Small and medium enterprises (also SMEs, small and medium businesses, SMBs, and variations thereof) are companies whose headcount or turnover falls below certain limits.
The abbreviation SME occurs commonly in the European Union and in international organizations, such as the World Bank, the United Nations and the WTO. The term small and medium-sized businesses or SMBs is predominantly used in the USA.
EU Member States traditionally had their own definition of what constitutes an SME, for example the traditional definition in Germany had a limit of 500 employees, while, for example, in Belgium it could have been 100. But now the EU has started to standardize the concept. Its current definition categorizes companies with fewer than 50 employees as "small", and those with fewer than 250 as "medium".[1] By contrast, in the United States, when small business is defined by the number of employees, it often refers to those with fewer than 100 employees, while medium-sized business often refers to those with fewer than 500 employees.
Both US and EU generally use the same threshold of fewer than 10 employees for small offices (SOHO).
In most economies, smaller enterprises are much greater in number. In the EU, SMEs comprise approximately 99% of all firms and employ between them about 65 million people. In many sectors, SMEs are also responsible for driving innovation and competition. Globally SMEs account for 99% of business numbers and 40% to 50% of GDP.
In India, the Micro and Small Enterprises (MSEs) sector plays a pivotal role in the overall industrial economy of the country. It is estimated that in terms of value, the sector accounts for about 39 per cent of the manufacturing output and around 33 per cent of the total export of the country. Further, in recent years the MSE sector has consistently registered higher growth rate compared to the overall industrial sector. The major advantage of the sector is its employment potential at low capital cost. As per available statistics, this sector employs an estimated 31 million persons spread over 12.8 million enterprises and the labour intensity in the MSE sector is estimated to be almost 4 times higher than the large enterprises.[2]
In South Africa the term SMME, for Small, Medium and Micro Enterprises, is used. Elsewhere in Africa, MSME is used, for Micro, Small and Medium Enterprises. Size thresholds vary from country to country.
The lack of a universal size definition makes business studies and market research more difficult.
SMEs IN INDIA
With the advent of planned economy from 1951 and the subsequent industrial policy
followed by Government of India, both planners and Government earmarked a
special role for small-scale industries and medium scale industries in the Indian
economy. Due protection was accorded to both sectors, and particularly for small-
scale industries from 1951 to 1991, till the nation adopted a policy of liberalization
and globalization. Certain products were reserved for small-scale units for a long
time, though this list of products is decreasing due to change in industrial policies
and climate.
SMEs always represented the model of socio-economic policies of Government of
India which emphasized judicious use of foreign exchange for import of capital goods
and inputs; labour intensive mode of production; employment generation; non-
concentration of diffusion of economic power in the hands of few (as in the case of
big houses); discouraging monopolistic practices of production and marketing; and
finally effective contribution to foreign exchange earning of the nation with low
import-intensive operations. It was also coupled with the policy of de-concentration of
industrial activities in few geographical centers.
It can be observed that by and large, SMEs in India met the expectations of the
Government in this respect. SMEs developed in a manner, which made it possible
for them to achieve the following objectives:
• High contribution to domestic production
• Significant export earnings
• Low investment requirements
• Operational flexibility
• Location wise mobility
• Low intensive imports
• Capacities to develop appropriate indigenous technology
• Import substitution
• Contribution towards defense production
• Technology – oriented industries
• Competitiveness in domestic and export markets
At the same time one has to understand the limitations of SMEs, which are:
• Low Capital base
• Concentration of functions in one / two persons
• Inadequate exposure to international environment
• Inability to face impact of WTO regime
• Inadequate contribution towards R & D
• Lack of professionalism
In spite of these limitations, the SMEs have made significant contribution towards
technological development and exports.
SMEs have been established in almost all-major sectors in the Indian industry such
as:
• Food Processing
• Agricultural Inputs
• Chemicals & Pharmaceuticals
• Engineering; Electricals; Electronics
• Electro-medical equipment
• Textiles and Garments
• Leather and leather goods
• Meat products
• Bio-engineering
• Sports goods
• Plastics products
• Computer Software, etc.
As a result of globalization and liberalization, coupled with WTO regime, Indian
SMEs have been passing through a transitional period. With slowing down of
economy in India and abroad, particularly USA and European Union and enhanced
competition from China and a few low cost centers of production from abroad many
units have been facing a tough time.
Those SMEs who have strong technological base, international business outlook,
competitive spirit and willingness to restructure themselves shall withstand the
present challenges and come out with shining colours to make their own contribution
to the Indian economy
Sunday, November 16, 2008
Friday, November 14, 2008
SME sector
The importance and contribution of the SME sector to the economic growth and prosperity is well established. Their role in terms of employment creation, upholding the entrepreneurial spirit and innovation has been crucial in fostering competitiveness in the economy. Towards meeting the National developmental objective of a growth rate of over 8% on a sustained basis, it is imperative for the industrial sector to grow at a faster pace supported by a vibrant SME sector. Towards this, Government’s policy initiatives like enactment of the new Micro Small and Medium Enterprises Development Act, 2006, pruning of reserved SSI list, advising FIs to increase their flow of credit to the SME sector, are all initiatives towards boosting entrepreneurship, investment and growth.
With the bridging of the information gap on the SME sector attempted through periodical census, formation of CIBIL and SMERA, policy makers prescription has been to make information available to the lenders to not only extend financial support to creditworthy SME units and to approach proactively SME units in initial stages of development. Providing quality information is particularly essential in this era of globalisation wherein Indian SME sector face competition from domestic players as well as from imports. There exists further scope for increasing their export potential, market share in domestic market and them achieving status of serious players in the ‘Global Value Chain’. Access to finance and capital are the key resources for improved competitiveness and effective operations of SMEs. Providing support to SMEs in this critical area has been the raison d’être of SMERA. It has been our commitment to develop a strong and vibrant SMEs segment that acts as the backbone of India’s industrial sector. SMERA has been contributing to this goal by providing ratings to these firms, to enable their sustained and vibrant growth. SMERA recognises this potential of the SME segment and the benefits it holds for our nation.It is in this context SMERA, jointly with Dun & Bradstreet India, is proud to launch the publication series, Emerging SMEs of India.
The high fragmented nature of the SME segment makes availability of information difficult. A one-point reference document listing SMEs was imperative at this juncture. We hope to fulfil this long felt need. The publication has attempted to provide critical information on 370 companies and provide a concise profile of their activities. It aims to bring out the best SMEs and project them before domestic corporates outsourcing their needs to SMEs and also potential importers on the lookout for reliable SMEs to source their requirements.
The current endeavour is an effort to fill the void and provide Indian SMEs a platform where they can interact, learn and do networking with stakeholders in associated events together with brand building. We are sure that this publication will benefit many individuals, banks, corporates, government institutions and agencies that provide support and promote the SMEs.
Through this pioneering initiative, SMERA re-dedicates itself to serving the small and medium enterprises of India.
With the bridging of the information gap on the SME sector attempted through periodical census, formation of CIBIL and SMERA, policy makers prescription has been to make information available to the lenders to not only extend financial support to creditworthy SME units and to approach proactively SME units in initial stages of development. Providing quality information is particularly essential in this era of globalisation wherein Indian SME sector face competition from domestic players as well as from imports. There exists further scope for increasing their export potential, market share in domestic market and them achieving status of serious players in the ‘Global Value Chain’. Access to finance and capital are the key resources for improved competitiveness and effective operations of SMEs. Providing support to SMEs in this critical area has been the raison d’être of SMERA. It has been our commitment to develop a strong and vibrant SMEs segment that acts as the backbone of India’s industrial sector. SMERA has been contributing to this goal by providing ratings to these firms, to enable their sustained and vibrant growth. SMERA recognises this potential of the SME segment and the benefits it holds for our nation.It is in this context SMERA, jointly with Dun & Bradstreet India, is proud to launch the publication series, Emerging SMEs of India.
The high fragmented nature of the SME segment makes availability of information difficult. A one-point reference document listing SMEs was imperative at this juncture. We hope to fulfil this long felt need. The publication has attempted to provide critical information on 370 companies and provide a concise profile of their activities. It aims to bring out the best SMEs and project them before domestic corporates outsourcing their needs to SMEs and also potential importers on the lookout for reliable SMEs to source their requirements.
The current endeavour is an effort to fill the void and provide Indian SMEs a platform where they can interact, learn and do networking with stakeholders in associated events together with brand building. We are sure that this publication will benefit many individuals, banks, corporates, government institutions and agencies that provide support and promote the SMEs.
Through this pioneering initiative, SMERA re-dedicates itself to serving the small and medium enterprises of India.
Thursday, November 13, 2008
exchange rate movements
Tuesday, November 11, 2008
Public Private partnership
Public-private partnership
Public-private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP or P3.
In some types of PPP, the government uses tax revenue to provide capital for investment, with operations run jointly with the private sector or under contract (see contracting out). In other types (notably the Private Finance Initiative), capital investment is made by the private sector on the strength of a contract with government to provide agreed services. Government contributions to a PPP may also be in kind (notably the transfer of existing assets). In projects that are aimed at creating public goods like in the infrastructure sector, the government may provide a capital subsidy in the form of a one-time grant, so as to make it more attractive to the private investors. In some other cases, the government may support the project by providing revenue subsidies, including tax breaks or by providing guaranteed annual revenues for a fixed period.
Typically, a private sector consortium forms a special company called a "special purpose vehicle" (SPV) to develop, build, maintain and operate the asset for the contracted period. In cases where the government has invested in the project, it is typically (but not always) allotted an equity share in the SPV. The consortium is usually made up of a building contractor, a maintenance company and bank lender(s). It is the SPV that signs the contract with the government and with subcontractors to build the facility and then maintain it. In the infrastructure sector, complex arrangements and contracts that guarantee and secure the cash flows, make PPP projects prime candidates for Project financing. A typical PPP example would be a hospital building financed and constructed by a private developer and then leased to the hospital authority. The private developer then acts as landlord, providing housekeeping and other non medical services while the hospital itself provides medical services.
//
Origins
Pressure to change the standard model of Public Procurement arose initially from concerns about the level of public debt, which grew rapidly during the macroeconomic dislocation of the 1970s and 1980s. Governments sought to encourage private investment in infrastructure, initially on the basis of accounting fallacies arising from the fact that public accounts did not distinguish between recurrent and capital expenditure.
The idea that private provision of infrastructure represented a way of providing infrastructure at no cost to the public has now been generally abandoned, interest in alternatives to the standard model of public procurement persisted. In particular, it has been argued that models involving an enhanced role for the private sector, with a single private sector organisation taking responsibility for most aspects of service provisions for a given project, could yield an improved allocation of risk, while maintaining public accountability for essential aspects of service provision.
Initially, most public-private partnerships were negotiated individually, as one-off deals. In 1992, however, the Conservative government of John Major in the United Kingdom introduced the Private Finance Initiative (PFI)[1], the first systematic program aimed at encouraging public-private partnerships. In the 1992 program, the main focus was on reducing the Public Sector Borrowing Requirement, although, as already noted, the effect on the public accounts was largely illusory. The Labour government of Tony Blair elected in 1997, persisted with the PFI sought to shift the emphasis to the achievement of "value for money" mainly through an appropriate allocation of risk.
A number of Australian state governments have adopted systematic programs based on the PFI. The first, and the model for most others, is Partnerships Victoria.
Early problems
Because of the focus on avoiding increases in public debt, many private infrastructure projects in the early 1990s involved provision of services at substantially higher cost than could have been achieved under the standard model of public procurement. The central problem was that private investors demanded and received a rate of return that was higher than the government’s bond rate, even though most or all of the income risk associated with the project was borne by the public sector.
A number of Australian studies of early initiatives to promote private investment in infrastructure reached the conclusion that, in most cases, the schemes being proposed were inferior to the standard model of public procurement based on competitively tendered construction of publicly owned assets (Economic Planning Advisory Commission (EPAC) 1995a,b; House of Representatives Standing Committee on Communications Transport and Microeconomic Reform 1997; Harris 1996; Industry Commission 1996; Quiggin 1996).
One response to these negative findings was the development of formal procedures for the assessment of PPPs in which the central focus was on "value for money" rather than reductions in debt. The underlying framework was one in which value for money was achieved by an appropriate allocation of risk. These assessment procedures were incorporated in the Private Finance Initiative and its Australian counterparts from the late 1990s onwards.
Subsequent debate
Although the general view that governments should seek "value for money" has been widely accepted, there have been continuing disputes over whether the guidelines designed to achieve these goals are appropriate, and whether they have been correctly applied in particular cases. Much of the discussion has been based on debates over the UK Private Finance Initiative.
PSPP Variant
Some social enterprises have proposed, or are operating, partnerships with the state and commercial partners which they call Public Social Private Partnerships (PSPP) .
Public-Private Product Development Partnership (PDP)
PDPs are a class of PPPs that focus on health product development for diseases of the developing world. PDPs have formed over the past decade to unite the public sector's commitment to international public goods for health with private industry's expertise in product development and marketing. These not-for-profit organizations bridge public- and private-sector interests, with a view toward resolving the specific incentive and financial barriers to increased industry involvement in the development of safe and effective products.
Specific cases
While some PPP projects have proceeded smoothly, others have been highly controversial. Australian examples include: Airport Link, the Cross City Tunnel, and the Sydney Harbour Tunnel, all in Sydney; the Southern Cross Station redevelopment in Melbourne; and the Robina hospital in Queensland.
Some examples
International
Some international health care programs may be considered public-private partnerships:
The Global Alliance for Vaccines and Immunization is financed per 75% (750 Mio.US$) by the Bill and Melinda Gates Foundation, which has a permanent seat in the supervisory board of GAVI.
As a UN agency, the WHO is financed through the UN system by contributions from member states. In recent years, the WHO's work has involved more collaboration with NGOs and the pharmaceutical industry, as well as with foundations such as the Bill and Melinda Gates Foundation and the Rockefeller Foundation. Some of these collaborations may be considered global public-private partnerships (GPPPs); half the WHO budget is financed by private foundations.
The Global Fund to Fight AIDS, Tuberculosis & Malaria, a Geneva based UN connected organisation, established in 2002 to dramatically upscale global financing of interventions against the three pandemics.
The TB Alliance is financed by public agencies and private foundations, and partners with research institutes and private pharmaceutical companies to develop faster-acting, novel treatments for Tuberculosis that are affordable and accessible to the developing world.
DNDi, the Drugs for Neglected Diseases Initiative was founded in 2003 as a not-for-profit drug development organization focused on developing novel treatments for patients suffering from neglected diseases.
The International AIDS Vaccine Initiative (IAVI), a biomedical public-private product development partnership (PDP), was established in 1996 to accelerate the development of a vaccine to prevent HIV infection and AIDS. IAVI is financially supported by governments, multilateral organizations, and major private sector institutions and individuals.
[Public Private Partnerships for Disaster Management] http://www.responsenet.org/show.detail.asp?id=9658 , brings together the Private sector for PPP models with a tool box of partnership opportunities towards Towards Resilient & Sustainability Goals
The Public Private Partnership for improving teaching and learning in schools in Abu Dhabi, United Arab Emirates.
Australia
Southbank Education and Training Precinct, Brisbane
Adelaide-Darwin Railway (a BOOT arrangement)
Airport Link, Sydney
Cross City Tunnel, Sydney
Eastern Distributor, Sydney
Lane Cove Tunnel, Sydney
Sydney Harbour Tunnel, Sydney
M2 Hills Motorway, Sydney
M4 Western Motorway, Sydney
M5 South Western Motorway, Sydney
Westlink M7, Sydney
CityLink, Melbourne
EastLink, Melbourne
Newcastle Mater Hospital Redevelopment, Newcastle, NSW
Southern Cross Station, Melbourne
Headquarters Joint Operations Command (HQJOC)construction and maintenance of a major Defence facility. Queanbeyan and Bungendore, [NSW]
Canada
The 407 ETR toll road north of Toronto, Ontario
The Royal Ottawa Mental Health Centre in Ottawa, Ontario
The William Osler Health Centre in Brampton, Ontario
The Viva bus rapid transit network in York Region, Ontario
Confederation Bridge construction in Prince Edward Island
Canada Line automated rapid transit service in Greater Vancouver, British Columbia.
MaRS Discovery District a partnership, in Toronto, to commercialize publicly funded medical research with the help of private enterprises.
The western portion of the Highway 30 project west of Montreal, Quebec
East Africa
In the realm of international development, public private partnerships are common as the host government is supported by international private sector investment. The Gates Foundation and the Global Fund for Aids, TB and Malaria donate medical commodities and technical support to strengthen health service delivery at government institutions.
Many non-governmental organisations also support public private partnerships in health service delivery. In Kampala, the International Hospital provides the facilities for complex surgery with finance support from the Ugandan government. At the smaller scale, Hope Clinic Lukuli is providing philanthropic primary health care using government and donor funded health commodities.
Germany
TerraSAR-X, Friedrichshafen
India
NISG, Hyderabad
Ireland
PPPs are being increasingly used in Ireland to deliver both major and minor infrastructural projects.
National Maritime College of Ireland
West-Link bridge on M50 motorway in Dublin
New Zealand
Vector Arena in Auckland is one public-private partnership in New Zealand. The Auckland City Council and Auckland Regional Council have contributed $68 million toward the $80 million indoor multipurpose arena. Ownership will be transfered back to the city in 40 years from completion.
United Kingdom
Private Finance Initiative
The maintenance of London Underground: Metronet and Tube Lines (since 2003)
National Air Traffic Services (since 2001)
Some National Health Service (NHS) hospitals and other agencies
Firrhill High School
Williamwood High School
Beath High School, Cowdenbeath
Queen Anne High School, Dunfermline
Stirling High School and various schools in the Stirling area
Brentside High School, London
Stranraer Academy
Douglas Academy, Milngavie, Glasgow
Grosvenor Grammar School, Belfast
United States
California Fuel Cell Partnership (CaFCP)
State Route 125, San Diego, California
Central Park, New York City
Chicago Skyway Bridge, Chicago, Illinois
Dulles Greenway, suburban Washington, DC
Indiana East-West Toll Road, (Interstate 80/Interstate 90), Northern Indiana
Las Vegas Monorail, Nevada
Southern Indiana Toll Road, (Interstate 69, proposed), Martinsville to Evansville, Indiana
The redevelopment of downtown Chattanooga, Tennessee from the mid-1980s to present.
Pocahontas Parkway, suburban Richmond, Virginia
Riverside County Library System, Riverside, California
Silver Line (Washington Metro), suburban Washington, DC
HOT (High Occupancy or Toll) Lanes on the Capitol Beltway, suburban Washington, DC, [2]
Water Taxi Beach, Hunters Point, Queens, New York
InfraGard [3]
Federal Reserve
Public-private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP or P3.
In some types of PPP, the government uses tax revenue to provide capital for investment, with operations run jointly with the private sector or under contract (see contracting out). In other types (notably the Private Finance Initiative), capital investment is made by the private sector on the strength of a contract with government to provide agreed services. Government contributions to a PPP may also be in kind (notably the transfer of existing assets). In projects that are aimed at creating public goods like in the infrastructure sector, the government may provide a capital subsidy in the form of a one-time grant, so as to make it more attractive to the private investors. In some other cases, the government may support the project by providing revenue subsidies, including tax breaks or by providing guaranteed annual revenues for a fixed period.
Typically, a private sector consortium forms a special company called a "special purpose vehicle" (SPV) to develop, build, maintain and operate the asset for the contracted period. In cases where the government has invested in the project, it is typically (but not always) allotted an equity share in the SPV. The consortium is usually made up of a building contractor, a maintenance company and bank lender(s). It is the SPV that signs the contract with the government and with subcontractors to build the facility and then maintain it. In the infrastructure sector, complex arrangements and contracts that guarantee and secure the cash flows, make PPP projects prime candidates for Project financing. A typical PPP example would be a hospital building financed and constructed by a private developer and then leased to the hospital authority. The private developer then acts as landlord, providing housekeeping and other non medical services while the hospital itself provides medical services.
//
Origins
Pressure to change the standard model of Public Procurement arose initially from concerns about the level of public debt, which grew rapidly during the macroeconomic dislocation of the 1970s and 1980s. Governments sought to encourage private investment in infrastructure, initially on the basis of accounting fallacies arising from the fact that public accounts did not distinguish between recurrent and capital expenditure.
The idea that private provision of infrastructure represented a way of providing infrastructure at no cost to the public has now been generally abandoned, interest in alternatives to the standard model of public procurement persisted. In particular, it has been argued that models involving an enhanced role for the private sector, with a single private sector organisation taking responsibility for most aspects of service provisions for a given project, could yield an improved allocation of risk, while maintaining public accountability for essential aspects of service provision.
Initially, most public-private partnerships were negotiated individually, as one-off deals. In 1992, however, the Conservative government of John Major in the United Kingdom introduced the Private Finance Initiative (PFI)[1], the first systematic program aimed at encouraging public-private partnerships. In the 1992 program, the main focus was on reducing the Public Sector Borrowing Requirement, although, as already noted, the effect on the public accounts was largely illusory. The Labour government of Tony Blair elected in 1997, persisted with the PFI sought to shift the emphasis to the achievement of "value for money" mainly through an appropriate allocation of risk.
A number of Australian state governments have adopted systematic programs based on the PFI. The first, and the model for most others, is Partnerships Victoria.
Early problems
Because of the focus on avoiding increases in public debt, many private infrastructure projects in the early 1990s involved provision of services at substantially higher cost than could have been achieved under the standard model of public procurement. The central problem was that private investors demanded and received a rate of return that was higher than the government’s bond rate, even though most or all of the income risk associated with the project was borne by the public sector.
A number of Australian studies of early initiatives to promote private investment in infrastructure reached the conclusion that, in most cases, the schemes being proposed were inferior to the standard model of public procurement based on competitively tendered construction of publicly owned assets (Economic Planning Advisory Commission (EPAC) 1995a,b; House of Representatives Standing Committee on Communications Transport and Microeconomic Reform 1997; Harris 1996; Industry Commission 1996; Quiggin 1996).
One response to these negative findings was the development of formal procedures for the assessment of PPPs in which the central focus was on "value for money" rather than reductions in debt. The underlying framework was one in which value for money was achieved by an appropriate allocation of risk. These assessment procedures were incorporated in the Private Finance Initiative and its Australian counterparts from the late 1990s onwards.
Subsequent debate
Although the general view that governments should seek "value for money" has been widely accepted, there have been continuing disputes over whether the guidelines designed to achieve these goals are appropriate, and whether they have been correctly applied in particular cases. Much of the discussion has been based on debates over the UK Private Finance Initiative.
PSPP Variant
Some social enterprises have proposed, or are operating, partnerships with the state and commercial partners which they call Public Social Private Partnerships (PSPP) .
Public-Private Product Development Partnership (PDP)
PDPs are a class of PPPs that focus on health product development for diseases of the developing world. PDPs have formed over the past decade to unite the public sector's commitment to international public goods for health with private industry's expertise in product development and marketing. These not-for-profit organizations bridge public- and private-sector interests, with a view toward resolving the specific incentive and financial barriers to increased industry involvement in the development of safe and effective products.
Specific cases
While some PPP projects have proceeded smoothly, others have been highly controversial. Australian examples include: Airport Link, the Cross City Tunnel, and the Sydney Harbour Tunnel, all in Sydney; the Southern Cross Station redevelopment in Melbourne; and the Robina hospital in Queensland.
Some examples
International
Some international health care programs may be considered public-private partnerships:
The Global Alliance for Vaccines and Immunization is financed per 75% (750 Mio.US$) by the Bill and Melinda Gates Foundation, which has a permanent seat in the supervisory board of GAVI.
As a UN agency, the WHO is financed through the UN system by contributions from member states. In recent years, the WHO's work has involved more collaboration with NGOs and the pharmaceutical industry, as well as with foundations such as the Bill and Melinda Gates Foundation and the Rockefeller Foundation. Some of these collaborations may be considered global public-private partnerships (GPPPs); half the WHO budget is financed by private foundations.
The Global Fund to Fight AIDS, Tuberculosis & Malaria, a Geneva based UN connected organisation, established in 2002 to dramatically upscale global financing of interventions against the three pandemics.
The TB Alliance is financed by public agencies and private foundations, and partners with research institutes and private pharmaceutical companies to develop faster-acting, novel treatments for Tuberculosis that are affordable and accessible to the developing world.
DNDi, the Drugs for Neglected Diseases Initiative was founded in 2003 as a not-for-profit drug development organization focused on developing novel treatments for patients suffering from neglected diseases.
The International AIDS Vaccine Initiative (IAVI), a biomedical public-private product development partnership (PDP), was established in 1996 to accelerate the development of a vaccine to prevent HIV infection and AIDS. IAVI is financially supported by governments, multilateral organizations, and major private sector institutions and individuals.
[Public Private Partnerships for Disaster Management] http://www.responsenet.org/show.detail.asp?id=9658 , brings together the Private sector for PPP models with a tool box of partnership opportunities towards Towards Resilient & Sustainability Goals
The Public Private Partnership for improving teaching and learning in schools in Abu Dhabi, United Arab Emirates.
Australia
Southbank Education and Training Precinct, Brisbane
Adelaide-Darwin Railway (a BOOT arrangement)
Airport Link, Sydney
Cross City Tunnel, Sydney
Eastern Distributor, Sydney
Lane Cove Tunnel, Sydney
Sydney Harbour Tunnel, Sydney
M2 Hills Motorway, Sydney
M4 Western Motorway, Sydney
M5 South Western Motorway, Sydney
Westlink M7, Sydney
CityLink, Melbourne
EastLink, Melbourne
Newcastle Mater Hospital Redevelopment, Newcastle, NSW
Southern Cross Station, Melbourne
Headquarters Joint Operations Command (HQJOC)construction and maintenance of a major Defence facility. Queanbeyan and Bungendore, [NSW]
Canada
The 407 ETR toll road north of Toronto, Ontario
The Royal Ottawa Mental Health Centre in Ottawa, Ontario
The William Osler Health Centre in Brampton, Ontario
The Viva bus rapid transit network in York Region, Ontario
Confederation Bridge construction in Prince Edward Island
Canada Line automated rapid transit service in Greater Vancouver, British Columbia.
MaRS Discovery District a partnership, in Toronto, to commercialize publicly funded medical research with the help of private enterprises.
The western portion of the Highway 30 project west of Montreal, Quebec
East Africa
In the realm of international development, public private partnerships are common as the host government is supported by international private sector investment. The Gates Foundation and the Global Fund for Aids, TB and Malaria donate medical commodities and technical support to strengthen health service delivery at government institutions.
Many non-governmental organisations also support public private partnerships in health service delivery. In Kampala, the International Hospital provides the facilities for complex surgery with finance support from the Ugandan government. At the smaller scale, Hope Clinic Lukuli is providing philanthropic primary health care using government and donor funded health commodities.
Germany
TerraSAR-X, Friedrichshafen
India
NISG, Hyderabad
Ireland
PPPs are being increasingly used in Ireland to deliver both major and minor infrastructural projects.
National Maritime College of Ireland
West-Link bridge on M50 motorway in Dublin
New Zealand
Vector Arena in Auckland is one public-private partnership in New Zealand. The Auckland City Council and Auckland Regional Council have contributed $68 million toward the $80 million indoor multipurpose arena. Ownership will be transfered back to the city in 40 years from completion.
United Kingdom
Private Finance Initiative
The maintenance of London Underground: Metronet and Tube Lines (since 2003)
National Air Traffic Services (since 2001)
Some National Health Service (NHS) hospitals and other agencies
Firrhill High School
Williamwood High School
Beath High School, Cowdenbeath
Queen Anne High School, Dunfermline
Stirling High School and various schools in the Stirling area
Brentside High School, London
Stranraer Academy
Douglas Academy, Milngavie, Glasgow
Grosvenor Grammar School, Belfast
United States
California Fuel Cell Partnership (CaFCP)
State Route 125, San Diego, California
Central Park, New York City
Chicago Skyway Bridge, Chicago, Illinois
Dulles Greenway, suburban Washington, DC
Indiana East-West Toll Road, (Interstate 80/Interstate 90), Northern Indiana
Las Vegas Monorail, Nevada
Southern Indiana Toll Road, (Interstate 69, proposed), Martinsville to Evansville, Indiana
The redevelopment of downtown Chattanooga, Tennessee from the mid-1980s to present.
Pocahontas Parkway, suburban Richmond, Virginia
Riverside County Library System, Riverside, California
Silver Line (Washington Metro), suburban Washington, DC
HOT (High Occupancy or Toll) Lanes on the Capitol Beltway, suburban Washington, DC, [2]
Water Taxi Beach, Hunters Point, Queens, New York
InfraGard [3]
Federal Reserve
Friday, September 19, 2008
Activity Based Costing
Introduction:
Activity Based Costing (ABC) is an accounting technique that allows an organization to determine the actual cost associated with each product and service produced by the organization without regard to the organizational structure. It is developed to provide more-accurate ways of assigning the costs of indirect and support resources to activities, bushiness processes, products, services, and customers. ABC systems recognize that many organizational resources are required not for physical production of units of product but to provide a broad array of support activities that enable a variety of products and services to be produced for a diverse group of customers. The goal of ABC is not to allocate common costs to products. The goal is to measure and then price out all the resources used for activities that support the production and delivery of products and services to customers.
Concept of Activity-Based-Costing:
An organization performs activities to do its business. These activities define the kind of business you are in: a ship owner has an activity to unpack boats; an accounting firm prepares tax returns; a manufacturer produces products; a council delivers services; a university teaches students. All activities consume resources. It is the consumption of these resources that adds to overhead costs.
The basis of Activity Based Costing is: look at the activities required to produce the cost of the product or service. The activities consume resources and the cost of these can be calculated. The amount of activity required for each product and service is determined, hence the real cost can be determined.
What's what in ABC?
The activity is the work that is done.
The resource is what the activity uses to do the work e.g. people, equipment, and services. Resources cost money.
The cost of the activity depends on the quantity of resources used to accomplish the activity.
The cost driver for an activity is the factor that influences the amount of the resources that will be consumed by this activity.
Example: the activity is delivering goods. The costs of this activity include the truck drivers' wages, fuel, depreciation of the truck, insurance, etc. The quantities of the resources that will be consumed by this activity are influenced by the number of deliveries made per year. Hence the cost driver could be the number of deliveries. A cost driver is designed to allocate the delivery activity cost pool to the cost objects.
(Note: The software has the facility to enter and change the cost drivers as better information becomes available).
The activity driver measures how much of the activity is used by the cost object. Example: Product A is delivered once a month, whereas product B is delivered once a week. Products A and B require a different number of deliveries, hence the cost of the delivery activity should be assigned to each product on the basis of the number of deliveries each uses.
The cost object is whatever it is you wish to cost. It could be a product, service, process, job or customer. While traditional costing arbitrarily allocates overhead costs, ABC traces overhead costs by looking at the activities that each product and service calls upon. With ABC the products consume the activities. It is the activities that cost money. If there were no activities, no resources would be consumed. It is the activities that you do that define your business.
Why use Activity-Based-Costing?
Activity-Based-Costing is necessary for the following reasons.
* Understand TRUE profitability of your customers, products, or services
* Quantify the cost of non-value added activities such as errors and reworks
* Identify opportunities to reduce costs and/or increase efficiency
* Obtain actionable information to negotiate price increases for unprofitable clients
* Understand why profitability may be mediocre despite good strategic fundamentals
* Stratify overhead costs so they can be managed more effectively
How Does ABC Work?
The first stage in an initial ABC study is to develop a fundamental understanding of the Resources (expenditures) and Activities (work performed) of an organization. The Resources are then mapped to the Activities, thereby quantifying the cost of performing each of these Activities. These costs are traced to Cost Objects (customers, products, or services) providing tremendous insight into where an organization is making and losing money.
ABC Model:
The objective of an ABC implementation is to relate all of the costs of doing business to products, services, or customers. Developing the initial model consists of the following five steps:
1. Identify the Resources (expenditures) of an organization
2. Determine Activities (work performed) that are supported by Resources
3. Define Cost Objects (products, services, customers)
4. Develop Resource Drivers to link Resources to Activities
5. Develop Cost Drivers to link Activities to Cost Objects
These steps are discussed in greater length below.
Step 1: Identify Resources
Resources represent the expenditures of an organization. Examples include production labor, sales and marketing labor, occupancy and utilities, equipment, and supplies. These are the same costs that are represented in a traditional accounting view; unlike traditional accounting, ABC links these costs to products, customers, or services.
Step 2: Identify Activities
Activities represent the work performed in an organization. ABC Activities for the sales department in a typical organization might include:
Making sales calls to existing customers
Making sales calls to potential customers
Making customer service calls
Training product representatives
Evaluating products and improving product knowledge
Distributing samples
Attending trade shows and other events
Traditional accounting will often break the cost of the sales department into salaries, benefits, allocated rent, supplies, and so on. Unlike traditional accounting, which reports what the costs are (i.e. salaries, benefits, rent), ABC accounts for these costs based on what activities caused them to occur. By determining the actual activities that occur in various departments, such as accounting, customer service, and sales, it is then possible to more accurately relate these costs to customers, products, and services.
Step 3: Identify Cost Objects
ABC provides profitability by one or more cost object, usually represented by products, customers, and/or services. Cost Object profitability is utilized to identify money losing customers, to validate separate divisions or business units, or to measure the performance of individual projects, jobs, or contracts. Defining the outputs to be viewed is an important step in a successful ABC implementation.
Step 4: Determine Resource Drivers
Resource Drivers provide the link between the expenditures of an organization and the Activities performed within the organization.
For example, the total salary of a customer service representative would likely be allocated to the Activities performed based on the amount of time spent performing the Activity. If 50% of her time is spent performing the activity, taking orders for existing customers, 50% of her salary (including all costs such as benefits, taxes, and insurance) would be allocated to this Activity.
Step 5: Determine Cost Drivers
Determination of Cost Drivers completes the last stage of the model. Cost Drivers trace, or link, the cost of performing certain Activities to Cost Objects.
For example, taking orders for existing customers may be linked to specific customers based on the number of orders taken, if each order takes approximately the same amount of time. If order taking time varies based on the customer, this cost may be linked based on another driver or multiple drivers.
Conclusion:
Today, companies are using ABC/M to make better-informed decisions about pricing, what type of customers to pursue, and what products or services to offer. Activity-Based Costing determines the TRUE COST & PROFITABILITY of customers, products, and/or services. While traditional accounting may provide your business with an accurate sense of the direct costs of your products or services, indirect costs are often less accurately applied. Overhead, such as customer support or marketing costs, tend to be allocated based on arbitrary factors.
Activity-Based Costing measures the costs and profits of an organization based on the activities performed within that organization. By focusing on processes that contribute to revenues and business operations, ABC can accurately determine how each process relates back to specific products, customers, or services. This can make a big difference after considering warehouse, sales, customer service, administration and other costs that are often applied at a standard rate, if at all. With ABC you can drill into profitability and performance by almost any factor you can think of.
Activity Based Costing (ABC) is an accounting technique that allows an organization to determine the actual cost associated with each product and service produced by the organization without regard to the organizational structure. It is developed to provide more-accurate ways of assigning the costs of indirect and support resources to activities, bushiness processes, products, services, and customers. ABC systems recognize that many organizational resources are required not for physical production of units of product but to provide a broad array of support activities that enable a variety of products and services to be produced for a diverse group of customers. The goal of ABC is not to allocate common costs to products. The goal is to measure and then price out all the resources used for activities that support the production and delivery of products and services to customers.
Concept of Activity-Based-Costing:
An organization performs activities to do its business. These activities define the kind of business you are in: a ship owner has an activity to unpack boats; an accounting firm prepares tax returns; a manufacturer produces products; a council delivers services; a university teaches students. All activities consume resources. It is the consumption of these resources that adds to overhead costs.
The basis of Activity Based Costing is: look at the activities required to produce the cost of the product or service. The activities consume resources and the cost of these can be calculated. The amount of activity required for each product and service is determined, hence the real cost can be determined.
What's what in ABC?
The activity is the work that is done.
The resource is what the activity uses to do the work e.g. people, equipment, and services. Resources cost money.
The cost of the activity depends on the quantity of resources used to accomplish the activity.
The cost driver for an activity is the factor that influences the amount of the resources that will be consumed by this activity.
Example: the activity is delivering goods. The costs of this activity include the truck drivers' wages, fuel, depreciation of the truck, insurance, etc. The quantities of the resources that will be consumed by this activity are influenced by the number of deliveries made per year. Hence the cost driver could be the number of deliveries. A cost driver is designed to allocate the delivery activity cost pool to the cost objects.
(Note: The software has the facility to enter and change the cost drivers as better information becomes available).
The activity driver measures how much of the activity is used by the cost object. Example: Product A is delivered once a month, whereas product B is delivered once a week. Products A and B require a different number of deliveries, hence the cost of the delivery activity should be assigned to each product on the basis of the number of deliveries each uses.
The cost object is whatever it is you wish to cost. It could be a product, service, process, job or customer. While traditional costing arbitrarily allocates overhead costs, ABC traces overhead costs by looking at the activities that each product and service calls upon. With ABC the products consume the activities. It is the activities that cost money. If there were no activities, no resources would be consumed. It is the activities that you do that define your business.
Why use Activity-Based-Costing?
Activity-Based-Costing is necessary for the following reasons.
* Understand TRUE profitability of your customers, products, or services
* Quantify the cost of non-value added activities such as errors and reworks
* Identify opportunities to reduce costs and/or increase efficiency
* Obtain actionable information to negotiate price increases for unprofitable clients
* Understand why profitability may be mediocre despite good strategic fundamentals
* Stratify overhead costs so they can be managed more effectively
How Does ABC Work?
The first stage in an initial ABC study is to develop a fundamental understanding of the Resources (expenditures) and Activities (work performed) of an organization. The Resources are then mapped to the Activities, thereby quantifying the cost of performing each of these Activities. These costs are traced to Cost Objects (customers, products, or services) providing tremendous insight into where an organization is making and losing money.
ABC Model:
The objective of an ABC implementation is to relate all of the costs of doing business to products, services, or customers. Developing the initial model consists of the following five steps:
1. Identify the Resources (expenditures) of an organization
2. Determine Activities (work performed) that are supported by Resources
3. Define Cost Objects (products, services, customers)
4. Develop Resource Drivers to link Resources to Activities
5. Develop Cost Drivers to link Activities to Cost Objects
These steps are discussed in greater length below.
Step 1: Identify Resources
Resources represent the expenditures of an organization. Examples include production labor, sales and marketing labor, occupancy and utilities, equipment, and supplies. These are the same costs that are represented in a traditional accounting view; unlike traditional accounting, ABC links these costs to products, customers, or services.
Step 2: Identify Activities
Activities represent the work performed in an organization. ABC Activities for the sales department in a typical organization might include:
Making sales calls to existing customers
Making sales calls to potential customers
Making customer service calls
Training product representatives
Evaluating products and improving product knowledge
Distributing samples
Attending trade shows and other events
Traditional accounting will often break the cost of the sales department into salaries, benefits, allocated rent, supplies, and so on. Unlike traditional accounting, which reports what the costs are (i.e. salaries, benefits, rent), ABC accounts for these costs based on what activities caused them to occur. By determining the actual activities that occur in various departments, such as accounting, customer service, and sales, it is then possible to more accurately relate these costs to customers, products, and services.
Step 3: Identify Cost Objects
ABC provides profitability by one or more cost object, usually represented by products, customers, and/or services. Cost Object profitability is utilized to identify money losing customers, to validate separate divisions or business units, or to measure the performance of individual projects, jobs, or contracts. Defining the outputs to be viewed is an important step in a successful ABC implementation.
Step 4: Determine Resource Drivers
Resource Drivers provide the link between the expenditures of an organization and the Activities performed within the organization.
For example, the total salary of a customer service representative would likely be allocated to the Activities performed based on the amount of time spent performing the Activity. If 50% of her time is spent performing the activity, taking orders for existing customers, 50% of her salary (including all costs such as benefits, taxes, and insurance) would be allocated to this Activity.
Step 5: Determine Cost Drivers
Determination of Cost Drivers completes the last stage of the model. Cost Drivers trace, or link, the cost of performing certain Activities to Cost Objects.
For example, taking orders for existing customers may be linked to specific customers based on the number of orders taken, if each order takes approximately the same amount of time. If order taking time varies based on the customer, this cost may be linked based on another driver or multiple drivers.
Conclusion:
Today, companies are using ABC/M to make better-informed decisions about pricing, what type of customers to pursue, and what products or services to offer. Activity-Based Costing determines the TRUE COST & PROFITABILITY of customers, products, and/or services. While traditional accounting may provide your business with an accurate sense of the direct costs of your products or services, indirect costs are often less accurately applied. Overhead, such as customer support or marketing costs, tend to be allocated based on arbitrary factors.
Activity-Based Costing measures the costs and profits of an organization based on the activities performed within that organization. By focusing on processes that contribute to revenues and business operations, ABC can accurately determine how each process relates back to specific products, customers, or services. This can make a big difference after considering warehouse, sales, customer service, administration and other costs that are often applied at a standard rate, if at all. With ABC you can drill into profitability and performance by almost any factor you can think of.
Sunday, September 14, 2008
Activity Based Costing-Case Study
Activity Based Costing Capabilities/Case Study
Activity Based Costing (ABC) to Improve Accuracy of Product Costing for Financial Services Firm
The Challenge:
This financial services firm had a wide variety of products. These products could have been originated by them or purchased from other financial institutions. These products had different statuses (e.g., current, delinquent, default, resale). As the industry was becoming more competitive, some national players were focusing on these products, and the government was negatively impacting rates, this financial institution needed to better understand their costs by product, status, and source to assist them with:
a) Determining strategy
b) Making purchasing decisions
c) Managing performance
The Approach:
We met with senior management to determine specifically the type of improved costing information that was needed. Employees from cost centers in two locations attended one or two workshops. In these workshops, the employees were given a brief explanation of why the company needed more accurate costing information and what was expected from them. The employees were asked to define their activities. They were asked to either do time studies or estimate what percentage of their time was spent for each activity. Then they were asked to determine how to assign these activities to the various cost objects (i.e. products, source, and status).
This information was loaded into ABC Technologies OROS activity costing package where we were able to extend the capabilities of the software to meet the clients needs by working closely with ABC Technologies.
Activity Based Costing (ABC) to Improve Accuracy of Product Costing for Financial Services Firm
The Challenge:
This financial services firm had a wide variety of products. These products could have been originated by them or purchased from other financial institutions. These products had different statuses (e.g., current, delinquent, default, resale). As the industry was becoming more competitive, some national players were focusing on these products, and the government was negatively impacting rates, this financial institution needed to better understand their costs by product, status, and source to assist them with:
a) Determining strategy
b) Making purchasing decisions
c) Managing performance
The Approach:
We met with senior management to determine specifically the type of improved costing information that was needed. Employees from cost centers in two locations attended one or two workshops. In these workshops, the employees were given a brief explanation of why the company needed more accurate costing information and what was expected from them. The employees were asked to define their activities. They were asked to either do time studies or estimate what percentage of their time was spent for each activity. Then they were asked to determine how to assign these activities to the various cost objects (i.e. products, source, and status).
This information was loaded into ABC Technologies OROS activity costing package where we were able to extend the capabilities of the software to meet the clients needs by working closely with ABC Technologies.
Kaizen
Kaizen
Kaizen (改善, Japanese for "improvement") is a Japanese philosophy that focuses on continuous improvement throughout all aspects of life. When applied to the workplace, Kaizen activities continually improve all functions of a business, from manufacturing to management and from the CEO to the assembly line workers.[1] By improving standardized activities and processes, Kaizen aims to eliminate waste (see Lean manufacturing). Kaizen was first implemented in several Japanese businesses during the country's recovery after World War II, including Toyota, and has since spread to businesses throughout the world.[2]
Contents:-
1 Introduction
2 Translation
3 History
4 Implementation
Introduction
Kaizen is a daily activity, the purpose of which goes beyond simple productivity improvement. It is also a process that, when done correctly, humanizes the workplace, eliminates overly hard work ("muri"), and teaches people how to perform experiments on their work using the scientific method and how to learn to spot and eliminate waste in business processes.
To be most effective kaizen must operate with three[citation needed] principles in place:
consider the process and the results (not results-only) so that actions to achieve effects are surfaced; systemic thinking of the whole process and not just that immediately in view (i.e. big picture, not solely the narrow view) in order to avoid creating problems elsewhere in the process; and
a learning, non-judgmental, non-blaming (because blaming is wasteful) approach and intent will allow the re-examination of the assumptions that resulted in the current process.
People at all levels of an organization can participate in kaizen, from the CEO down, as well as external stakeholders when applicable. The format for kaizen can be individual, suggestion system, small group, or large group. At Toyota, it is usually a local improvement within a workstation or local area and involves a small group in improving their own work environment and productivity. This group is often guided through the kaizen process by a line supervisor; sometimes this is the line supervisor's key role.
While kaizen (at Toyota) usually delivers small improvements, the culture of continual aligned small improvements and standardization yields large results in the form of compound productivity improvement. Hence the English usage of "kaizen" can be: "continuous improvement" or "continual improvement."
This philosophy differs from the "command-and-control" improvement programs of the mid-twentieth century. Kaizen methodology includes making changes and monitoring results, then adjusting. Large-scale pre-planning and extensive project scheduling are replaced by smaller experiments, which can be rapidly adapted as new improvements are suggested.
Translation:
This section does not cite any references or sources.Please help improve this section by adding citations to reliable sources. Unverifiable material may be challenged and removed. (March 2008)
The original kanji characters for this word are: 改 善
In Japanese this is pronounced "kaizen".
改 ("kai") means "change" or "the action to correct".
善 ("zen") means "good".
In Chinese this is pronounced "gai shan":
改善 ("gǎi shàn") means "change for the better" or "improve".
改 ("gǎi") means "change" or "the action to correct".
善 ("shàn") means "good" or "benefit". "Benefit" is more related to the Taoist or Buddhist philosophy, which gives the definition as the action that 'benefits' the society but not one particular individual (i.e., multilateral improvement). In other words, one cannot benefit at another's expense. The quality of benefit that is involved here should be sustained forever, in other words the "shan" is an act that truly benefits others.
History
In Japan, after World War II, American occupation forces brought in American experts in statistical control methods and who were familiar with the War Department's Training Within Industry (TWI) training programs to restore the nation. TWI programs included Job Instruction (standard work) and Job Methods (process improvement). In conjunction with the Shewhart cycle taught by W. Edwards Deming, and other statistics-based methods taught by Joseph M. Juran, these became the basis of the kaizen revolution in Japan that took place in the 1950s.[3]
Implementation
The Toyota Production System is known for kaizen, where all line personnel are expected to stop their moving production line in case of any abnormality and, along with their supervisor, suggest an improvement to resolve the abnormality which may initiate a kaizen.
The cycle of kaizen activity can be defined as:
standardize an operation →
measure the standardized operation (find cycle time and amount of in-process inventory) →
gauge measurements against requirements →
innovate to meet requirements and increase productivity →
standardize the new, improved operations →
Continue cycle ad infinitum.
This is also known as the Shewhart cycle, Deming cycle, or PDCA.
Masaaki Imai made the term famous in his book, Kaizen: The Key to Japan's Competitive Success.
Apart from business applications of the method, both Anthony Robbins and Robert Maurer have popularized the kaizen principles into personal development principles. The basis of Robbins' CANI (Constant and Never-Ending Improvement) method in kaizen is discussed in his Lessons in Mastery series.
In their book The Toyota Way Fieldbook, Brijesh Rawat from NIFT Delhi, Jeffrey Liker and David Meier discuss the Kaizen Blitz and Kaizen Burst (elsewhere also called Kaizen Event) approaches to Continuous Improvement. Brijesh did many experiments in the system and calculated detailed results to enhance improved and refined process at Bareilly to heal the sick industries in his city (Bareilly). A Kaizen Blitz, or rapid improvement, is a focused activity on a particular process or activity. The basic concept is to identify and quickly remove waste. Another approach is that of Kaizen Burst, this is a specific point Kaizen activity on a particular process in the Value Stream.[4]
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