ENTREPRENEURSHIP

Governor Pack Road, Baguio City, Philippines 2600

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: ABM 12
Email: email@uc-bcf.edu.ph; Website: www.uc-bcf.edu.ph

MODULE 6 – ENTREP Subject Teacher:

Managing The Operations Function

Learning Objectives:
At the end of this module, the learners are expected to:
a. define operation as a function of the business;
b. define an operation plan;
c. identify the significant factors of an operation plan;
d. define a production plan; and
e. identify the significant factors of an operation plan.

Operations is one of the functional areas of the organization. This function sets forth the
responsibilities of acquiring materials and/or supplies and disposing or selling of finished goods.
Quality control management, a function which ensures the quality in all processes involved in the
conversion of raw materials to finished goods, up to the point of delivering them to the buyers, is
indispensable in the operations. Operations, therefore, is an important function of maintaining good
quality of products (goods or services) delivered to customers.

In relation to the development of a business plan, operations as a function must be particularly

explained and/or described in the following parts:

1. Operation Plan
2. Production Plan

A. Operation Plan

An Operation Plan outlines the acquisition of raw materials and delivery of the products to the
target consumers. This major section of the business plan must cover the following areas:

Evaluation of Suppliers

Quality control must start as early as the time of determining the supplier/s, those from whom
the raw materials will be coming from. This requirement for quality management aims to prevent or
minimize the incidence of acquiring defective raw materials or supplies. A review and evaluation of
the profile and goods and services of all or substantially all of the probable suppliers must be done in
order for the business enterprise to choose the best supplier of materials which will be processes into
finished goods.

Materials requisition and receiving procedures

A comprehensive process of acquiring and receiving raw materials from the suppliers must be
laid out in the business plan. The business enterprise must assign personnel responsible for inspecting
the materials or supplies that were actually received. Also, these authorized personnel must compare
the materials actually received and materials appearing in the purchase order to ensure that all
those needed by the business were delivered. The above-stated responsibilities must be documented
in a receiving report.

Storage and inventory control system

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 ENTREPRENEURSHIP
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: ABM 12
Email: email@uc-bcf.edu.ph; Website: www.uc-bcf.edu.ph

MODULE 6 – ENTREP Subject Teacher:

The business enterprise must be able to describe the manner of storing its inventories of raw
materials and finished goods. The inventories must be stored in a manner preventive of possible losses
and damages. Businesses, especially those who make large level of purchases of materials must
maintain a warehouse. It is also good to mention the procedure on how these materials or goods
were transferred from one place or another. In practice, businesses usually employ the “Just-in-time
manufacturing system” or the JIT system, where goods are only manufactured according to the
actual orders. This is a very good strategy of preventing wastages in manufacturing as well as high
cost attributed to storing inventories.

Shipment system and control

A process concerning the pullout of finished goods and their delivery must also be included in
the business plan. IN particular, the business enterprise must be able to define a clear process on the
approval of shipment of goods, the terms of shipment, as well as the manner on how the goods will
be shipped. It is important to have a clear agreement between the customer or client and the
business enterprise as regards the ownership over the goods shipped. This has for its purpose the
determination of who shall bear the risk of loss over the goods shipped.

Note: Review the concepts of FOB Shipping point and FOB Destination

Functions of support services.

Support services shall include other functional areas of the organization. The services of the
human resource, marketing, and finance usually complement the functions of the operations
department. The business plan must be able to layout the clear relationship between operations and
the other functional areas.

B. Production Plan

While some organizations treat the Production Department distinct from Operations
Department, some small and medium enterprises consider their functions intimately dependent with
each other. This is for the reason that the conversion of goods from raw materials to finished goods, a
process involved in production, is necessarily included in the process involved in operations. In the
business plan, the necessary processes and activities in production must be comprehensively
explained in the production plan which shall cover the following areas:

Production Schedule

The business enterprise shall set up a standard time frame within which a certain number or
quantity of goods will be produced within that given period of time. However, the variability of the
quantity of goods to be produced is probable due to the continuous changes in demand and
supply. Thus, the number of goods to be manufactured must also be determined in accordance with
the current demand of products (relate with JIT Manufacturing System) and the availability of
supplies and/or materials.

Production Process

The production process lays out the steps to be performed in converting the inputs of
production (raw materials, labor, capital, entrepreneur) into finished goods. A flowchart or other
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 ENTREPRENEURSHIP
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: ABM 12
Email: email@uc-bcf.edu.ph; Website: www.uc-bcf.edu.ph

MODULE 6 – ENTREP Subject Teacher:

forms of diagram may be used for a more simplified and comprehensive reference of the production
process. It will also be necessary for the enterprise to describe the process of disposal of scrap
materials as part of the enterprise’s environmental responsibility.

Processing Plant and Equipment

This section identifies all the needed fixed assets in the production process. The usual fixed
assets used shall include, but not limited to the following:

1. Machinery
2. Equipment
3. Tools; and
4. Manufacturing Plant

It is important to completely describe the fixed assets in terms of their estimated useful life,
scrap value, acquisition cost, and periodic depreciation.

Sources of Materials

Since the suppliers were already clearly evaluated in the operation plan, this section shall
continue to describe the expected quality of the supplies or materials needed. The terms with
suppliers concerning damaged materials shall also be laid-out in this particular section.

Production Cost

This section of the production plan is important in preparing the financial plan of the business
plan. An estimate of the costs of production shall be clearly detailed in this part. The accounts that
must be clearly explained shall include the following:

1. Direct Costs, which shall include direct materials and labor; and
3. Factory Overheads

The estimates of costs provided in this section shall become the bases of computing the selling
price of the goods for sale. The cost of goods sold is usually used to determine the gross profit margin
of the business enterprise.

References:
BAL 338.04
Kuratko, D. (2012). Entrepreneurship: An Introduction. Pasig City: Cengage Learning Asia
K9654
2012 Pte. Ltd.
BAL 658.421 Batisan, R. (2016). Entrepreneurship. Makati City: Diwa Learning Systems Inc
B3208
2016

BAL 658.421
Aduana, N. (2016). Entrepreneurship in Philippine Setting. Quezon City: C&E Publishing,
B3208
2016 Inc.

Kotler, P., & Armstrong, G. (2013) Principles of marketing (14th ed.). Harlow, England:
Pearson Education Ltd.

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