There is not one correct tool or technique to be used for each problem faced and not all are appropriate for all problems. He or she should examine the available tools and techniques and apply one or more than one that will help to resolve the problem faced.
The reason why the father wished to close down the branch was that it appeared to be making a loss. However, it is quite the reverse; if the branch was closed then, the positive contribution from the branch would be lost and overall profits would fall.
This is because the indirect costs of production do not vary with output and, therefore, closure of a section of the firm would not lead to immediate savings. This may mean that closing the branch would be a mistake on financial grounds. This mistake is made due to a misunderstanding of nature of cost behavior.
If the branch is closed then the only costs that would be saved are the costs directly related to the running of the branch: The costs are indirect in nature, in this example the marketing and central administration costs, would still have to be paid as they are unaffected by output.
For this decision to be made, we should use contribution as a guide for deciding whether or not to close a branch. This can also be applied to the production of certain product lines, or the cost effectiveness of departments. On financial grounds, contribution is therefore, a better guide in making decisions.Life Insurance.
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Continuous Improvement. Continuous improvement is the process of constantly making things better than they were before. Kaizen Definition. Kaizen can be defined as the philosophy and practice of continuous improvement.
Inbound Logistics' glossary of transportation, logistics, supply chain, and international trade terms can help you navigate through confusion and get to the meaning behind industry jargon. The Plan-Do-Study-Act (PDSA) Worksheet is a useful tool for documenting a test of change.
The PDSA cycle is shorthand for testing a change by developing a plan to test the change (Plan), carrying out the test (Do), observing and learning from the consequences (Study), and determining what modifications should be made to the test (Act).
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