (Kanban)
- Products are made to order, when they are ordered.
- Businesses only order new stock when it is needed.
- Items are only bought when they are needed or in demand.
- Essentially Pull is JIT (Just In Time).
- There is a reduced amount of leftover resources as products are made to order.
One-piece flow
- One item is produced at a time, so there is not confusion in manufacture.
- The flow of production becomes highly predictable and focused.
- One product is made at a time, so production could be slow.
- Large objects may only be made one at a time.
- Batch ordering may not be possible, so businesses cannot take advantage of economy of scale.
- Standardise manufactured components.
Takt
- Takt is how fast a product is manufactured to meet demand.
- It allows a business to balance work to achieve a continuous flow.
- Continuous Improvement > Kaizen says ‘Continuous Improvement’ through self reflection.
No Defects
- Products with defects must be fixed before being allowed to go on to the next stage of production.
- Rate of production is improved, as the rate off success is near optimal.
- Products with defects may still have been able to sell. It means waste could be higher than before.
- Products could also be higher quality.
Lead time is the time it takes for a customer to receive a product after ordering it.

Zero based budgets are are when budgets are reviewed without reference to the previous budget. Normally this does not happen, however it is growing in popularity, as it usually results in lower costs.
Business Failure

May 5th, 2016
Businesses just starting out have a generally low rate of success, 50% of businesses fail within the first two years. Some of the common causes of business failure are avoidable, however there are some examples that businesses may not predict.

Could Leadership Cause Business Failure?

Leadership in a business is vital to its survival, but failure to identify where they need to straighten up and fly right again could mean that a business is left behind, unable to correct it’s course.
- Loss of Control, Just short of divorce of ownership, an owner unable to make effective and authoritative decisions could mean that a business could start to lack innovation or a competitiveness that every business needs to get an advantage over competition. At the same time, an owner making too little decisions could also mean a business effectively has no leader, which in small business could be the difference between growth and decline.
- Overtrading could see a business go into liquidation, it is important that a business can fulfil its promise and deliver too customers and HMRC, if a business does not identify when it needs to have some liquid assets or a financial cushion, it could loose out on future repeat purchases. Bad leadership could be the root cause of overtrading, however poor management and/or communication could also make overtrading the determinate factor. Machinery breaking may also mean that overtrading orders that they can no longer fulfil could cause massive cash flow problems for a business
- Ineffective Expenditure could mean that a business could go quick. Inability to manage finance and good investments could see even the largest business fail. Even if a business does not invest in merit-less research and development, a lack of innovation or diversification in their products could also see them fail as a result.
  - Poor cash flow could lead to insolvency.
  - No profit made
  - Margins are too high, not enough return.
  - No Inflows, Product is not developed effectively.
  - Pressure groups prevent business from making enough money or attract too much of a negative stigma.
  - Interest rates mean business cannot afford premises.
  - Business unable to move product as price is too high because ingredients are too expensive.
Business can also fail if they do not have enough profit,companies that can’t expand due to financial and logistical restraint, greed and overheads being too high could mean that a business is unable to continue trading.

Key Terms
- Business Administration – A management firm (usually accountants) come into a business in order to improve spending and save a business from collapse.
- Liquidation – Selling assets to cover costs. Usually as a last resort to pay debtors.
Common Business Failure

Financial
- Minimum wage has increased (living wage)
- Economy is bad (or not favourable)
- Inadiquate Finance
- Majour Bad Debt
- Inadiquate shareholder capital
- Employees are not getting paid, so stop working
- Greed or Theft
- Dominant sales from a now dead source
Non-Financial
- Legal and Social Change
- Consumer Protection Laws
- Poor Management
- No Interest in Business
- Poor Idea
- Poor Execution
- Poor Tourism/Footfall
The Working Capital Cycle

May 5th, 2016

The working capital cycle is a proportion of a businesses working capital that is used to allow a business to operate normally, it is the funds required by a business in order to continue trading efficiently. Without a business being able to calculate how much working capital it needs in order to operate, then it may find it hard to continue to function, the working capital cycle involves anything from inventory and supplies, to production and storage. Without proper working capital, it could lead to business failure.

The Working Capital Cycle

The working cycle has limited use as a single planning tool, however when combined with multiple tools, it can provide a very powerful overview of what a business works with month, to month. Just because a business has inflows of $1m each month, it does not mean that they make $1m profit. The working capital cycle will also allow a company to identify any ways of keeping a positive cash flow through better trade terms as well.

Each ‘stage’ of the capital cycle has multiple costs associated with it. Just because a product needs to be stored, does not mean it has not cost, there may be refrigeration cost, it could be perishable, it may need a security guard to look after the facility, the lights and electricity around the building all need to be paid for. It is important that a customer receives the product as soon as it is made, as it means that overall there is less cost associated with the product, additionally for products like clothing and fashion accessories or technology, the longer it is stored could also mean that its value is decreased as it goes out of fashion.

Over trading could also mean that a company may not be able to pay for the process to be completed using its normal working capital and may have to secure new funds for the time being until the debt is paid after they have sold the product.

How Long Will my Phone Battery Last Before it Dies?

May 5th, 2016

phone battery last before it dies Defined obsolescence has gotten a hold of me again, I will have to purchase a new phone, as my old one is about to expire! I have had my phone for about 2 Years, I recieved it in the summer and It was fairly new at the time, being released in August 2014, My little HTC Desire 610 has been through a lot. It’s had 2 screen protectors, 2 cases and been across 3 networks. Now that It is aged, I have since rooted it and install android Lollipop it has had a new breath of life, However It’s quite slow as a daily driver and I think I will need a new one soon. The battery cover on the back cannot be removed and only the SIM card and External Memory can be replaced. How Unfortunate. But It got me wondering, How long will my phone battery last before it dies.

Some people wonder how long their phone battery will last before it dies, before it basically doesn’t hold a charge and it’s battery life is no longer able to last a day.I however know that answer, my phone will die on approximately Saturday, December 24th 2016 at 8:20 am, as at this point it will no longer hold a charge. How do I know this? Let me explain…

Data Collection

Firstly, I needed to collect data to predict when my phone was degrading in battery life, I decided that the easiest measurable metric would be when my phone was plugged in. Because I would usually do this when I got in from home, It did not require me collecting any data as it could all be done automatically. I know this isn’t the most precise method for multiple reasons, such as I may not always plug my phone in at the same time, the phone may not always record the results (as you will see) and the percentage when i plug it in is not an accurate assumption of health. However my findings did show a trend that shows the battery is degrading at about 0.000109% every minute, which gives me 7 and a half months to buy a new one.

Recording the Results

To record the results I used Google Drive and IFTTT to note down the percentage charge at the times the phone was disconnected and reconnected from power. It also recorded the charge type, such as USB,AC or an external Battery. This could potentially also alter my results as the percentage increase would vary over different mediums of charge, so I eliminated all but AC power, as this was always from the same plug and USB lead. So, How did I calculate how long will my phone battery last before it dies?

The recipe I used is nearly identical to this one, I made one for it being plugged in and one for it being unplugged. the data ended up looking like this.

Date and Time	Status	Battery Percentage	Power Source
March 11, 2016 at 04:19PM	Unplugged	41
March 11, 2016 at 04:19PM	Charging	41	AC
March 11, 2016 at 04:33PM	Unplugged	50
March 11, 2016 at 04:34PM	Charging	49	AC
March 11, 2016 at 04:37PM	Unplugged	52
March 11, 2016 at 04:39PM	Charging	52	AC
March 11, 2016 at 04:44PM	Unplugged	56
March 11, 2016 at 04:45PM	Charging	56	AC

As you can see at this time I unplugged the device multiple times over 25 minutes to read emails and texts or whatever showed up on my phone. I was interested in this, so charted the occurrences of a date and time, and found that I had unplugged and plugged in again my phone four times in 1 minute at maximum, and had unplugged and plugged in my phone over 249 times. Here are the occurrences, excluding dates where I did not plug in my phone as although it would contribute to how long will my phone battery last before it dies, it did not trigger the app.

phone unplug replug showing Battery Last before It Dies

This also got me wondering how many times a day I unplugged my phone, If you look at the data, It shows that, for example, on the 20th of February, a Saturday, I unplugged my phone 16 times.

times phone was unplugged on a given day showing Battery Last before It Dies

It seems that for about a week during march I was unplugging my phone a lot, and I can’t really see a connection, I was at school on the 11th, I guess I must have been heavily using my phone over that period. The more perceptive of you will have noticed that the entire month of April is omitted, that is because the data was not recorded as I had been logged out of the IFTTT app, I did not realise until later when I re-enabled it, Having the empty months would alter the data so I have removed them from the results. Perhaps I shouldn’t worry how long will my phone battery last before it dies and instead how long the connector will last.

So How Long Will My Phone Battery Last Before It Dies?

phone plug in showing Battery Last before It Dies

This graph shows every event recorded, including when I was not recording the phone being plugged in, It clearly shows, using a linear trendline, that there is a decline in the battery percentage. Which shows my phone’s average battery percentage when being plugged in, when it reaches 0%, which I have decided is to be a dead battery, in 336101 Minutes, or 5602 hours. Coincidentally, It dies on Christmas Eve, the perfect time to be gifted a new phone ;).

Category: Featured

The Impact on EU Trade Imports and Exports vs Capacity Utilisation

Labour Intensive Production

Capital Intensive Production

What is the purpose of Kanban?

Kanban Asset Tag

What are Sources of Finance

Sources of Finance in IT

What is an Entrepreneur?

Advantages and Disadvantages of a Corporate ‘Think Tank’

Be SMART

Formulas for Liquidity Ratios

Lean Production for Expansion

Lean Production Techniques

Could Leadership Cause Business Failure?

Key Terms

Common Business Failure

Financial

Non-Financial

The Working Capital Cycle

Data Collection

Recording the Results

So How Long Will My Phone Battery Last Before It Dies?