Quantitative Reasoning for Business

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Date Submitted: 10/03/2009 09:53 AM

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Quantitative Reasoning for Business

Quantitative reasoning in business allows managers the ability to apply tools necessary to make sound business decisions. In my role as a manager I will be faced with the task of making numerous decisions that will affect the daily operations of the business and shareholder value in the company. Analytical tools will give me the best chance at making successful and sound business judgments that will increase shareholder value.

Every decision in my business that requires purchase of capital equipment or the movement of work from one location to another for example, requires a cost trade analysis. In the aerospace business this is much like a return on equity (ROE) statement. The analysis determines how much the operation will cost against how much the company can benefit from the new operation in terms of time and money. As an example moving work from one location to another, the process looks at the quantity to be moved, the 3 year demand for the product; the material cost for in-house make versus the supplier, the total delivered cost of the product and provides a delta or a net savings. If the payback can be achieved in less than 5 years, the length of a typical contract, then the trade is generally approved.

Costs are also managed through the use of learning curve calculations, which take into account a specific number of units and budgets. Based on 20 units of assembly (T20) the learning curve is expected to be on time and budget at the twentieth unit of production. Or in terms of performance, be at 85% by unit 20.Our need to measure our tactical process performance improvements will ensure meeting or goals and objectives. The book, Industrial Engineering Terminology [1] defines a learning curve as a plot of productive output or work unit times of an individual or group as a function of time or output per unit of time, used to project the learning rate of a new job or project. The learning curve equation is simple....