ent300_module09.ppt

INTRODUCTION
 Operation is one of an important function in a
business organization
 Managing operations is crucial to make sure that
the business is able to produce product or deliver
services according to the specification, quality and
time specified by the customer
 Operations management can be defined as the
process of marshalling business input to
transform them into output in the form of product
or services

Components in an operations system
The components of an operations system that is
involved in the transformation of business input into
output comprises of the following:
 Business Input
 Transformation Process
 Output
 Feedback
 External Environment

Schematic Diagram of an Operations System
The components of an operations system can be portrayed in
the schematic diagram as shown below:
Input Output
Transformation
Process
Transformation
Process
Feedback
External Environment Factors

OPERATIONS PLAN
 The operations plan is the one of the section that
is included in the business plan
 This section will demonstrate the operational
aspect of the business that is crucial in
transforming the business input into output
 The operations plan will ensure the business is
able to produce the product or to provide the
services that the business had planned in the
marketing plan

The operations plan comprises of the following topics:
 Process Planning
 Operations Layout
 Production Planning
 Material Planning
 Machine and Equipment Planning
 Manpower Planning
 Overheads Requirement
 Location Plan
 Business and Operations Hours
 License, Permits and Regulations Required
 Operations Budget
 Implementation Schedule

PROCESS PLANNING
 Process planning involve the identification of the
step-by-step processes from beginning to end in
making the product or in providing the services
 For manufacturing business, the processes
involved will be explained clearly such as the
activity involved, its duration and the equipment
used
 For service business, the process planning will
explain all the steps that should be taken from
start to finish to provide the service to the
customer

PROCESS PLANNING (cont.)
 The step by step processes can be illustrated using
diagram such as a flow chart or a process chart
 The process chart will use symbols that are
universally recognized in the operations
management field
 These symbols are also used in the job activity
chart to show a worker’s activity

Symbols Used in the Process Chart
Operation Activity that modify, transform or give added
value to the input
Transportation Movement of materials or goods from one
place to another
Inspection Activity that measure the standard or quality
Symbol Activity Description
Delay Process is delayed because in process materials
are waiting for next activity
Storage Finished product or goods are stored in the
storage area or warehouse

Flow Chart for the Production of Mixed Fruits Jelly
Transfer the fruits from the store to the production area
Check the quality of the fruits and segregate the bad fruits
Clean the fruits under running water
Put the fruits into the fruit chopper for chopping process
Use electric ladle to stir the fruit until the fruits change
into pulp
Add ten parts of water into the mixture
Boil the mixture for 90 minutes
Put the chopped fruits into the boiler for steaming process

Activity Chart for Web Designing Services
Greet the client
Invite the client into the discussion room
Get the relevant information from the client
Brief the client about terms and conditions
Get the agreement from the client regarding terms and
condition
Work on the design of the web
Get the feedback from the client
Make the amendment accordingly
Make a presentation to the client
Send the client to the door

OPERATIONS LAYOUT
 Illustrate the layout of the operations
 Layout refers to the arrangement of machine,
equipment, workers and other facilities used in
the operations
 The layout must be design in such a way that the
production of goods and services can be done
smoothly and efficiently
 There are three types of layout:
o Layout based on process
o Layout based on product
o Layout based on marketing

Layout based on product
 This type of layout is suitable for a business that
has product focus or continuous flow production
 The design of this layout is made according to the
sequence of activities to product the product
 Example of a business that have this kind of layout
is a food processing factory
Types of Layout

Layout based on process
 This layout is suitable for a business that produce
several products using similar processes
 This type of layout is design based on the similarity
of processes where by machine and equipment that
perform similar function will be grouped together
 Example of business with this type of layout is a
steel workshop and a tailor store
Types of Layout (cont.)

Layout based on marketing
 This layout is designed with an intention to
maximized the area available to display goods
 Examples of layout based on marketing can be
observed in the retail business such as book store
or departmental store
Types of Layout (cont.)

Example of Layout Based on Product
Filling
Area
Office
Steaming
Receiving
Area
Finished
Goods
Storage
Fruits Cleaning Area
Washing Area
Fruits
Chopper

Example of Layout Based on Process
Milling
Machine
Grinding
Machine
Drilling
Machine
Office
Tool
Room
Storage
Area

Example of Layout Based on Marketing
Store
Cashier
Aisle
Frozen Food
Aisle
Pastry
Products
Aisle

Cashier
Food Display Counter
Beverages
Dining Area
Kitchen
Store
Food
Counter
Toilet
Example of Layout in a Restaurant

PRODUCTION PLANNING
 It is important to make sure that the business is
able to produce output or to provide services that
is enough to fulfill the expected market demand or
sales
 This can be achieved by having a good production
planning
 In production planning, the business will
determine how much output to produce for a
certain period of time such as in a day, a week or a
month
 The business may need the information from the
marketing plan, e.g. average sales forecast

Example of calculation for output per day
Average sales forecast per month = Rs 25,200.00
Price per unit = Rs 15.00
Number of output per month = Rs 25,200.00
Rs 15.00
= 1,680 units
If the number of working days per month is 24 days
The amount of output to be produced per day is:
= 1,680 units
24 days
= 70 units per day

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin
© Entrepreneurship Department, Faculty of Business Management, Universiti Teknologi MARA 2008
MATERIAL PLANNING
 Material planning is done to determine the type
and amount of raw materials need for the
production
 Material planning involved four steps:
o Identify and list down the raw materials required
o Prepare the Bills of Materials
o Calculate the quantity of raw material required
o Identify the suppliers of raw materials

Identify and list down the raw materials required
 Usually in manufacturing business, the raw
materials used is easily identified
 For example, to manufacture pencils, raw
materials needed are hollow wood, lead, eraser,
metal band, paint, glue and packaging box
 In case of retail business, the raw materials is
known as goods. The business need to estimate the
amount of initial goods to be purchased to start the
business operation

Prepare the bills of materials
 The bills of materials will contains a complete list
of materials, parts or components and the
amount needed to produce a unit of product
 To prepare the bill of material, the entrepreneur
must understand the design of the product
 This bill of material is important information for
purchasing activities

Example of Bills of Materials
 To produce a unit of pencil, the bills of materials is
as follows:
Product No. Description Specification Quantity
101 Half hollow wood 17 cm long 2
102 Lead 17 cm long
1.5mm diameter
1
103 Eraser 0.75 cm long
6mm diameter
1
104 Metal band 2 cm long 1
105 Paint 0.5 ml 1
106 Glue 0.5 ml 1

Examples of Materials Requirement Schedule
Material Quantity Safety
Stock
Total Material
Requirement
Price /
unit
(RM)
Total price
(RM)
Flour 50 Kg 5 kg 55 1.2 66
Sugar 50 Kg 5kg 55 2.8 154
Eggs 200 units 20 220 0.15 33
Corn Syrup 100 Liter 10 110 3 330
Margarine 100 Kg 10 110 2 220
Total 803

MACHINE & EQUIPMENT PLANNING
1. List out all machine and equipment required
base on the process flow chart or process plan
2. Determine the amount of machine and
equipment required based on the venture
capacity requirement
3. Identify the suppliers that are reliable in term of
price and after sale services
Steps to determine machine and equipment
requirement:

Factors to be considered in purchasing machine
and equipment
• Price
• Quality and reliability
• Availability of spare parts
• Break down maintenance facility
• Technology & user friendly
• Supplier reputation
• After sale services

No. Machine Quantity Price / Unit
(RM)
Total
Price
(RM)
1. Mixer 1 2000 2000
2. Cutter 2 1000 2000
3. Cash Register 1 1500 1500
Total 5500
Examples of Machine & Equipment Requisition
Planning Schedule

Steps to determine quantity for machine &
equipment
1. Determine the planned rate of production per day
2. Determine the standard production time per unit
for the planned machine
3. Determine the machine productive time:
Operation hours – (Setting up time + Down Time)
4. Calculate the amount of machine required using
the formula given in the next slide

Formula To Calculate the amount of machine
require:
Machine Productive Time per day
Planned Rate of Production per day
X
Standard
Production
Time / Unit
=
No. of
Machine
Required

MANPOWER PLANNING
Steps to determine the amount of direct labor
required by the venture:
1. Determine the planned rate of production per day for
the particular section of job
2. Determine the standard time for a worker to produce
one unit of product or to complete a particular job
3. Determine workers productive hours:
Working hours per day – rest time or workers idling time
4. Calculate the amount of direct labor required

Formula To Calculate the amount of direct labor
required
Worker Productive Time per day
Planned Rate of Production per day
X
Worker Standard
Production Time /
Unit
=
No. of
Worker
Required

Example of Direct Labour Planning Schedule
No Position No. of
Staff
Required
Salary/
Month
(RM)
EPF
(RM)
13 %
Socso
(RM)
2%
Total
(RM)
1 Operation
Manager
1 2000.00 260.00 2260.00
2
Total

OVERHEADS REQUIREMENT
 Determine the overheads that are required in the
operations
 Overheads refers to requirements other than
direct raw materials and direct labour
 Examples of overheads are indirect labour costs,
indirect material, insurance, maintenance and
utilities

LOCATION PLAN
 The entrepreneur has to make decision which
premise is the best for the business to operate
 Choice of location is important because it will
affect:
•Sales revenue
•Business operation cost
•Long term investment

Factors that Influence the Choice of Location
1. MANUFACTURING ACTIVITY
– Priority should be given to the cost factors
– In manufacturing cost saving would contribute to
profit
2. SERVICE ACTIVITY
– In service priority should be given to distance from
market or customers.
– Distance from customers will influence sales revenue
– In service business cost saving may not contribute to
sales revenue
– Increase in revenue will contribute to increase in
profit

Factors to be considered for Choice of Location
• Distance from raw
material / suppliers
• Labor supply
• Transportation
• Price of Land or
rentals
• Infrastructure
• Climate
• Local Government
Policy
• Security
• Facility for expansion
and business
development

BUSINESS AND OPERATIONS HOURS
 Business hours refer to the time the business is
open to the customers
 Operation hours refer to the hours the workers
have to work.
 For manufacturing, usually the business will
operate on 8-hours per shift. Thus the
entrepreneur will only decide whether the business
will runs for one shift or more. This will depends
upon the planning for production

BUSINESS AND OPERATIONS HOURS (cont.)
 For service business, the entrepreneur will has to
state the business hours in terms of days and hours
 For example, a restaurant may open to the
customer from 7 a.m. to 10 p.m. every day
 However, the operations hours for the workers will
be different
 The working hours may be from 5 a.m. to 12.a.m
 The entrepreneur may have 2 shifts for the
workers; the first shift will starts from 5 a.m. to 3
p.m. and the second shift starts from 3p.m. to 12
a.m.

LICENSE, PERMITS and REGULATIONS
 Find out and list down all the license/permits/
regulations that are required to operate the
business
 Identify which agency is responsible to approve the
particular license/permit
 For example, a restaurant among others will need
the following license/permit/regulations:
o License for signboard
o Permits for emigrant workers
o Typhoid injection for the workers

OPERATIONS BUDGET
 The business need to estimate the budget for the
operations activities
 The operations budget can be categorized into:
• Fixed asset expenditure
• Monthly expenses
• Other expenses
 This operation budget is important because it
will be one of the input to prepare the financial
plan

OPERATIONS BUDGET (cont.)
•Fixed Asset Expenditure
oRefers to the investment on long term assets used
in the operations to produce the product or
services
oExamples are the purchase of machines and
equipment
•Monthly Expenses
oRefers to the payment made every month in the
operations department
oExamples are wages for workers and raw
materials purchased

OPERATIONS BUDGET (cont.)
•Other Expenses
oThese are expenses that are made and could not be
categorized as fixed asset expenditure or monthly
expenses
oExamples are deposits and insurance

Example of Operations Budget
Item Fixed Asset Monthly
Expenses
Other
Expenses
Machine and Equipment
Factory Renovation
Raw Materials
Wages + EPF + SOCSO
Utilities
Factory Rent
Deposit for rent
Deposit for utilities
RM 35,500
RM 45,000
RM 20,000
RM 6,500
RM 600
RM 3,000
RM 6,000
RM 1,000
Total RM 80,500 RM 30,100 RM 7,000

IMPLEMENTATION SCHEDULE
 Implementation scheduling involves
sequencing and allotting time to all project
activities
 To prepare implementation schedule,
entrepreneurs has to decide how long each
activity and compute the requirement on
people and other resources
 Scheduling normally use Gantt Chart which is
a planning chart used to schedule resources
and allocate time

The Importance of Project Scheduling
Project scheduling serves several purposes:
1. It shows the relationship of each activity to
others and to the whole project
2. It identifies the precedence relationship
among activities
3. It encourages the setting of realistic time
and cost estimate for each activity
4. It helps make better use of people, money
and material by identifying critical
bottlenecks in the project

Example of Project Implementation Schedule
Activities Deadlines Durations
Incorporation of business Jan – Mac 2009 3 months
Application for permits and
license
Jan – April 2009 4 months
Searching for business premise Feb – Mac 2009 3 months
Renovation of premise April 2009 1 month
Procurement of machines and
raw material
April – June 2009 3 months
Recruitment of labours June 2009 1 month
Installation of machines June 2009 1 month

END OF MODULE 9

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