Operation Plan: Dr. Azlin Shafinaz Mohamad Arshad

OPERATION PLAN
Dr. Azlin Shafinaz Mohamad Arshad

Malaysian Academy of SME & Entrepreneurship
Development
(MASMED)
LEARNING OUTCOMES
▪ To understand the concept of

operations function in business
▪ To prepare an operations plan for
their proposed project
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
OPERATIONS
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
External Environment Factors
Input Transformation Output

Transformation
Process
Process
Feedback
OPERATION 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
Operations plan comprises of :
1. Process Planning
2. Operations Layout
3. Production Planning
4. Material Planning
5. Machine and Equipment Planning
6. Manpower Planning
7. Overheads Requirement
8. Location Plan
9. Business and Operations Hours
10. License, Permits and Regulations Required
11. Operations Budget
12. Implementation Schedule
Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin
© Entrepreneurship Department, Faculty of Business Management, Universiti Teknologi MARA 2008
1. PROCESS PLANNING
▪ 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 step by step processes can be illustrated using diagram
such as a flow chart or a process chart (use symbols that
are universally recognized in the operations management
field).

Symbols Used in Process Chart
Symbol Activity Description
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
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
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

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

2. OPERATIONS LAYOUT
▪ 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
Types of Layout
a. 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

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

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

c. 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

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

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

3. 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 = 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
4. 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
1.5mm diameter
103 Eraser 0.75 cm long 1
6mm diameter
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 Total Material Price / Total price
Stock Requirement unit (RM)
(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

5. 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.
Factors to consider in purchasing
machine & equipment
• Price
• Quality and reliability
• Availability of spare parts
• Break down maintenance facility
• Technology & user friendly
• Supplier reputation
• After sale services
Examples of Machine & Equipment Requisition
Planning Schedule
No. Machine Quantity Price / Unit Total

(RM) Price
(RM)
1. Mixer 1 2000 2000
2. Cutter 2 1000 2000
3. Cash Register 1 1500 1500
Total 5500

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
No. of Planned Rate of Production per day Standard

Machine = X Production
Required Machine Productive Time per day
Time / Unit

6. 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
No. of Planned Rate of Production per day Worker Standard

Worker = X Production Time /
Worker Productive Time per day
Required Unit

7. 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

8. 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 Influence the Location
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
Factors to be considered
for Choice of Location
• Distance from raw

• Local Government Policy
material / suppliers
• Labor supply • Security
• Transportation • Facility for expansion
• Price of Land or and business
rentals development
• Infrastructure
• Climate

9. BUSINESS & OPERATION 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.
▪ 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.
10.LICENSE, PERMITS
& 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
11. OPERATION 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

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

12. 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.

Activities Deadlines Durations
Incorporation of business Jan – Mac 2020 3 months
Application for permits and Jan – April 2020 4 months
license
Searching for business premise Feb – Mac 2020 3 months
Renovation of premise April 2020 1 month
Procurement of machines and April – June 2020 3 months
raw material
Recruitment of labours June 2020 1 month
Installation of machines June 2020 1 month


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OPERATION PLAN

Dr. Azlin Shafinaz Mohamad Arshad

▪ To understand the concept of

▪ Operation is one of an important function in

Input Transformation Output

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Symbol Activity Description

Operation Activity that modify, transform or give

Inspection Activity that measure the standard or

Storage Finished product or goods are stored in

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Transfer the fruits from the store to the production area

Clean the fruits under running water

Use electric ladle to stir the fruit until the fruits

Add ten parts of water into the mixture

Boil the mixture for 90 minutes

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

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

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

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

a. Layout based on product

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

 Average sales forecast per month = RM 25,200.00

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

▪ The bills of materials will contains a complete

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

▪ To produce a unit of pencil, the bills of materials

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

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

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

No. Machine Quantity Price / Unit Total

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

No. of Planned Rate of Production per day Standard

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

No. of Planned Rate of Production per day Worker Standard

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

▪ Determine the overheads that are required

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

▪ The entrepreneur has to make decision which

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

• Distance from raw

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

▪ Business hours refer to the time the business

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Total RM 80,500 RM 30,100 RM 7,000