ORGANIZATION PLAN, PRODUCTION PLAN, AND OPERATION PLAN

ORGANIZATION PLAN
The organization plan provides a detailed description of the business in terms of the following:
1. Form of the business organization
2. Liability of the owner or owners
3. Organizational structure
4. Roles and responsibilities
5. Salary requirements

FORM OF THE BUSINESS ORGANIZATION

A business organization can come in the form of a sole proprietorship, a partnership, or a
corporation.
The factors affecting the selection of the most appropriate business form include the following:
1. Capital requirement
2. Liability of the owner or owners
3. Management and supervisory skills
4. Tax implications
5. Government intervention
6. Nature of the business
7. External financing requirements

LIABILITY OF THE OWNER OR OWNERS

This section describes the extent of the owner’s financial obligations with creditors. The
creditors can be in the form of individual persons, suppliers of raw materials and supplies, or financial
institutions. The extent of financial liability can either be limited or unlimited.
The term limited liability means that in the case of business dissolution and there still remains
unsettled financial obligation of the business, the creditor cannot go after the personal property of the
business owner. The liability of the owner is only up to the extent of his / her financial contributions to
the business. On the other hand, the term unlimited liability means that the creditors can run after the
personal property of the owner in the event that the business fails to fully settle its financial obligation
during business dissolution.
The extent of liability of the owners in sole proprietorship and a partnership is usually unlimited.
In a corporate form of business organization, the shareholders have limited liability. They are only liable
to the extent of their investments in the corporation. The investment of the shareholders is represented
through ownership of shares or stocks.

ORGANIZATIONAL STRUCTURES
The organizational structure of the business is usually shown or reflected in the organizational
chart. It shows and defines the hierarchy of the different positions in the organization and the
interrelationships of the different offices or departments. The organizational chart depicts the flow of
communication within the organization, and the line and staff authority that must be observed and
executed.
A corporation has the most complicated organizational structure, since most corporations are
composed of a huge workforce and also if the corporation operates across the different parts of the
Philippines. On the other hand, a small business, like the business that you intend to open, has a very
simple organizational structure- the owner act as the president or general manager and, at the same
time, the head of the production and marketing operations.
The entrepreneur prepares the structure that best fits the organization and hires the most
qualified people to do the tasks.
ROLES AND RESPONSIBILITIES
The roles and responsibilities of the various positions in the business organization must be
clearly defined in order to minimize and avoid misunderstanding and overlapping of functions. The
educational requirements and experiences required of the workers must also be specified. Furthermore
a clear set of selection criteria for every position in the organization eases the hiring process and assures
the organization that only qualified personnel are hired.

SALARY REQUIREMENTS
The organizational plan must show the total estimated monthly and annual salary requirements
of the business. All other mandatory benefits like the employer’s contributions to the Social Security
System (SSS), Pag-Ibig, and Philhealth must likewise be specified. If some legal plans and moves of the
Congress of the Philippines will bring about increases in the salaries of personnel, the projected amount
must be included in the disclosure as well.

PRODUCTION PLAN
The production plan presents or describes activities related to the production of goods. The
production plan is the result of the industry analysis, particularly the study of supply and demand and
costumer behaviour.
The production plan usually includes the following:
1. Production schedule
2. Production process
3. Processing plan and equipment
4. Sources of materials
5. Production cost

PRODUCTION SCHEDULE
The production schedule presents the total number of goods to be produced and the expected
time to produce them. The total number of units to produce, however, is usually affected by the
following factors:
1. Demand for the product
2. Availability of resources
3. Capacity of the plant
The primary factor that influences the number of goods to be produced is market demand. The
entrepreneur must produce goods based on the total demand of the costumer. The second
consideration is timing. Producing the goods exactly at the time when the costumers need them is an
excellent production practice.

PRODUCTION PROCESS
The different processes or stages involved in the production of goods must be clearly spelled out
in this section, as well as the description of the following:
1. Exact processing procedure
2. Materials, parts, or ingredients required
3. Expected time to process the product
A schematic diagram showing the procedural steps in making the product will help clarify this
section.
There are instances when the waste disposal system or procedure must be discussed in this
section.

PROCESSING PLANT AND EQUIPMENT

This section of the production plan describes the manufacturing plant, the machinery and
equipment, and the various tools to be used in the production of goods, including their respective
estimated costs. It also talks about the location of the processing plant and the reason fpr the selection
of the site. In most instances the layout of the processing plant and the factory building is illustrated.
The general perspective presents the general view of the manufacturing plant.
In the selection of the machinery and other equipment, the entrepreneur must consider the
following factors:
1. Capacity of the plant or machinery
2. Model of the machinery or equipment
3. Availability of spare parts
4. Cost and terms of payment

SOURCES OF MATERIALS
The possible sources of raw materials and manufacturing supplies must be described in terms of
the following:
1. Proximity of the source to the processing plant
2. Payment terms and conditions
3. Discounts and damages
4. Terms of shipment
The quality of raw materials plays a very significant role in the production of quality products.
That is why most businesses get their materials from reliable and reputable suppliers. Some businesses
assign certain personnel to check and assure the quality of deliveries. The entrepreneur must find
trustworthy supplier and maintain good relationship with them.

PRODUCTION COST
This section of the plan must show estimated cost of production. The three elements of cost,
namely labor, direct materials, and factory overhead must be properly described and accounted for. All
the materials used in the production of goods must be properly listed and provided with the cost. The
total cost of the proposed product may serve as the basis in setting its selling price, which must not be
lower than its production cost.

OPERATION PLAN
The operation plan is a major section of the business plan that outlines the various activities,
from the acquisition of raw materials to the delivery of the products to the target consumers.
The operation plan commonly covers the following areas:
1. Evaluation of suppliers
2. Materials requisition and receiving procedures
3. Storage and inventory control system
4. Shipment system and control
5. Function of support services

EVALUATION OF SUPPLIERS
The suppliers of raw materials must practice total quality management to minimize or avoid
defects or damages in the supplies. The business must conduct a critical evaluation of the suppliers of
raw materials and establish harmonious working relationships with them to reduce the treats they
posed.

MATERIALS REQUISITION AND RECEIVING PROCEDURES

The procedures in requisitioning raw materials and other manufacturing supplies and receiving
them must be explained in the operation plan. The person assigned to conduct inspection upon receipt
of the materials must also be included.
This section covers the following areas:
1. Basis of receiving the raw materials
2. Comparison of the order and receipt
3. Quality of materials received
 The basis of the receiving report is the purchase order of the business. It must be signed by an
authorized personnel. After the inspection, the person receiving the materials usually prepares the
receiving report.

STORAGES AND INVENTORY CONTROL SYSTEM

The operation plan describes how the business stores the finished goods and protects its
inventory against possible theft and losses. Goods that have been completed in the processing plant are
transferred to the warehouse or storeroom.
This section deals with the following:
1. Owning or renting a warehouse
2. Management of the warehouse
3. Procedures in the transfer of goods
4. Control of inventory in the warehouse

SHIPMENT SYSTEM AND CONTROL

The basis of sales invoice and other shipment documents are the purchase order received from
the customers. The sales contract and shipping documents must be properly approved before the
product is shipped to the customers.
This section covers the following:
1. Approval of shipping and sales documents
2. Terms of shipment
3. Manner of shipping the product
4. Other terms and conditions like sales contract

FUNCTIONS OF SUPPORT SERVICES

It includes the important role of other support services such as the maintenance personnel and
the security officers and staff.
Most businesses consist of three or four functional areas as follows:
1. Finance
2. Marketing
3. Operation
4. Human resources.