ENT300 Module09

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP
THE OPERATIONS PLAN
Module 9
THE OPERATIONS PLAN
Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Entrepreneurship Department, Faculty of Business Management, Universiti Teknologi MARA 2008

THE OPERATIONS PLAN
LEARNING OUTCOMES
At the end of the module, students should be able
to:
understand the concept of operations function
in business
understand the topics that are included in an
operations plan
prepare an operations plan for their proposed
project

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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


THE OPERATIONS PLAN
Schematic Diagram of an Operations System

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

Output

THE OPERATIONS PLAN
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
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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 workers activity


THE OPERATIONS PLAN
Symbols Used in the Process Chart

Symbol
Activity
Operation
Transportation
Inspection
Description
Activity that modify, transform or give added
value to the input
Movement of materials or goods from one
place to another
Activity that measure the standard or quality
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


THE OPERATIONS PLAN
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
Put the chopped fruits into the boiler for
steaming 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


THE OPERATIONS PLAN
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
Send the client to the door
Work on the design of the web
Make a presentation to the client
Get the feedback from the client
Make the amendment accordingly

THE OPERATIONS PLAN
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


THE OPERATIONS PLAN
Types of Layout
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


THE OPERATIONS PLAN
Types of Layout (cont.)

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


THE OPERATIONS PLAN
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


THE OPERATIONS PLAN
Office
Fruits Cleaning Area

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

THE OPERATIONS PLAN
Example of Layout Based on Process

Office
Milling
Machine
Grinding
Machine
Drilling
Machine
Storage
Area

Tool
Room

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


THE OPERATIONS PLAN
Example of Layout in a Restaurant
Cashier
Kitchen
Dining Area
Toilet
Beverages
Food Display Counter

Food
Counter
Store

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
Example of calculation for output per day

Average sales forecast per month = RM 25,200.00
Price per unit
= RM 15.00
Number of output per month = RM 25,200.00
RM 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


THE OPERATIONS PLAN
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
o
o
o
Identify and list down the raw materials required

Prepare the Bills of Materials
Calculate the quantity of raw material required
Identify the suppliers of raw materials


THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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


THE OPERATIONS PLAN
Example of Bills of Materials

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

Quantity

THE OPERATIONS PLAN
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
330
Margarine
100 Kg
10
110
220
Total
803

THE OPERATIONS PLAN
MACHINE & EQUIPMENT PLANNING

Steps to determine machine and equipment
requirement:
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

THE OPERATIONS PLAN
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


THE OPERATIONS PLAN
Examples of Machine & Equipment Requisition

Planning Schedule
No.
Machine
Quantity Price / Unit

(RM)
Total
Price
(RM)
1.
Mixer
2000
2000
2.
Cutter
1000
2000
3.
Cash Register
1500
1500
Total

5500

THE OPERATIONS PLAN
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


THE OPERATIONS PLAN
Formula To Calculate the amount of machine

require:
No. of
Planned Rate of Production per day
Machine =
Machine Productive Time per day
Required

Standard
Production
Time / Unit

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
Formula To Calculate the amount of direct labor

required
No. of
Planned Rate of Production per day
Worker =
Worker Productive Time per day
Required

Worker Standard
X Production Time /
Unit

THE OPERATIONS PLAN
Example of Direct Labour Planning Schedule

No Position
Operation
Manager
No. of
Staff
Required
Salary/
Month
(RM)
EPF
(RM)
13 %
2000.00
260.00
2
Total

Socso
(RM)
2%
Total
(RM)
2260.00

THE OPERATIONS PLAN
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


THE OPERATIONS PLAN
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


THE OPERATIONS PLAN
Factors that Influence the Choice of Location

1.
2.
MANUFACTURING ACTIVITY
Priority should be given to the cost factors
In manufacturing cost saving would contribute to
profit
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


THE OPERATIONS PLAN
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


THE OPERATIONS PLAN
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


THE OPERATIONS PLAN
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.

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
OPERATIONS BUDGET (cont.)

Fixed Asset Expenditure
o Refers to the investment on long term assets used
in the operations to produce the product or
services
o Examples are the purchase of machines and
equipment
Monthly Expenses
o Refers to the payment made every month in the
operations department
o Examples are wages for workers and raw materials
purchased

THE OPERATIONS PLAN
OPERATIONS BUDGET (cont.)

Other Expenses
o These are expenses that are made and could not be
categorized as fixed asset expenditure or monthly
expenses
o Examples are deposits and insurance


THE OPERATIONS PLAN
Example of Operations Budget

Item
Fixed Asset
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
Total
RM 80,500
Monthly
Expenses
Other
Expenses
RM 20,000
RM 6,500
RM 600
RM 3,000
RM 6,000
RM 1,000
RM 30,100

RM 7,000

THE OPERATIONS PLAN
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 OPERATIONS PLAN
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

THE OPERATIONS PLAN
Example of Project Implementation Schedule

Activities
Incorporation of business
Deadlines
Jan Mac 2009
Durations
3 months
Application for permits and

license
Searching for business
premise
Renovation of premise
Jan April 2009
4 months
Feb Mac 2009
3 months
April 2009
1 month
Procurement of machines and

raw material
Recruitment of labours
April June 2009
3 months
June 2009
1 month
June 2009
1 month
Installation of machines


THE OPERATIONS PLAN
END OF MODULE 9


ENT300 Module09

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

ENT300 Module09

Uploaded by

Copyright:

Available Formats

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

THE OPERATIONS PLAN

THE OPERATIONS PLAN

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Components in an operations system

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Schematic Diagram of an Operations System

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

The operations plan comprises of the following topics:

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

PROCESS PLANNING (cont.)

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Symbols Used in the Process Chart

Process is delayed because in process materials

Finished product or goods are stored in the

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Flow Chart for the Production of Mixed Fruits Jelly

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Activity Chart for Web Designing Services

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Types of Layout (cont.)

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Types of Layout (cont.)

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Fruits Cleaning Area

Example of Layout Based on Product

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Example of Layout Based on Process

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Example of Layout Based on Marketing

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Example of Layout in a Restaurant

Food Display Counter

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Example of calculation for output per day

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Identify and list down the raw materials required

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Identify and list down the raw materials required

ENT/ETR300 FUNDAMENTALS OF ENTREPRENEURSHIP

Prepare the bills of materials