This document summarizes key topics in Chapter 8 on Operation Management from an entrepreneurship textbook. It discusses the transformation process, productivity index and how to calculate it using an example. It also outlines process planning, material requirement planning, capacity planning, and provides an example calculation of machinery and labor requirements needed to meet a sales forecast. The learning outcomes are to understand Operation Management concepts and be able to apply them.

1. BAEB501 : ENTREPRENEURSHIP
CHAPTER 8:
Operation Management
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2. Chapter 8: Operation Management
Topic Outlines
8.1 The Transformation Process
8.2 Productivity Index
8.3 Example for Productivity Index
8.4 Process Planning
8.5 Symbol used in Process Chart
8.6 Material Requirement
8.7 Capacity Planning
8.8 Example Capacity Planning
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3. Chapter 8: Operation Management
Learning Outcomes
 After completing this chapter, student should be able to:
 Explain the basic information of Operation Management
 Understand the Operation Management concept
 Apply the concepts learnt
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4. Chapter 8: Operation Management
8.1 The Transformation Process
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5. Chapter 8: Operation Management
8.2 Productivity Index
 The efficiency of the transformation process is measured by
comparing the ratio of the total value of output to the total value of
input. The ratio is also known as the Productivity Index
 Productivity Index = Total Value of Output
Total Value of Input
 Productivity index can be more or less than 1. A ratio greater than 1
indicates that the business operation is running efficiently. If less
than 1, it indicates that the business operation is inefficient.
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6. Chapter 8: Operation Management
8.3 Example for Productivity Index
 A restaurant makes a sale of RM60000 per month. The operational cost
per month is RM40000. The productivity index for this restaurant can
be calculated as follows:
 Productivity Index = Total Value of Output
Total value of Input
= Total sales per month
Total operation cost per month
= RM60000
RM40000
= 1.5
The PI calculated for restaurant is 1.5. It is greater than 1.0 and
indicates that the restaurant has an efficient business operation. An
efficient business operation will contribute to profitability and
growth.
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7. Chapter 8: Operation Management
8.4 Process Planning
 Process planning involve 2 types of chart.
There are:
Activity Chart
Process Flow Chart
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8. Chapter 8: Operation Management
8.5 Symbol used in Process Chart
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9. Chapter 8: Operation Management
8.6 Material Requirement
 There are 4 steps involves in material requirement planning.
 Identify and list down the raw material required
 Prepare the bill of materials
 Calculate the quantity of raw material required
 Identify supplier
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10. Chapter 8: Operation Management
8.7 Capacity Planning
 The capacity of any production
operation refer to the amount of
output that can be produced
within a specified time.
 Capacity planning is method to
calculate machinery and
manpower requirements so that
production demand based on
sales forecast can be met.
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11. Chapter 8: Operation Management
8.8 Example Capacity Planning
 If sales forecast is RM520 units of blouses per month, monthly
production demand is 520 blouses. If working days per month is
assumed to be 26days per month, the daily production rate is:
 520/26 = 20 per day
 20/7 = 2.85 per hour
 Assume; 1 tailor/1.5 hours
 Efficiency for 0.667 blouse per hour
 Therefore, the number of tailors required is:
 Production capacity per hour required/ tailor capacity per hour.
 2.9 blouses per hour/0.667 blouse per hour
 4.34 tailors
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