2. LEARNING OUTCOMES
1. To work out on material requirement in
producing a product.
2. To calculate cost per unit, selling
price, and profit margin.
3. To construct process flow of
production.

3. ACTIVITY 1
Work in group. Assuming that you are
about to start a selling burger business
via roadside stall at Taman Seroja.
List down all the raw materials needed to
produce burger.

4. ACTIVITY 2
Assuming the following list of raw materials,
work out on cost per unit of your burger.
Suggest your selling price and calculate your
profit margin.
• Burger Bun – 40pcs @ RM15.00
• Tomato Sos – 340g @ RM2.20 (enough for 40 pcs of finished burger)
• Chili Sos – 330g @ RM2.00 (enough for 40 pcs of finished burger)
• Beef Paste – RM4.20 of 10 pcs of Ramly beef paste.
• Mayonaise – 230g @ RM3.30. (enough for 40 pcs of finished burger)
• Cucumber – RM0.60 per piece. (enough for 70 pcs of finished burger)

5. ACTIVITY 2
Work in group. Assuming that you are
about to start a selling burger business
via roadside stall at Taman Seroja.
List down all the raw materials needed to
produce burger.

6. Operation Management
1.
2.
3.
4.
5.
6.
7.
The Transformation Process
Productivity Index
Process Planning
Material Requirement Planning
Layout Plan
Selection of Location
Calculation of Operational Costs

7. 1. The Transformation Process
External Environment Forces
INPUT______
• LABOUR
• RAW MATERIALS
• MACHINES &
EQUIPMENTS
• TECHNOLOGY &
METHODS
• CAPITAL
OUTPUT___
TRANSFORMATION
PROCESS
SERVICES
OR
PRODUCTS

8. 2. Productivity Index
Total Value of Output
Productivity Index =
Total Value of Input
The productivity index (P.I) can be more or
less than 1.
P.I > 1 = business running efficiently
P.I < 1 = business running inefficiently

9. 3. Process Planning
Symbol
Type of
Activities
Description
Operation
Activities that modify, transform or give
values to the output
Transportation
When materials are transported from
one point to another.
Inspection
Measures standard of the in-process
material, finished product or services
Delay
When in-process material is restrained in
a location waiting for next activity
Storage
When in-process materials or finished
products are stored in the storage area.

11. 4. Material Requirement
Planning
Step I :
Step II :
Step III:
Step IV:
Identify and list down the raw
materials required
Prepare the bill of materials
Calculate the quantity of raw
material required
Identify supplier

12. Step I
Identify and list all the raw materials required
to manufacture the product or provide the
service.
– Restaurant: the raw materials required depend
on the menu for the day
– Cleaning service: the materials required include
consumable items like detergents and scrubbing
pads.
– Retail business: fresh goods, sundry goods,
canned goods.
– Burger Stall: the raw materials used are
proportionate to each layer of ingredients inside
the burger.

13. Step II
• Prepare a bill of
materials required for
a unit of product.
Ingredient Amount required for
100 cookies
Flour
2 kg
Margarine 0.5 kg
Sugar
1 kg
Eggs
4 units
Water
0.5 litre

14. • Therefore, the bill of materials
for a unit of cookies will be:
Ingredient
Amount Required/Cookie
Flour
0.02 kg
Margarine
Sugar
0.005 kg
0.01 kg
Eggs
0.04 of an eggs
(1 egg for 25 cookies)
0.005 litre
Water

15. Step III
• Estimate the raw material requirement
by multiplying the bill of materials with
the total number of cookies to be
produced monthly.
• The number of units to be produced
must be based on the sales forecast in
the marketing plan.

16. Example:
If the forecast demand per month is 50,000
units of cookies.
If the amount of stock at the end of the
month is 5% of the amount.
= 50,000 + 5%(50,000)
= 50,000 + 2,500
= 52,500 cookies/month

17. The materials required for the month:
Ingredient
Amount Required/Month
Flour
0.02kg/unit x 52,500 = 1050kg
Margarine
0.005kg/unit x 52,500 = 2025kg
Sugar
0.01kg/unit x 52,500 = 525kg
Eggs
0.04/unit x 52,500 = 2100 units
Water
0.005litre/unit x 52,500 = 262.5 litre

18. Step IV
Identify supplier
• Look through internet/publications/survey by
trade associations, and seek quotations
from suitable suppliers.
1.
2.
3.
4.
Price and discount
offered
Quality of materials
Sales terms & conditions
e.g payment terms
After sale service and
warranty
5.
6.
7.
Lead time i.e the time
between orders and
delivery
Delivery terms e.g free
transportation
Reliability of supplier

19. Capacity Planning
• The capacity of any production
operation refers to the amount of
output that can be produced within a
specified time.
• It is a method to calculate machinery
and manpower requirements so that
production demand based on sales
forecast can be met.

20. • Based on monthly sales forecast, the
daily production capacity can be
determine by dividing it by the number
of working days per month.
• This capacity should be divided by the
number of working hours per day to
give the capacity per hour.

21. • If sales forecast is 520 units of ‘tudung’
per month.
• If working days per month is assumed
to be 26 days per month, the daily
production rate is:
910
days = 35 ' tudung' per day
26
35
hours = 5 ' tudung' per hour
7

22. Purchasing of
‘tudung’ materials
Storage of ‘tudung’
materials
Cutting of raw materials to size.
i.e large, medium and small
Quality inspection
Transport the materials that
have been cut to tailor’s
table
Sewing by
tailors
Ironing
Packaging
Storage before
shipping out

23. Activity: ‘Tudung’ cutting
If one cutter can cut 1 ‘tudung’ in 1/3
hour, the reciprocal of this is:
= the cutter’s capacity to cut per hour
= 3 ‘tudung’ per hour
Therefore, the number of cutter required
is:
= Production capacity per
hour/cutter’s capacity per hour
= 5/3 = 1.67 (needs 2 cutters)

24. Manpower Requirement
Determine the number of workers required
If one tailor can sew 1 ‘tudung’ in ½ hour,
then his hourly capacity is:
= 1/0.5 hr
= 2 ‘tudung’ per hour
Therefore, the number of tailors required
is:
= 5/2
= 2.5 tailors (3 tailors) and also, at least 3
sewing machines + 1 (standby)

25. If one tailor requires a working space
of 8 ft by 10 ft, than the total space
required for 4 tailors is:
= 8ft x 10 ft x 4 tailors
= 320 square ft

26. 5. Layout
• Layout refers to the arrangement of
machinery, equipment, workers and other
facilities used in the operation.
• The arrangement should be made in such a
way that the production of goods and
services can be done efficiently.
• It should take into consideration the
integration of several factors including work
station, tool room, store, office, prayer room
and toilet.

27. Types of layout
Layout based on product
– The design is done according to the
sequence of activity to produce the
product.

29. Layout based on process
– The design is based on the production
process.
– It is suitable for a factory producing
several products that undergo a similar
process.

31. Layout based on marketing
– The layout is designed to utilise the
available space to display goods.
– Example: retailed shop and bookshop.
•Arrangement of goods are
interactive
•Goods are easily accessible and
convenient for the customers
•It is easy for the entrepreneur to
protect goods from theft
•The entrepreneur can maximize the
return of investment form the space
used.

32. 6. Physical Location
• It is crucial to choose the right location
for the business because a strategic
location can contribute to the success
of the business.
• The choice of location will depend on
the following factors:
– Distance of operation centre/factory
is near from the source of raw
materials
– Near to the source of manpower

33. – Easy access to transportation facilities.
•Highways e.g. LPT
•Port e.g. Klang
•Airport e.g. Sepang
– Distance from targeted customers.
– Other factors
•Basic infrastructure, Utilities, banks,
schools and housing, government
policies and safety of surrounding.

34. 7. Operations Costs
• It is essential to determine the total
operational cost in order to calculate
the cost per unit of the goods
produced.
• Operations costs include costs of
direct material, direct labour and
overheads

35. • Direct materials costs
– Money spend on materials that are
directly used to produce the products
or services.
• Direct labour costs
– The money paid as wages, salaries and
benefits to the workers involved directly
in the production of the products and
services.
• Overhead costs
– Include electricity, water, rents,
insurance, wages of indirect labour,
maintenance and depreciation.

36. Operations Costs = Direct material + Direct labour + Overhead
Total Operations Cost (RM)
Cost per Unit =
Total Number of Output (Units)

37. Q&A
THANK YOU!!