Abstract
The “PQ” problem was published in 1990 by Goldratt. An adapted version of this problem is provided to master’s level students a few weeks before starting an operations management course. The performance statistics collected from three South African (since 2016) and one European business school (from 2018 onwards) do not make for good reading. To date, only 2.3 per cent of the students (42 students from the sample of 1 866 students) were able to answer both questions correctly; and some of them were not able to justify their correct decisions. This paper will explore the differences between traditional, cost-based methods of decision-making for day-to-day operational and improvement decisions as practised by many companies today — and hence the bad performance by the students — and taking a systems approach to decision-making. The paper will argue for taking the systems approach as a real alternative, without which alternative realities will remain but a dream.
Highlights
When meeting my master’s level students in class for their first session, we have a short discussion on what management is
There is a necessary condition which is cash flow, and which is necessary for survival
At the same time, when decisions are made to make the accounting numbers look good, cash flow may be jeopardised, and profits may not improve. This is because management is making decisions about the future, whereas accounting is about recording the past, but having no real impact on cash flow from an accounting perspective
Summary
When meeting my master’s level students in class for their first session, we have a short discussion on what management is. The correct way to determine the profitability of products when an internal constraint exists is a concept that has been known for a very long time Even though it exists in management accounting textbooks, very few students are familiar with it, or they just tend to forget it. Proposal 1, one the other hand, reduces the time on the constraint, which suggests that it will be possible to produce and sell more units for which there is still a demand Whether it is worthwhile in the long run, considering the implementation costs and the increase in load on Resource C, must be considered by making a calculation to prove or disprove the viability.
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