Management: Exam 6
IN CLASS PROBLEM: Ending inventory 2018: $325,000 COGS 2017: $3,000,000 COGS 2018: $3,500,000 ITOR improved by one turn from 2017 to 2018. 10.8 (2018) 9.8 (2017) How much did inventory improve by?
$3,000,000/9.8= $306,122 2017 ending inventory $325,000-306,122= $18,878
Inventory turnover rate is calculated as: A: TO = COGS/Average Inventory B: TO = Sales/Average inventory at cost C: TO = (Sales - COGS) - Average inventory at cost
*A: TO = COGS/Average Inventory* WILL NEED TO USE THIS EQUATION TO CALCULATE
What are the Categories for Performance Appraisal?
-Absolute -Relative -Outcomes based
What is Speculative vs cycle vs buffer/safety stock?
-Speculative: Flu shot season, you know you'll need it so you order in advance -Safety: price might be going up, buy more so you have extra, shortage of a drug, stockpiling EX: Always have extra birth control on shelf -Cycle stock: It comes in, goes out, you just have it, normal inventory EX: retirement community medications
*What are the Four Costs Associated with Inventory?*
1. Acquisition cost The price the pharmacy pays for the product 2. Procurement costs The costs associated with purchasing the product ex: ordering, pricing, receiving order, putting away the order 3. Carrying costs The storage, handling, insurance, cost of capital to finance the inventory, and opportunity costs 4. Stock-out cost The cost of not having the product on the shelf when a patient needs or wants it
What is Dr. John Kotter: The Eight-Stage Process for Leading Change?
1. Establish a Sense of Urgency 2. Create the Guiding Coalition 3. Develop a Change Vision 4. Communicate the Vision for Buy-in 5. Empower Broad-Based Action 6. Generate Short-Term Wins 7. Never Let Up 8. Incorporate Changes in the Culture
What are the purchasing objectives?
1. To obtain the right products 2. To obtain products in the right quantity 3. To obtain products at the right time 4. To obtain products at the right price 5. To obtain products from the right vendor
*What are the methods of inventory management?*
1. Visual method Look at the number of units in inventory and compare them with a listing of how many should be carried 2. Periodic method Count the stock on hand at predetermined intervals and compare with minimum desired levels 3. Perpetual inventory systems Computerized Most efficient Can tell precisely the amount of inventory on hand for any product at any given time
What is the Rationale for Implementing Effective Performance Appraisals: COMMUNICATIVE?
1.Ensures understanding of performance expectations by managers and staff •Mitigates the possibility of "role stress" "role ambiguity "role conflict" 2.Provides a formal means for employees to voice concerns and make suggestions for system improvement 3.Indicates management's commitment to open dialogue and fairness
What are the Types of Performance Appraisal Processes?
1.Identify the types of processes 2.Evaluate the strengths and weaknesses of each
What are performance appraisals?
1.Rationale for implementation 2.Difficulties associated with performance appraisal implementation
How should you Conduct the Performance Appraisal Interview?
1.Review and update the position description and performance standards 2.Discuss the performance ratings assigned 3.Highlight strengths and accomplishments since the previous review 4.Discuss objectives that were not reached since the previous appraisal 5.Discuss future performance and assist with career planning
How should you Plan for the Performance Appraisal Interview?
1.What results should the interview achieve? 2.What good contributions is the employee making? 3.Is the employee working up to his potential? 4.Is the employee clear about the organization's performance expectations? 5.What strengths does the employee have that can be built on or improved? 6.Is there any additional training available that can help the employee improve?
What was the calculation from the exam? Calculate 2009 EI 2009: T=??? COGS: 2,135,000 Sales: 2,750,000 2010: T: ???? EI: 260,194 ending inventory given COGS: 2,650,000 Sales: 3,450,000
2009: *T=9.3 (10.3-1)* COGS: 2,135,000 Sales: 2,750,000 2010: *T=10.3 had to calculate using T= COGS/EI* EI: 260,194 ending inventory COGS: 2,650,000 Sales: 3,450,000 *2009 EI calculation:* 9.3=2,135,000/EI EI= 229,570 260,194-229,570= 30,624
A GPO is: A: A group purchasing organization B: A general purchase order C: A buying group found in the Greater Pennsylvania Area
A: A group purchasing organization
A small discount that is offered in exchange for a prompt payment is called a: A: Cash discount B: Dating discount C: Serial discount
A: Cash discount Dating discount- usually ends up hurting you like you get 1% back Serial- bulk percent, pre-purchase
A system wherein the supervisor assesses the employee's level of performance on a Likert-type scale is: A: Graphic rating B: Critical incident C: Essay D: Forced choice
A: Graphic rating
Cook's Pharmacy is currently dispensing 500 capsules of Prozac ® 20mg. per month. If the technician orders two bottles of 100 Prozac ® each time a prescription of 60 capsules is dispensed, what will the result be? A: Inventory increases and cash flow decreases. B: Inventory increases and carrying costs decrease C: Inventory obsolescence occurs
A: Inventory increases and cash flow decreases.
One type of inventory management relies on the pharmacist or a designated person to look at the number of units in inventory and compare them with a listing of how many should be carried. When the number of units falls below the desired amount, an order is placed. This is a A: Visual inventory system B: Perpetual inventory system C: RFID system
A: Visual inventory system
What are the relative categories?
Alternation Ranking Paired Comparisons Forced Distribution
*What is the net profit : average inventory ratio?*
Another measure to determine effectiveness of inventory management: -Whether the inventory is being used efficiently to make a profit -*Goal: greater than 20%* •Example: ITOR for Smith Pharmacy for FY 2010 = 9.5 Net profit: $50,000 Average inventory: $150,000 Calculate the net profit/average inventory percentage Is Smith Pharmacy using inventory efficiently?
Each of the following can enhance over the counter sales in a community pharmacy except: A: Traffic flow design that does not waste the consumer's time in searching for items B: Elevation of the pharmacy designed to restrict the consumer's view of the department C: Store layout of fixtures designed to place fast movers at eye level
B: Elevation of the pharmacy designed to restrict the consumer's view of the department
2/10, net 30 means: A: A 2 percent discount is offered if the invoice is paid in 30 days. B: A 10 percent discount is offered if the invoice is paid in 30 days. C: A 2 percent discount is offered if the invoice is paid in 10 days, otherwise the net amount is due in 30 days.
C: A 2 percent discount is offered if the invoice is paid in 10 days, otherwise the net amount is due in 30 days.
Which of the following would NOT be a reasonable accommodation that a community pharmacy might to expected to undertake to comply with the ADA? A: Adjusted aisle widths B: Adjusted counter heights C: Adjusted ceiling heights
C: Adjusted ceiling heights
Radio frequency identification (RFID) technology facilitates each of the following except: A: Identification of when the product arrived at the wholesaler B: Identification of when the product arrived at the pharmacy C: Identification of when the product arrived at the patient's home
C: Identification of when the product arrived at the patient's home
Another purchase term that is important for managers to understand is dating. Each of the following is a type of dating with the EXCEPTION of: A: Prepayment B: Collect on delivery C: Post dating D: Delayed or future dating.
C: Post dating
What is cash vs dating vs serial vs bulk discount?
Cash discount: Prepayment/early with cash not credit, pay faster than you have to because you have cash flow and can pay now 2/10/net 30 is an example Dating discount: -Pre-order using credit or cash -Collect on delivery: it expires soon so you get a discount for short-dated product -Delayed/future: new product and buy three bottles now won't get billed now and if price goes down, you get the less expensive if cheaper a few months from now (incentive to buy new drugs on market) Serial discount: A percentage if you buy x amount you get 2% discount, not tied to total amount Bulk discount: Buying in bulk you get more discount, If you buy 5 you can each for $100 if you buy 10 you can buy each for $75
*What is the cash freed equation?*
Cash freed= (COGS/Turns-current)-(COGS/Turns-projected)
What about your Your Vision Must Bring Customers In?
Create a "Buzz" Hormone consultations Health classes Private events (include wine & appetizers) Travel vaccines New product lines
According to Kotter, the eight-step process of creating major change includes ________. A: Communicating the change vision to administrative staff only on a need to know basis. B: Creating a small select group to lead the change. C: Generating long-term wins. D: Creating a sense of urgency
D: Creating a sense of urgency
Which statement best describes the state of performance evaluations, particularly in pharmacy? A: Performance appraisals are among managers' favorite responsibilities. B: Performance appraisals are known to be performed very frequently. C: Performance appraisals are mandated by law to be conducted in some states. D: Processes of evaluation vary considerably across organizations.
D: Processes of evaluation vary considerably across organizations.
Performance appraisal systems A: Need be evaluated only by human resources personnel B: Do not need to be linked to the organization's allocation of rewards C: Reduce the need for regular, informal feedback D: Require periodic monitoring and updating
D: Require periodic monitoring and updating
What is Performance Appraisals and Their Advantages and Disadvantages Paired comparisons?
Each employee is compared with every other employee one at a time on each criterion Advantages: May appear to be less subjective than alternation ranking Disadvantages: Limited feedback
What are the Performance Appraisals and Their Advantages and Disadvantages, Cont. 360o Feedback?
Employees rate themselves, and comparisons are made with ratings by various stakeholders Advantages: Multiple points of view, facilitates reflection Disadvantages: Very time-consuming, subject to role conflict
What is the Rationale for Implementing Effective Performance Appraisals: Rewards?
Equity in rewards Provides a means for accurate and equitable distribution of organizational rewards Provides recognition for past service Helps to establish support for terminating "problem" or underachieving employees
What are the absolute categories?
Essay Critical incident Checklist Graphic ranking Behaviorally Anchored Rating Scales 360 degrees feedback Forced choice
A relative appraisal system is exemplified by "Management by Objectives." T/F
False
The primary reason that performance appraisals are undertaken is to eliminate poorly functioning employees from the organization. T/F
False
The primary reason that performance appraisals are undertaken is to eliminate poorly functioning employees from the organization. T/F
False It is not the primary reason, but you do need it to fire someone
A relative appraisal system is exemplified by "Management by Objectives." T/F
False Management by objectives is absolute
Length of service and merit pay increases are equally motivating and can keep employees satisfied. T/F
False: Younger people can get paid more than some pharmacists that have been there for 30+ years
The employer must provide employees undergoing a performance appraisal with any materials beforehand in order to comply with Title VII of the Civil Service Reform Act of 1978. T/F
False: not all and any of those materials beforehand for the appraisal
What is the Rationale for Implementing Effective Performance Appraisals: Financial?
Financial position Assists in reducing operating costs Avoids costly litigation Reduces replacement costs
What are the profit equations?
Gross profit = revenue - cost of goods sold Net profit = revenue - cost of goods sold - all other expenses Revenue = money made from selling a product
What are Intrinsic vs extrinsic rewards?
Intrinsic: informal recognition, day to day, personal feedback Extrinsic: An award, tangible, employee meeting recognition, promotion
Example of a serial discount?
Invoice price $100 10% Quantity discount $100.00 × 0.1 = $10.00 $100.00 − $10.00 = $90.00 2% Cash discount $90.00 × 0.02 = $1.80 $90.00 − $1.80 = $88.20
What are the Outcome-oriented Performance Appraisals and Their Advantages and Disadvantages, Cont.?
Management by Objectives Work standards approach
When to use the cash freed equation?
Only use cash freed equation: if everything else is the same like COGS except turns changes, "HOW MUCH CASH CAN I FREE UP or how much turn change to free up this much money"
What is the Rationale for Implementing Effective Performance Appraisals: Management Functions?
Other managerial functions Supplies evidence to review organizational and systems problems Provides data on recruitment and selection procedures Indentifies deficiencies in orientation and training programs
What was Janet Kusler's Vision in 1999?
Pharmacy Compounding Vaccinations Gift Shop
What was Kusler's vision in 2000?
Pharmacy Compounding Vaccinations Gift Shop Compliance Packaging
What was Kusler's vision 2004?
Pharmacy Compounding Vaccinations Gift Shop Compliance Packaging Kitchen Shop
What is Kusler's vision 2007?
Pharmacy Compounding Vaccinations Gift Shop Compliance Packaging Kitchen Shop Home Store Drug Studies
What is Kusler's vision in 2009?
Pharmacy Compounding Vaccinations Gift Shop Compliance Packaging Kitchen Shop Patient Care Management
What is Kusler's vision in 2011?
Pharmacy Compounding Vaccinations Gift Shop Compliance Packaging Kitchen Shop Patient Care Management Wine Travel clinic
What is Janet Kusler's vision for excellent reputation?
Physicians refer patients Fast service (most Rxs done in 5 minutes) ALWAYS find the answer to MD questions (books, web, DIC) Develop enthusiastically satisfied customers
What is the Rationale for Implementing Effective Performance Appraisals: Productivity?
Productivity of labor Provides direction to employees on how to improve Establishes an environment conducive to self-motivation Assists employees with career planning Promotes satisfaction and elicits commitment of employees Mitigates turnover
What is the Performance Appraisals and Their Advantages and Disadvantages, Cont. Checklist?
Rater answers with a yes or a no a series of questions about the employee's behavior Advantages: Easy to complete, indicative of specific behaviors Disadvantages: Burdensome and subject to interpretation
What is Performance Appraisals and Their Advantages and Disadvantages: Forced distribution?
Rater categorizes employees into one of three groups according to how well they meet expectations Advantages: Eliminates leniency and central tendency Disadvantages: Limited feedback, skewing
What is the Performance Appraisals and Their Advantages and Disadvantages, Cont. Behaviorally Anchored Rating Scales?
Rater employs highly descriptive scales to indicated employee's tendency to demonstrate desirable behaviors Advantages: Quantitative, conducive to supply feedback Disadvantages: Central tendency, burdensome
What is Performance Appraisals and Their Advantages and Disadvantages Management by Objectives?
Rater establishes goals for the employee to achieve during the next period, and employee is evaluated on his or her success Advantages: Highly participatory and incentive-driven Disadvantages: *Employees evaluated by different standards* NOT THE SAME STANDARDS
What is the Performance Appraisals and Their Advantages and Disadvantages, Cont. Graphing rating?
Rater indicates various employee traits and behaviors on a scale Advantages: Often based on trait measures Disadvantages: Leniency, central tendency, use of traits
What is the Performance Appraisals and Their Advantages and Disadvantages, Cont. Critical incident?
Rater maintains a record of incidents indicative of both positive and negative behaviors of the employee Advantages: Derived from documented data Disadvantages: Burdensome and subject to interpretation
What is the Performance Appraisals and Their Advantages and Disadvantages, Cont. Essay?
Rater prepares a written statement describing the employee's strengths and weaknesses Advantages: May provide rich data Disadvantages: Differences across raters, lack of objectivity
What is the Performance Appraisals and Their Advantages and Disadvantages, Cont. Forced Choice?
Rater ranks a set of statements describing the employee's performance Advantages: Mitigates bias Disadvantages: Irksome to raters, feedback is challenging
What is Performance Appraisals and Their Advantages and Disadvantages Alternation Ranking?
Rater selects most and least valued employee from remaining pools of employees Advantages: Eliminates leniency and central tendency Disadvantages: Limited feedback, perceptions of bias
What is the Performance Appraisals and Their Advantages and Disadvantages Work Standards Approach?
Rater sets a standard or an expected level of output and compares each employee's performance to the standard Advantages: Evaluation is more standardized Disadvantages: Standards may be viewed as unfair
What is Human resource management?
Recruit Hire Train Develop Terminate
What is the Rationale for implementing effective performance appraisals has been elucidated?
So, what is so difficult about this process and why is it often neglected? Managers have identified performance reviews as one of their least favorite activities Requires: Preparation Thoughtful analysis Time to design an effective appraisal system that is right for the organizational culture Time to create annual reviews for all employees Time to schedule and facilitate annual review appointments Excellent communication skills, including the aptitude to deliver unpleasant news Excellent interpersonal skills Ability to resolve conflict Capacity to follow up and hold others accountable
What is the Rationale for Implementing Effective Performance Appraisals: LEGAL?
Title VII of the Civil Service Reform Act •Heightened concern regarding appraisal issues •Federal statute, Title VII addressed performance appraisal Age Discrimination in Employment Act
An example of an absolute performance appraisal system is the essay appraisal. T/F
True
Organizational rewards include intrinsic and extrinsic rewards: T/F
True
What is the Rationale for Implementing Effective Performance Appraisals?
With an understanding of the legal mandates on businesses discussed previously, which acts provide rationale for this implementation? Communication rationale? Productivity rationale? Reward rationale? Managerial functions rationale? Financial rationale?
What is a turn?
turns= how long inventory is sitting on the shelf. Ex: 12 turns= one turn a month (one month's supply of inventory) Days inventory on hand= 365 days/turns
What is the Criteria to Select Vendors?
• Are they reliable and dependable? What is their order accuracy? Do they have a good reputation? • Will they provide drug pedigree information and certify that the drug is not stolen, diverted, or counterfeit? • Will they negotiate price and purchase terms with the pharmacy? Will they help to ensure contract compliance when ordering? • What is their delivery schedule? • Are they innovative? • Do they provide financing and credit options? • Do they have good customer relations? How often will a representative call on the pharmacy? Can I develop a positive business relationship with this supplier? • Do they offer any value-added services? Will they help with advertising and promotion, provide inventory reports and analyses, or assist with pharmacy layout and design? Do they offer a private-label line of products? • What technology do they offer to help with purchasing and inventory management?
What are Special Considerations for Appraisal Systems in Pharmacy?
•Alternative systems or different components for pharmacists and support personnel -Autonomy and responsibility •Be cognizant of your own biases -Race, ethnicities, intergenerational dynamics, etc. •Don't focus on traits and/or aspects of personality not affiliated with specific behaviors
What is the summary of performance interviews?
•Careful planning and implementation should make performance appraisals less onerous •Performance appraisals are closely linked to employee motivation, performance, commitment, and turnover •Should be accompanied by frequent and substantial informal feedback •Appraisal interview is key to success of appraisal system •Rewards should be closely linked to results of the appraisal
What should you consider for Allocating Rewards?
•Consider the presence of performance constraints •Provide a clear distinction between cost-of-living, seniority, and merit pay increases •Enlist trust among employees •Make merit pay substantial •Be flexible in scheduling rewards •Effectively communicate merit and total pay policy to employees
What is the Integrity of the Drug Supply Chain?
•Counterfeit products •"Authorized distributors" •Chain of custody—accurate drug pedigree Electronic track and trace technology Radio frequency identification (RFID) tags Would also help with drug recalls •SNI - standardized numerical identifiers combined with NDCs
What is the summary of merchandizing?
•Create an environment for shoppers that will make the pharmacy easy and fun to shop and become their health care destination of choice •Appeal to the senses -See and hear •Use merchandise techniques to help customers find what they need and experience items and services they may not have thought of purchasing
What is pharmacy design?
•Customers demand convenience, service, and ambience -Want to get in and out quickly •Don't want to be too trendy or rapidly outdated •Determine the characteristics and needs of your customers •Size of departments are typically determined by: -Industry average -Sales per square feet •Make sure counseling areas and dispensing areas are aligned with the profession •Need to comply with: -The Americans with Disabilities Act of 1990 -The Health Insurance Portability and Accountability Act -Legal requirements, local codes and ordinances -Restrictions of the shopping center
What is the intro to merchandising?
•Exterior design (e.g., colors and shapes of the outdoor signage) -Help create and identity with customers •Everything seen and felt and the ease of entry into the store can be planned •The success of the "front end" is crucial to the financial success of the pharmacy •Design, layout, and merchandise are important to draw customers in
What is the Pharmacy Layout?
•Goal is to create a mood that: Welcomes customer traffic Increases time spent browsing yet not searching for goods Encourages unplanned purchases Invites them to return to the pharmacy in the future •Two main types of store layouts: Grid layout Free-flow layout
What is inventory management?
•Inventory -Represents a pharmacy's largest asset -*Least liquid asset* •Four general costs with inventory management 1. Acquisition 2. Procurement 3. Carrying 4. Out of stock •Effective inventory management decreases the cost of goods sold and operational expenses, resulting in increased gross margins and net profits
What is the Inventory Management SummaryEvaluation of Effectiveness?
•Inventory turnover rate (ITOR) Most common ratio used *ITOR = cost of goods sold / average inventory value (at cost)* Higher is better—as long as not running out of stock •Net-profit-to-average-inventory ratio Whether the inventory is being used efficiently to make a profit Greater than 20 percent
What is Pharmacy Merchandising?
•Involves proper placement of goods on shelving •Cross-selling -The process of selling across departments to facilitate customers purchasing more items than they may have intended originally •End caps -Space at end and beginning of aisle runs •Plan-o-grams -Diagrams that show the placement, space, and management of each item in a particular section of shelves •Facing -The arrangement of a product one package wide on a shelf •Cross-merchandising -Fast-moving, high-profit items can be displayed in various departments throughout the store •Used to highlight products: -Displays -Point-of-purchase materials (signage)
What are some Suggestions for Addressing Performance Deficiencies?
•Limit criticism to one or two major problems •Reserve critical remarks until after some of the positives have been accentuated •Maintain open dialogue with the employee •Avoid the use of terms that potentially could be misconstrued §Attitude, work ethic, professionalism, and weakness §How can you convey this messaging?
What is the right price in purchasing?
•List price and terms of sale have an impact on the overall acquisition cost •Terms of sale Discounts -Quantity -Cash -Serial Dating -Prepayment -Collect on delivery -Delayed or future
How should you Prepare the Employee for the Performance Appraisal Interview?
•Make an appointment well in advance •Provide: A copy of the position description and corresponding performance standards A copy of the evaluation form used A copy of the report of the previous review Departmental/organizational objectives for the current and subsequent year Instructions on how to prepare for the meeting
What is the role of technology in inventory management?
•Manage inventory faster and more accurately •Allows for a wide array of reports Purchase-trend report Sales-analysis report Item-movement report •e-procurement Even CIIs •Radiofrequency Identification (RFID)
What are Performance Appraisal Interviews?
•Need to ensure that the system is reliable and valid •Typically happen annually -Anniversary of hire date or rating period (everyone—easier) •Effectiveness should be monitored -Quality of performance standards, effective use of appraisal results, tracking of the raters, and elimination of adverse impact
What are some Other Benefits to Reward Good Performers?
•Offer to pay for attendance at a local CE program •Provide funding for attendance at national conferences •Offer to offset the cost of professional recognition and certification processes •Fund membership in a professional association •Buy lunch •Allow someone to represent you at an important meeting •Assign tasks with greater level of responsibility
What should you take into consideration when looking for the right product?
•Pharmacy managers should evaluate the following factors when deciding what products to order: -Past usage -Target market -Pharmacy image and goals -Formularies -Industry data -Industry representatives -Consumer information
What is inventory management?
•Practice of planning, organizing, and controlling inventory so that it contributes to the profitability of the business •Important principles: Minimize the amount invested in inventory Minimize the procurement and carrying costs Balance supply and demand
What is Merchandising the Prescription Department?
•Sets apart from other retail stores selling merchandise •Should be given a position of prominence in the store •Clean and well organized •Open feel •Patient waiting area •Patient consultation area •Perhaps a drive-through window •Perhaps in-store medical clinic
What is Motivation and Informal Feedback?
•Support from supervisors goes a long way towards keeping employees satisfied -Be cognizant of the desire for autonomy and personal growth by all employees •Informal feedback should be rendered on a consistent basis
How can you evaluate the Right Quantity at the Right Time?
•Three Types of stock 1. Cycle stock 2. Buffer or safety stock 3. Anticipatory or speculative stock •Estimate the minimum quantity •Establishing stock depth •Reorder point What is the budget?
As a Manager, How Will You Allocate Rewards?
•What special considerations need to be considered? •What is the difference between cost-of-living, seniority, and merit pay increases? Which will you use? Are there parameters to consider (ie how much merit if you are awarding?) •Will you ask for perspective from anyone else? If so, who? •Are there other rewards besides monetary? •How will you communicate policy regarding total pay and merit pay?
