Aup - s2 Fisheries Business Share

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FISHERIES BUSINESS
Academic Year 2021 – 2022
Jakarta, 7 February 2022
Prof. Ir. R. Sjarief Widjaja, PhD.

Dr. Moch. Nurhudah, Api., MSc.
Agus Wibisono, MM.
Afianto, SE., MM.
MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

Course Syllabus
Name of Course : Fisheries Business

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Programme : MSc. Course in AUP – Fisheries Polytechnic, Jakarta
Credits : 3 SKS
Lecturer : - Dr. Mochammad Nurhuda, MSc.
- Prof. Ir. R. Sjarief Widjaja, PhD.
- Agus Wibisono, MS.
- Afianto, SE., MM.
Course Description :
The course consists of three major topics such as : identification of potential fisheries business opportunities ; how to
create an innovative idea, develop a new product or services and to deliver as a prospective business model, and finally,
how to propose a fisheries business plan. A series of intensive coursework will be asked to be presented and discussed,
and guided to be a ready-used business proposal of an innovative/ prospective business ideas. The feasibility of the
business proposal will be reviewed and examined as part of the accomplishment of the course.
Lecture Topics :
1 – Nature of Fisheries Business week 1-2
2 – Market Analysis week 3-4
3 – Product Development week 5
4 – Plant Layout week 6-7
6 – Mid Term Evaluation week 8
5 – Production Management week 9-10
6 – Quality Assurance week 11
7 – Organization and Human Resources week 12-13
8 – Finance week 14-15
10 – Final Term Evaluation week 16

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REFERENCES
• Kementerian Kelautan dan Perikanan RI, “RENSTRA KKP 2020-

2024”, KKP, April 2021.
• Glencoe et-al, “Glencoe Entrepreneurship – Building a business”,
Chapter 8, Market Analysis, Entrepreneurship, 2011.
• Kahfi, Iwan dan Wibisono, Agus Purnomo, “Program on
Entrepreneurship Course Outline 2020 - Menggali Ide Bisnis, Kuliah
Umum Kewirausahaan”, Universitas Prasetya Mulya, 2020.
• Annacchino, Mark, “New Product Development”, Elsevier, 2003.
• _______, “Developing New Product”, Pearson Education Inc.,
Publishing as Prentice-Hall, copyright 2011.
• Moran, Sean, “Process Plant Layout”, 2n Edition, Elsevier, 2016.
• Halevi, Gideon, “Handbook of Production Management
Method”, Elsevier, 2001,
• Hiten Patel, “Production Management”, 2014.

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Course-works
1 – Define the fisheries business environment and potential business opportunity that could
be generated as a new/ innovative breakthrough, select a certain product or service
which could be developed further.
2 – Prepare market research for selected product or service, that describe : SWOT analysis,
market size and threat from the competitor and also prepare the strategy for winning
the competition.
3 – Prepare detail specification of the product or service, include product design, technical
specification, material/ component, production process, need to build a small factory,
facilities and equipment, organization and capital budgeting/ cost structure.
4 – Select an appropriate location with some bench marking for relevant location, design a
layout of the factory, completed with major production facilities and material handling,
and also set-up technical specification of some major production equipment.
5 – Plan the organization structure and need for man power, and finally, prepare a
forecasting for revenue generation, operation cost/ cost of good sold (cogs), estimated
net profit, and also calculate the ROI/ IRR/ payback period of your investment.

COURSE CONTENT 5
• MODULE 1 - Nature of Fisheries Business

• MODULE 2 - Market Analysis
• MODULE 3 - Product Development
• MODULE 4 - Plant Layout
• MODULE 5 - Production Management
• MODULE 6 - Quality Assurance
• MODULE 7 - Organization and Human Resource
• MODULE 8 - Finance

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Module 1
NATURE OF FISHERIES BUSINESS

MODULE 1 7
Topic : NATURE OF FISHERIES BUSINESS
Aims : To provide comprehensive knowledge about
potential and challenge of the sustainable
use of marine resources and understanding
about the strategic regional development
plan of the fisheries business
Subtopic : 1 – Potential and further challenge of
fisheries business
2 – Example of integrated implementation of
fisheries business in Lombok Island
Reference : RENSTRA KKP 2020-2024, KKP, April 2021
Coursework : Define a potential development of fisheries
business opportunity

MODULE 1 – DESCRIPTION 8
Topic : NATURE OF FISHERIES BUSINESS
Keyword :
- Understanding the characteristic of
Indonesia as an archipelagic states, history
of Djuanda Declaration 1957, marine
natural resources, potential economic
activities and their economic values and
strategic issues in fisheries business.
- Example of integrated implementation of
fisheries business in Lombok island ;
definition and principles, geographical
information, activities in capture fisheries,
aquaculture, salt production, marine
tourism, and proposed infrastructure and
connectivity.
DJUANDA DECLARATION 1957 9
Djuanda Declaration on December 13, 1957 which was later appointed to be
Regulations No.4 / PRP / 1960 concerning Indonesian Waters, was accepted and
stipulated in the 1982 United Nations Convention on the Law of the Sea (UNCLOS
1982). Furthermore, this declaration was reaffirmed by Regulations No. 17 of 1985
concerning the ratification of 1982 UNCLOS that Indonesia was an archipelago.
CONTENT AND ESSENCE OF DJUANDA DECLARATION

1. Indonesia as an archipelagic state that has its own complexion
2. Since ancient times the Indonesian archipelago has been always a unity
3. The provisions of the 1939 ordinance, can divide the territory of Indonesia from the
declaration containing the objectives:
• To realize the complete form of the Unitary territory of the Republic of
Indonesia
• To determine the territorial boundaries of the Republic of Indonesia, in
accordance with the principles of the archipelagic state
• To secure sea cross-traffic, the security and safety of the NKRI is guaranteed.

UNCLOS 1982 10
• Affirmation of the rights and obligations of coastal countries over the sea
territorial and the archipelagic waters (for archipelagic countries) and the
management of natural resources contained within them.
• The coastal country has the sovereignty of natural resource management in the
marine area of the Exclusive Economic Zone (EEZ) to the limit of 200 nautical
miles which includes the surface and column of seawater, the sea floor and the
air above it
• The coastal state has rights and obligations over additional zones up to 24
nautical miles measured from the baseline
• The coastal state has rights to the continental shelf up to 200 nautical miles
measured from the baseline and can be extended to more than 350 nautical
miles
• With the rights and obligations of the sea and its resources, the coastal state
can make management policies and law enforcement
• With all of its rights the coastal state is obliged to respect the rights of the world
community in relation to the demand for shipping, environmental protection,
economy and security.

POSITIVE IMPLICATION ON INDONESIA 11
AS AN ARCHIPELAGIC STATE
Before UNCLOS 1982 :

Area of Indonesian Waters:
2.1 million km2
Indonesia is recognized as an
archipelagic state (UNCLOS 1982):
a. Affirmation of rights and the
obligations of the coastal state
over the territorial sea and the
island sea
b. Sovereignty of natural resource
management in Exclusive
Economic Zone
After UNCLOS 1982 :

Area of Indonesian Waters :
5.8 million km2

POTENTIAL MARINE RESOURCES 12
• Indonesia has 17.504 islands, with length of coastal line about 108.000
km.
• Total Sea area in Indonesia Archipelago are 5,8 million km2 or around
2/3 from total area of the Republic of Indonesia :
- Sea Territory 3,1 million km2
- Exclusive Economic Zone (EEZ) of Indonesia 2,7 million km2
• 80% of industries and 75% of the big cities are located in coastline,
• From total 60 spot of oil and gas in Indonesia, 70 % are located in
offshore, with crude oil deposit around 9,1 billion,
• Most of tourist destinations are related to sea, coastal line and small
islands.

SECTOR IN MARITIME ECONOMY 13
• Sea transportation for cargo, car and passenger

• Maritime infrastructure includes offshore oil platform, coastal village,
breakwater, reclamation, sea port, under water piping and marine
cables
• Maritime services and insurances
• Maritime industries, shipbuilding industries and maritime support
industries
• Marine Tourism (costal resort, diving site, sport fishing etc)
• Fisheries (capture fisheries and aquaculture)
• Energy and mineral resources (current, tidal, wave, ocean thermal etc)
• Biotechnology and Pharmasetica industries

POTENTIAL FOR MARINE RESOURCES 14
• Indonesia is a country with the biggest marine Mega-

Biodiversity in the world :
• 8.500 species of fish, 37% of the world
• 555 species of seaweed
• 950 species of coral reef
• Potential of fish stock is 12.54 million tones / year
• Potential area for brackish water aquaculture pond 2,96
million Ha.
• Potential area for marine aquaculture 12,55 million Ha.

ECONOMIC VALUE MARITIME RESOURCES 15
• FISHERIES : US$ 31.935.651.400/year
• LOCAL COASTAL AREA : US$ 56.000.000.000 (total)
• MARINE BIOTECHNOLOGY : US$ 40.000.000.000 (total)

• MARINE TOURISM
(40% x US$ 5.000.000.000) : US$ 2.000.000.000/ year
• CRUDE OIL : US$ 6.643.000.000/year

(1,3 million barrel/days x
US$ 20/barrelx365x70%)
• MARINE TRANSPORTATION : US$ 20.000.000.000/year

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INTEGRATED MARITIME BUSINESS OPPORTUNITY IN

LOMBOK ISLAND
Examples on Maritime Regional Development :

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BLUE ECONOMY
Goals :
– Efficient use of marine resources
– Added value and product diversification with the principle of zero waste
– Increasing people welfare
– Increasing job opportunity
Strategy and approach :
– Integrated production line among core business process
– Improving connectivity among component of supply chain
– Integrated infrastructure
Commodities :
– Multiple commodities and products
– Creating new market
Sustainability :
environmental oriented production

South East Lombok At Glance 18
Indonesia
CENTRAL
EAST LOMBOK TOTAL
LOMBOK
MARINE AREA 2,813.94 KM2
1,208.39 KM2 1,605.55 KM2
LAND AREA
417. 65 KM2 1,074.33 KM2 1,491.98 KM2
POPULATION 282,775 people 320,804 people 603,579 people
COASTLINE 99.69 KM 260.71 KM 360.40 KM
SMALL ISLAND 20 islands 35 islands 55 islands

Present Condition of South and Central Lombok Island 19
Bumbang
Bay
Kuta Bay
Marine Concervation

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Regional Development of Lombok Island
A. ECO MARINE DEVELOPMENT CLUSTER
BUMBANG :
Captured fishery, farming, water tourism,

tourism accomodation, energy, marine culture,
marine conservation, surveillance
B. ECO MARINE CLUSTER AWANG :
Marine industry, salt field, Livestock,

culinary, marine culture, infrastructures,
surveillance
C. ECO MARINE CLUSTER SRUMBUNG :
Salt field, captured fisheries, culinary, marine

culture, survellance
D. ECO MARINE CLUSTER EKAS :
Marine industry, captured fishery, farming,

livestock, water tourism, tourism
accomodation, energy, research and
development
E. ECO MARINE CLUSTER SEREWEH :
Captured fisheries, eco tourism, energy,

marine culture, infratructures, sirveillance

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Zonning Plan in Lombok Island
Developing integrated economic zones based on the principles of sustainability, nature’s efficiency, zero waste, and social inclusiveness
ANG
Y
Kuta Bay
Marine Concervation

Potential of Marine Resources in Lombok 22
LOBSTER
Potential : 1,164.18Ha
Existing Area : 102.15 Ha
Production : 146 tons
(2012)
GROUPER
Potential : 1,709.4 Ha
Production : 42.258 tonnes
(2012)
PEARL
Potential : Jerowaru 786 Ha,
East Praya 5 Ha
Pujut 856.3 Ha
Existing Area : Jerowaru 314 Ha
Production : 0.20 tons
SEAWEED
Potential : 2,550 Ha
Existing Area : 687.94Ha
Production : 119,009ton
(2012)
Brackish Water Aquaculture SALT

(Shrimp, Milkfish) Potential : 850 Ha
Production : 10,870 ton
(2012)

Lobster Catching Area 23
Gb. Aperangkap lat penangkapan baby

lobster (pocong)
Zona
tangkapa
n baby
lobster
Gb. Tujuh jenis lobster yang terdapat
di perairan Ekas-Lombok

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Location for Salt Industries

Coastal Ecosystem In South and Central Lombok Island 25
Mangrove forest (mangrove) : Jerowaru ( 1,425 Ha), Praya Timur and Pujut (43.87 Ha)
Coral reef : Jerowaru (565.4 Ha), Praya Timur and Pujut (600.12 Ha)

Location for Marine Ecotourism
The potential 26
areas for eco-
tourism include:
▪Tanjung Ringgit
Preserve (Cagar
Alam Tanjung
Ringgit) - Lombok
Timur
▪Gunung Tunak
Nature Tourism
Park (Taman
Wisata Alam
Tanjung
Gunung Tunak) – Ringgit
Lombok Tengah Gunung Tunak Preserve
Nature Tourism
Park

Connectivity among Blue Economy Estate 27

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Course Works I
Identify the fisheries business environment and

potential business opportunity that could be
generated as a new/ innovative breakthrough,
select a certain product or service which could be
developed further.

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Module 2
MARKET ANALYSIS

MODULE 2 30
Topic : MARKET ANALYSIS
Aims : To provide comprehensive understanding about
marketing, and methodology for doing market
research in fisheries business
Sub Topic : 1 – Understanding the nature of market in fisheries
business
2 – Market segmentation
3 – Steps in market research
4 – Prepare set of target in marketing
Reference : - ___________, “Glencoe Entrepreneurship - Building
a business”, Chapter 8, Market Analysis,
Entrepreneurship, 2011
Coursework : Prepare market research for your business

Topic : MARKET ANALYSIS
Keyword :
- Industry life cycle / Level of maturity
- Nature of marketing
- Market segment and identifying group of
targeted market
- Type of market research
- Effective research plan and designing step by
step market research
- Industry forces that effect your business
understanding your competitor
- Analyze your target customer and creating
customer demand
- Forecasting demand

2.1. Industry – factors effect the nature of the industry 32
industry
a collection of businesses with a common line of products or services
carrying capacity industry life cycle

the ability of industry to support the current stage of an industry
new growth
1 Birth
uncertainty
the degree of stability or instability
in a given industry 2 Growth
complexity 3 Maturity
the number and diversity of
contacts with which a business
must deal 4 Decline

2.2. - Market Segmentation
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geographics
buying
demographics
characteristics
psychographics

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2.3. Target Market and Customer
1 Measurable
2 Large enough to be profitable
3 Reachable
4 Responsive

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2.4. Type of Market Research
exploratory research
market research
the collection and analysis of
information aimed at descriptive research
understanding the behavior of
consumers in a certain market
historical research

2.5.The Five Steps of an Effective Research Plan 36
5 Analyze the data
4 Organize the data
3 Collect primary data
2 Obtain secondary resources
1 Identify your information needs

2.6. Researching the Industry
37
Look at trends and patterns of change
Understand industry forces that affect your business
Study industry demographics
Analyze the competition

2.7. Industry Forces That Affect Your Business
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barriers to entry
threats from substitute products
sources of supply
buyers’ ability to bargain
technology

2.8. Researching the Target Customer
39
Create a customer profile
Evaluate customers’ needs
Forecast research to forecast demand

Conduct

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Course Works 2
Prepare a market research for selected product

or service, that describe : SWOT analysis for
proposed product or service, the potential
market size and threat from the competitor, and
how to set up a strategy for winning the
competition.

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Module 3
PRODUCT DEVELOPMENT

MODULE 3 42
Topic : NEW PRODUCT DEVELOPMENT

Aims : To provide comprehensive understanding about
product, new product development, product
failure and step by step development
Sub Topic : 1 - CONCEPT AND STRATEGY)
2 - NEW PRODUCT DEVELOPMENT
3 - PRODUCT FAILURE
4 - DEVELOPMENT PROCESS
5 - PRODUCT AND SOCIAL RESPONSIBILITY
Reference : Annacchino, Mark, “New Product Development”,
Elsevier, 2003.
___________, “Developing New Product”, Pearson
Education Inc., Publishing as Prentice-Hall,
copyright 2011
Coursework : Exercise a new product development

Topic : NEW PRODUCT DEVELOPMENT

Keyword :
- Reviewing the concept
- New product development strategy
- New product failure
- New product development process (Idea
generation, Idea screening, Concept
development and testing, Marketing strategy,
Business analysis, Product development, Test
marketing and Commercialization)
- Product decision and social responsibility
- International product and service marketing

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3.1. Rest Stop: Previewing the Concepts
1. Explain how companies find and develop new-product

ideas
2. List and define the steps in the new-product
development process and the major considerations in
managing this process
3. Describe the stages of the product life cycle and how
marketing strategies change during the product’s life
cycle
4. Discuss two additional product and services issues:
socially responsible product decisions and international
product and services marketing

3.2. First Stop 45
Google: Innovation Excellence
Google’s Success How They Did It
 Highly Innovative: Google
topped Fast Company’s list of  Light Speed Innovation: New
the world’s most innovative product planning looks ahead
firms, and regularly ranks within only four to five months; firm
top 3 on other lists. strives to take the fastest path to
new product development.
 Market Share: In a competitive

market, Google’s core  Idea Generation: Ideas come
business (online search) from any source or employee.
market share of 63% is twice Engineers spend 20% of time
the combined share of its two developing their own new ideas.
closest competitors.
 New Product Testing: New
 Ad Revenues: Google applications are launched on
captures 70% of all U.S. search- Google Labs; users test and
related ad revenues. provide feedback. Product
development is iterative.

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3.3. New-Product Development Strategy
• New product development:
The development of original products, product
improvements, product modifications, and new brands
through the firm’s own product development efforts.
• New product innovation is very expensive and very risky.

$20 - $30 billion is lost on failed food products annually.

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3.4. New-Product Failures
Why do new products fail?
• Overestimation of market size.

• Product design problems.
• Incorrectly positioned, priced, or
advertised.
• Pushed by high level executives despite
poor marketing research findings.
• Excessive development costs.
• Competitive reaction.

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3.5. New-Product Development Process
• Idea generation
• Idea screening
• Concept development and testing
• Marketing strategy development
• Business analysis
• Product development
• Test marketing
• Commercialization

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3.5.1. New-Product Development Process
Idea generation:
• Internal sources:
• Company employees at all levels
• External sources:
• Customers
• Competitors
• Distributors
• Suppliers
• Outsourcing (design firms, product consultancies,
online collaborative communities)
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Idea screening:
• Process used to spot good ideas and drop poor ones.

• Executives provide a description of the product along
with estimates of market size, product price,
development time and costs, manufacturing costs, and
rate of return.
• Evaluated against a set of company criteria for new
products.

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Concept development and testing:
• Product idea:
Idea for a possible product that the company can see
itself offering to the market.
• Product concept:
Detailed version of the new-product idea stated in
meaningful consumer terms.
• Concept testing:
Testing new-product concepts with groups of target
consumers to find out if the concepts have strong
consumer appeal.

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Marketing strategy development:
• Part One:
Describes the target market, planned value
proposition, sales, market share, and profit
goals.
• Part Two:
Outlines the product’s planned price,
distribution, and marketing budget.
• Part Three:
Describes the planned long-run sales and
profit goals, marketing mix strategy.

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Business analysis:
 Involvesa review of the sales, costs,
and profit projections to assess fit
with company objectives.
 Ifresults are positive, project moves
to the product development phase.

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Product development:
 Develops concept into a physical product.
 Calls for a large jump in investment.
 Prototypes are made.
 Prototypes must have correct physical
features and convey psychological
characteristics.
 Prototypes are subjected to physical tests.

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Testing marketing:
 Product and marketing program are
introduced in a more realistic market
setting.
 Not needed for all products.
 Can be expensive and time consuming,
but better than making a major marketing
mistake.

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Commercialization:
 Must decide on timing (i.e., when to
introduce the product).
 Must decide on where to introduce the
product (e.g., single location, state,
region, nationally, internationally).
 Must develop a market rollout plan.

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3.6.1. Additional Considerations
Product decisions and social

responsibility:
 Consider public policy issues,
regulations regarding acquiring or
dropping products, patent
protection, product quality and
safety, and warranties.

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3.6.2. Additional Considerations
International product and service

marketing:
 Must determine which products and
services to introduce in which
countries, and how much to
standardize or adapt the offering.
 Packaging presents new challenges
for international marketers.
 Many service businesses are global.

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3.7. Rest Stop: Reviewing the Concepts
1. Explain how companies find and develop
new-product ideas.
2. List and define the steps in the new-product
development process and the major
considerations in managing this process.
3. Describe the stages of the product life cycle
and how marketing strategies change
during the product’s life cycle.
4. Discuss two additional product and services
issues: socially responsible product decisions
and international product and services
marketing.

60
Coursework 3
Prepare detail specification of the product or

service, include product design, technical
specification, material/ component, production
process, need to build a small factory, facilities
and equipment, organization and capital
budgeting/ cost structure.

61
Module 4
PLANT LAYOUT

MODULE 4 62
Topic : PLANT LAYOUT

Aims : To provide knowledge about production plant layout,
concept design, type of layout, Systematic layout
planning, activity relationship analysis and space
requirement for any stages of production
Sub topic : 1 – Production plant layout
2 – Concept design
3 – Systematic layout planning
4 – Space requirement
5 – Material handling
Reference : Moran, Sean, “Process Plant Layout”, 2n Edition, Elsevier,
2016.
Coursework : Prepare a layout planning
Topic : PLANT LAYOUT

Keyword :
1- Production Plant Layout
2- Concept Design
3- Systematic Plant Layout
1. Data Gathering
2. Flow Analysis
3. Type of Layout
4. Activity Relationship Analysis
5. Space Requirement
6. Designing the layout
7. Evaluation

4.1. Production Plant Layout (1) 64
• Facility layout problem : design problem

- locations of activities
- Dimensions
- Configurations
• No overall algorithm exists
• Goals :
- Plan for the preferred situation in the future
- Layout must support objectives of the facility
- No accurate data → layout must be flexible

Production Plant Layout (2) 65
Design problem
Greenfield Location of one new machine
Reasons :
 new products
 changes in demand
 changes in product design
 new machines
 bottlenecks
 too large buffers
 too long transfer times

Production Plant LayouT (3) 66
Goals (examples) :
 minimal material handling costs ; minimal investments ;
minimal throughput time ; flexibility ; efficient use of
space
Restrictions :
 legislationon employees working conditions ; present
building (columns/waterworks)
Methods :
 Immer : The right equipment at the right place to permit
effective processing ; Apple: Short distances and short
times
4.2. Concept Design 67
Product
Layout
Logistics Process

4.3. Systematic Layout Planning - Muther (1961) 68
0 - Data gathering
1 - Flow 2 - Activities
Analysis
3 - Relationship Diagram
4 - Space requirements 5 - Space available
6 - Space Relationship
Diagram
Search
7 - Reasons to modify 8 - Restrictions
9 - Layout Alternatives
Selection 10 - Evaluation

4.3.1. Data gathering (1) 69
product design
sequence of assembly machines

operations
layout (assembly) line
Source : product design

 BOM
 Drawings
 “Gozinto” (assembly) chart, see fig 2.10
 Redesign, standardization → simplifications
Data gathering (2) 70
 Source : Process Design

- make/buy
- equipment used
- process times
 operations process chart (fig 2.12)
assembly chart
precedence diagram (fig 2.13)
operations

Data gathering (3) 71
Source: Production schedule design

 logistics:
where to produce, how much →
product mix
 marketing:demand forecast →
production rate
 types and number of machines
 continuous/intermittent
 layout → schedule

4.3.2. Flow analysis 72
 Flow of materials, equipment and personnel
Raw material Finished product
layout facilitates this flow

4.3.3. Types of Layout (1) 73
 Fixed Product Layout :

- Processes → product (e.g. shipbuilding)
 Product Layout / Flow Shop :

- Production line according to the
processing sequence of the product
- High volume production
- Short distances

Types of layout (2) 74
 Group Layout :
- Compromise between product layout and process layout
- Product layouts for product families → cells (cellular layout)
- Group technology
 Process Layout (Job Shop) :
- All machines performing a particular process are grouped
together in a processing department
- Low production volumes
- Rapid changes in the product mix
- High interdepartmental flow
Production volume and product variety-determines 75
- type of layout
production product group layout process layout

volume layout
product variety

Relationship diagrams 76
 Construction of relationships diagrams : diagramming

 Methods, amongst others : CORELAP
 Spatial picture of the relationships between departments
 Constructing a relation diagram often requires compromises.
What is closeness? 10 or 50 meters ?
Premise:
“geographic proximity reflects the relationships”
Sometimes other solutions :
 e.g. X - rating because of noise → acoustical panels instead of
distance separation
 e.g. A - rating because of communication requirement →
computer network instead of proximity
4.3.5. Space requirements 77
 Building geometry or building site → space

available
 Desired production rate, distinguish :
- Engineer to order (ETO)
- Production to order (PTO)
- Production to stock (PTS)
 Marketing forecast → productions quantities

Space Requirements 78
Equipment requirements:
 Production rate → number of machines required
 Employee requirements
rate machines employees
machine operators
assembly

Space Determination
79
# machines per operator

Space requirements
# assembly operators
1. Production center
- For manufacturing areas
METHODS : - Machine → space requirements
2. Converting
- e.g. for storage areas
- present space requirement → space
requirements
- non-linear function of production quantity

4.3.6. Designing the layout 80
 Search phase
 Alternative layouts
 Design process includes :
- Space relationship diagram
- Block plan
- Detailed layout
- Flexible layouts
- Material handling system
- Presentation

Layout alternatives 81
 Alternative layouts by shifting the departments to

other locations
 block plan, also shows e.g. columns and positions of
machines
selection detailed design

or
detailed design selection

4.3.7. Evaluation 82
• Best layout
cost of installation + operating cost ; compare future
costs for both the new and the old layout
• Other considerations
selling the layout ; assess and reduce resistance ;
anticipate amount of resistance for each alternative
• Causes of resistance
Inertia ; uncertainty ; loss of job content
• Minimize resistance by
Participation ; stages

83
Module 5
PRODUCTION MANAGEMENT

MODULE 5 84
Topic : PRODUCTION MANAGEMENT

Aims : To provide comprehensive understanding about how to
set up a series of planning, production and control of a
product or service to ensure smooth and efficient
operation, using proper production management
techniques
Sub Topic : 1 – PRODUCTION MANAGEMENT CONCEPT
2 – CHARACTERISTIC AND TYPE OF PRODUCTION SYSTEM
3 – ACTIVITIES OF PRODUCTION MANAGEMENT
Reference : - Halevi, Gideon, “Handbook of Production Management
Method”, Elsevier, 2001,
- Hiten Patel, “Production Management”, 2014
Coursework : Design of a production system

Topic : PRODUCTION MANAGEMENT
Keyword :
1- Production Management
2- Production / Operation Management
3- History of Production Management
4- Concept of Production Management
5- Characteristic of Production System
6- Classification of Production System (Job Shop, Batch, Mass, and
Continuous Production)
7- Objective of Production Management
8- Activities of Production Management (Location of facilities, Plant
layouts, Product design, Process design, Production and planning,
Quality control, Materials management and Maintenance
management)
9- Designing the layout
10- Material Handling
11- Evaluation
INTRODUCTION 86
 It is defined as planning , implementation and

control of industrial production process to ensure
smooth and efficient operation. production
management techniques are used in both
manufacturing and service industries.
 Simply, production management is a process of

planning, organizing, directing and controlling
the activities of the production function.

87
Production Management Operation Management

1. It’s concerned with 1. It is concerned with services
manufacturing
2. Out put is tangible 2. Output is intangible
3. Job use less labour and more 3. Job use more labour and
equipment less equipment
4. There is no customer 4. Frequent customer participation

participation

HISTORY 88
For over 2 centuries operations and production

management has been recognised as an important
factor in a country’s economic growth.
The traditional view of manufacturing management
began in 18thcentury when Adam Smith recognised
the economic benefits of specialisation of labour.
He recommended breaking of jobs down into
subtasks and recognises workers to specialised
tasks in which they would become highly skilled and
efficient.

89
In the early 20thcentury, F.W. Taylor developed

scientific management.
From then till 1930, many techniques were developed
prevailing the traditional view.
Production management becomes the acceptable
term from 1930s to 1950s. As F.W. Taylor’s works
become more widely known, managers developed
techniques that focussed on economic efficiency in
manufacturing.

90
Workers were studied in great detail to eliminate

wasteful efforts and achieve greater efficiency. At the
same time, psychologists, socialists and other social
scientists began to study people and human
behaviour in the working environment.
In addition, economists, mathematicians, and

computer socialists contributed more sophisticated
analytical newer approaches.

91
With the 1970s emerges 2 distinct changes in our

views.
The most obvious of these ref lected in the new name
operations management was a shift in the service &
manufacturing sectors of the economy.
As service sector became more prominent, the change
from ‘production’ to ‘operations’ emphasized the
broadening of our field to service organizations.
The second, more suitable change was the beginning
of an emphasis on synthesis, rather than just
analysis, in management practices.

CONCEPT OF PRODUCTION 92
Production is defined as “the step-by-step

conversion of one form of material into another
form through chemical or mechanical process to
create or enhance the utility of the product to the
user.”
Thus production is a value addition process. At each
stage of processing, there will be value addition.
Edwood Buffa defines production as ‘a process by

which goods and services are created’.

Example For Production 93
Manufacturing custom-made products Like -

1.Boilers with a specific capacity
2.Constructing f lats
3. Structural fabrication works for selected
customers, etc.
Manufacturing standardized products Like -
1.Car
2.Bus
3.Motor cycle
4.Television, etc.

PRODUCTION SYSTEM 94
The production system of an organization is that part,

which produces products of an organization.
It is that activity whereby Resources, f lowing within a

defined system, are combined & transformed in a
controlled manner to add value in accordance with
the policies communicated by management.

95

Characteristics Of Production System 96
1. Production is an organized activity, so every

production system has an objective.
2. The system transforms the various Inputs to useful
Outputs.
3. It doesn’t operate in Isolation from the other
organization system.
4. There exists a feedback about the activities,
which is essential to control and improve system
performance.

CLASSIFICATION 97
Production systems can be classified as:
1. Job Shop Production
2. Batch Production
3. Mass Production
4. Continuous Production

98

99
1 - JOB SHOP PRODUCTION
Job shop production are characterised by
manufacturing of one or few quantity of products
designed and produced as per the specification of
customers within prefixed time and cost.
The distinguishing feature of this is low volume &
high variety of products.
A job shop comprises of general purpose machines
arranged into different departments.
Each job demands unique technological
requirements, demands processing on machines in a
certain sequence.

2- BATCH PRODUCTION 100
Batch production is defined “as a form of

manufacturing in which the job passes through
the functional departments in lots or batches and
each lot may have a different routing.”
It is characterised by the manufacture of limited

number of products produced at regular intervals
and stocked awaiting sales.

3- MASS PRODUCTION 101
‘ Manufacture of discrete parts or assemblies

using a continuous process are called mass
production ’.
This production system is justified by very large

volume of production.
The machines are arranged in a line or product

layout. Product and process standardisation exists
and all outputs follow the same path.

4 - CONTINUOUS PRODUCTION 102
Production facilities are arranged as per the sequence

of production operations from the first operations
to the finished product.
The items are made to f low through the sequence of

operations through material handling devices such as
conveyors, transfer devices, etc.

OBJECTIVES OF PRODUCTION MANAGEMENT 103
 The objective of the production management is ‘to

produce goods services of right quality and
quantity at the right time and right
manufacturing cost’.
1. RIGHT QUALITY:
The quality of product is established based upon the
customers needs. The right quality is not necessarily
best quality. It is determined by the cost of the
product and the technical characteristics as suited to
the specific requirements.i.e.
104
 2. RIGHT QUANTITY
The manufacturing organization should produce
the products in right number. If they are produced
in excess of demand the capital will block up in the
form of inventory and if the quantity is produced in
short of demand, leads to shortage of products.
 3. RIGHT TIME
Timeliness of delivery is one of the important
parameter to judge the effectiveness of production
department. So, the production department has to make
the optimal utilization of input resources to achieve its
objective.

105
 4. RIGHT MANUFACTURING COST

Manufacturing costs are established before the
product is actually manufactured.

All attempts should be made to produce the
products at pre-established cost, so as to reduce
the variation between actual and the standard
(pre-established) cost.

SCOPE OF PRODUCTION MANAGEMENT 106
 Production management concern with the
conversion of inputs into outputs, using
physical resources, so as to provide the desired
utilities to the customer while meeting the
other organizational objectives of effectiveness,
efficiency and adoptability.
 It distinguishes itself from other functions such as
personnel, marketing, finance, etc., by its primary
concern for ‘conversion by using physical
resources.’

107
 Following are the activities which are listed under
production management functions:
1. Location of facilities
2. Plant layouts
3. Product design
4. Process design
5. Production and planning control
6. Quality control
7. Materials management
8. Maintenance management.

108
1- LOCATION OF FACILITIES
 Location of facilities for operations is a long-term
capacity decision which involves a long term
commitment about the geographically static factors
that affect a business organization. It is an important
strategic level decision-making for an organization.
 The selection of location is a key-decision as large

investment is made in building plant and machinery.

109
 An improper location of plant may lead to waste of all
the investments made in plant and machinery
equipments.
 Hence, location of plant should be based on the
company’s expansion plan and policy, diversification
plan for the products, changing sources of raw
materials and many other factors.
 The purpose of the location study is to find the
optimal location that will results in the greatest
advantage to the organization.

110
2 - PLANT LAYOUT
 Plant layout refers to the physical arrangement of
facilities. It is the configuration of departments,work
centres and equipment in the conversion process.
 The overall objective of the plant layout is to design a
physical arrangement that meets the required output
quality and quantity most economically.

111
OBJECTIVES OF PLANT LAYOUT
1. Integrate the production centres
2. Reduce material handling
3. Effective utilization of available space
4. Worker convenience and job satisfaction
5. Flexibility
6. Quick disposal of work
7. Smooth f low of operation
8. Avoids industrial accidents
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112
3 - PRODUCT DESIGN
 Product design deals with conversion of ideas into
reality. Every business organization have to design,
develop and introduce new products as a survival and
growth strategy.
 Developing the new products and launching them in
the market is the biggest challenge faced by the
organizations.
 The entire process of need identification to physical
manufactures of product involves three functions:
marketing, product development, manufacturing.

113
 Product development translates the needs of
customers given by marketing into technical
specifications and designing the various features into
the product to these specifications.
 Manufacturing has the responsibility of selecting the
processes by which the product can be manufactured.
 Product design and developmentprovides link
between marketing, customer needs and expectations
and the activities required to manufacture the
product.

114
4 - PROCESS DESIGN
 Process design is a macroscopic decision-making of an
overall process route for converting the raw material
into finished goods.
 These decisions encompass the selection of a process,
choice of technology, process f low analysis and layout
of the facilities.
 Hence, the important decisions in process design are
to analyzed the workf low for converting raw material
into finished product and to select the workstation for
each included in the workf low.

115
5 - PRODUCTION PLANNING CONTROL
 The principle of production planning and control lies

in the statement ‘First Plan Your Work and then Work
on Your Plan’.
 Main functions of production planning and control
includes planning, routing, scheduling, dispatching
and follow-up.

 Planning is deciding in advance what to do, 116
how to do it, when to do it and who is to do it.
 Routing may be defined as the selection of
path which each part of the product will
follow,which being transformed from raw
material to finished products. Routing
determines the most advantageous path to be
followed.
 Scheduling may be defined as‘the fixation of time
and date for each operation’ as well as it
determines the sequence of operations to be
followed.
117
 Dispatching is concerned with the starting the
processes. It gives necessary authority so as to
start a particular work, which has already been
planned under ‘Routing’ and ‘Scheduling’.
 The function of follow-up is to report daily the

progress of work in each shop in a prescribed
proforma and to investigate the causes of
deviations from the planned performance.

118
6 - QUALITY CONTROL
 Quality Control (QC) may be defined as ‘a system that
is used to maintain a desired level of quality in a
product or service’.
 Quality control can also be defined as ‘that industrial
management technique by means of which product of
uniform acceptable quality is manufactured’. It is the
entire collection of activities which ensures that the
operation will produce the optimum quality products
at minimum cost.

119
The main objectives of quality control are:
1. To reduce companies cost through reduction of
losses due to defects.
2. To achieve interchangeability of manufacture in
large scale production.
3. To produce optimal quality at reduced price.

4.To ensure satisfaction of customers with
productions or services or high quality level, to
build customer goodwill, confidence and
reputation of manufacturer
5. To make inspection prompt to ensure quality
control.
6. To check the variation during manufacturing.
120
7 - MATERIALS MANAGEMENT
 Materials management is that aspect of management
function which is primarily concerned with the acquisition,
control and use of materials needed and f low of goods and
services connected with the production process having
some predetermined objectives in view.

The main objectives of materials management are: 121
1. To minimize material cost.
2. To purchase, receive, transport and store materials
efficiently and to reduce the related cost.
3. To cut down costs through simplification,
standardization, value analysis, import substitution,
etc.
4. To trace new sources of supply and to develop cordial
relations with them in order to ensure continuous supply at
reasonable rates.
5. To reduce investment tied in the inventories for use in
other productive purposes and to develop high
inventory turnover ratios.

122
8 - MAINTENANCE MANAGEMENT
 In modern industry, equipment and machinery are a very important
part of the total productive effort. Therefore, their idleness or
downtime becomes are very expensive. Hence, it is very important that
the plant machinery should be properly maintained.
The main objectives of maintenance management are:

1. To achieve minimum breakdown and to keep the plant in good working
condition at the lowest possible cost.
2. To keep the machines and other facilities in such a condition that
permits them to be used at their optimal capacity without interruption.
3. To ensure the availability of the machines, buildings and services
required by other sections of the factory for the performance of their
functions at optimal return on investment.

123
Course Works 4
Select an appropriate location with

some bench marking for relevant
location, design a layout of the factory,
completed with major production
facilities and material handling, and also
set-up technical specification of some
major production equipment.

124
Module 6
QUALITY ASSURANCE

MODULE 6 125
Topic : QUALITY ASSURANCE
Aims : To provide comprehensive understanding
about the quality, how to set up a series of
action to promote high quality of product
and services. The principle of quality
assurance, quality control and total quality
management are described with examples
of food industries, manufacturing, laboratory
services, sanitary and hygienic services.
Sub Topic : 1 – QUALITY ASSURANCE
2 – QUALITY CONTROL
3 – TOTAL QUALITY MANAGEMENT
Reference : _____________ ,
Coursework : Design of a quality system in your company

Topic : QUALITY ASSURANCE
Keyword :
1- Quality Assurance
2- Quality Assurance vs Quality Control
3- Activities in Quality Assurance
4- Objectives of Quality Assurance
5- What is the Total Quality Management
6- Deming Wheel for Continuous Improvement
7- TQM in Food Industries (GMP, HACCP, ISO, BRC)
8- Good Manufacturing Practices
9- Good Agricultural Practices
10- Good Laboratory Practices
11- Good Hygienic Practices

WHAT IS QUALITY..?
127
 ISO 9000:2000 DEFINITION OF QUALITY-

 It is the degree to which a set of inherent characteristics
fulfills requirements.
 “Fitness for use”
 Quality is excellence that is better than a minimum
standard.
 “Conformance to requirements”
 The ability of your product or service to satisfy

128
DEFINITION
“Planned and systematic activities implemented
within the quality system that can be
demonstrated to provide confidence that a
product or service will fulfill requirements for
quality”
 Quality Assurance is a system for evaluating

performance, service, of the quality of a product
against system, standard or specified
requirement for customers.

 Planned activity or systematic approach to 129
provide adequate confidence of product and
service.

COMPONENTS OF QUALITY ASSURANCE 130
Long term
decision
(quality
policy)
Medium term decision

(training, facilities, operation
of QA)
Day to day
operation
(SOP’s
worksheet)

131
QUALITY ASSURANCE
QA is a way of preventing mistakes or defects

in manufactured products and avoiding
problems when delivering solutions or services
to customers.
ISO-9000 DEFINED
“A part of quality management focused on
providing confidence that quality requirements will
be fulfilled”

QUALITY ASSURANCE VS QUALITY CONTROL 132
Quality assurance

Quality control
1. A part of quality management focused
1. A part of quality management
on providing confidence that quality
focused on fulfilling quality
requirements will be fulfilled.
requirements.
2. Planned and systematic activities 2. The operational techniques

implemented within the quality system and activities used to fulfill
provide confidence that a product or requirements for quality.
service will fulfill requirements for quality
3. Quality Control just measures

3. is a complete system to assure the
and determines the quality
quality of products or services.
level of products or services.
It is a process i tself.

ACTIVITIES IN QUALITY
133
ASSURANCE
Overall management

OBJECTIVE OF QA.. 134
1) Managing good manufacturing practices

(GMP)including
2) Managing good laboratory practices (GLP)
3) Managing a safety programme
4) Assuring the quality of raw materials
5) Assuring the quality and traceability of finished

product
6) Evaluating plant environment
7) Developing an HACCP plan

135
TOTAL QUALITY
MANAGEMENT

WHAT IS TOTAL QUALITY 136
MANAGEMENT?
TOTAL -Made up of the whole
QUALITY -Degree of excellence a product or

service provides
MANAGEMENT -Act , Manner of handling (or) Art

WHAT’S THE GOAL OF 137
TQM?
“Do the right

things right
the first time,
every time.”

TOTAL QUALITY MANAGEMENT 138
PROGRAM
1. Top management commitment and involvement.
2. Customer involvement & designing products for quality.
3. Designing and controlling production processes.

4. Developing supplier partnerships.
5. Customer service, distribution, installation.
6. Building teams of empowered employees.
7. Benchmarking and continuous improvement.

DEMING WHEEL FOR 139
CONTINUOUS IMPROVEMENT
What changes
Take action to
can be made
standardize the for
process improvement
Evaluate result
Implementing
the plans, taking
small controlled
steps

140
 TQM is the integration of all functions and

processes within an organization in order to
achieve continuous improvement of the quality
of goods and services. The goal is customer
satisfaction.

OBJECTIVES OF TQM.. 141
 Process improvement
 Defect prevention
 Measuring system capacity
 Developing improvement checklist
 Helping teams make better decisions
 Developing operational definitions
 Observing behavior changes over a period of
time.

PRINCIPLES OF TQM.. 142

TQM IN FOOD INDUSTRY 143
Systems for development of quality

assurance:
 GMP
 HACCP,
 ISO
 BRC

Quality Assurance in food industry 144
( Inter- relationship)

GOOD MANUFACTURING 145
PRACTICES
 “Good manufacturing practice is that part of
quality assurance which ensures that products
are consistently produced and controlled to the
quality standards appropriate to their intended
use and as required by the marketing
authorization or product specification”.

146
DEFINITION..
 Good manufacturing practice guidelines
provide guidance for manufacturing, testing,
and quality assurance in order to ensure that
a food product is safe for human
consumption

GENERAL GUIDELINES FOR GMP 147
 Plant Maintenance  Air Quality And Ventilation

 Water
Storage
 Windows
 Work Surfaces  Lighting
 Supervision  Cleaning And Sanitation

 Personal Hygiene
 Walls
 Ceiling
 Training  Staff Hygiene
 Floors
 Doors
 Plant Construction &Design

GOOD AGRICULTURAL 148
PRACTICES
“GAP are set of practices that address to
environment, eco and social sustainability for all
farm processes for safety & Quality produce”
Good agricultural practices are a collection of

principle to apply for on farm production and post
production processes resulting in safe and
healthy food and non food agricultural products, while
taking into account economical ,social and environmental
sustainability.

149
OBJECTIVES OF GAP..
1. To ensure safety & Quality of Produce in food chain.
2. To capture new market advantage.
3. To improve use of natural resources.
4. To improve workers health and working condition.
5. To create new market opportunities to farmers
and exporters.
6. To export trade of Agricultural produce.

GOOD LABORATORY 150
PRACTICES
GLP is a set of principles that avoids a frame work
within which lab studies are planned, performed,
monitored, recorded, reported and achieved.
 “A quality system concerned with the organizational
process
the conditions
and under which non-clinical health and
environmental safety studies are planned, performed,
monitored, recorded, archived and reported.”
 GLP followed in labs to avoid accidents while handling

reagents.
 GLP has followed by every lab personnel.

151
 “A quality system concerned with the

organizational
process and the conditions under which non-clinical
health and environmental safety studies are
planned, performed, monitored, recorded, archived
and reported.”
 GLP followed in labs to avoid accidents while handling

reagents.
 GLP has followed by every lab personnel.

PRACTICES FOLLOWED IN 152
LAB
1. All personnel working In lab must wear uniform/
aprons to perform in the lab practices.
2. Wearing of mask, hats, covers, gloves,
shoes, etc. should be hygienically recommended
under GLP.
3. Safety glasses, protective eye glasses are essential to carry
hazardous operations.
4. Ill person should not allow to work.
5. Avoid poor illumination, obnoxious flavors and noise in lab
6. Provisions
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SANITARY & HYGIENIC 153
PRACTICES
 lighting and ventilation
 Location of premises
 Floors and walls
 Ceilings
 Insects
 Doors and windows
 Potable water supply
 equipment design

GOOD HYGIENIC 154
PRACTICES
 It refers to the set of practices associated with
the preservation of health and healthy living.
 Include all practices regarding the conditions
and measures necessary to ensure quality.

Areas examined under GHP 155
1. Primary production
2. Establishment: design and facilities
3. Control of operation
4. Establishment: maintenance and sanitation
5. Establishment: personal hygiene
6. Transportation
7. Product information and consumer awareness
8. Training

156
CONCLUSION
 Good Manufacturing Practices are the basis of the
production and preparation of safe food
 Good Hygienic Practices deal with safety and
suitability requirements to be followed world-wide
 Each food operation should adapt existing codes to
their specific set of conditions
 Food operations should also decide which practices
are critical for the safety of a product and thus have
to be included in the HACCP plan.

157
Module 7
ORGANIZATION AND HUMAN
RESOURCES DEVELOPMENT

158
part 7.1.
Organization and Management

MODULE 7 159
Topic : ORGANIZATION AND HUMAN RESOURCE
Aims : To provide comprehensive understanding
about how to set up an organization,
management technique to run a business,
and managing human resources to support
all the tasks
Sub Topic : 1 – ORGANIZATION AND MANAGEMENT
2 – HUMAN RESOURCE MANAGEMENT
Reference : - _____________, “Organization and
Management”, Department of Industrial
Engineering, University of Washington,
2010
Coursework : Design of an organization structure, types of
tasks and setting up a human resource team

Topic : ORGANIZATION AND HUMAN RESOURCES
Keyword :
1- Definition of Organization
2- Nature of Organization Environment
3- Organization Structure
4- Nature of Management
5- Management Process
6- Human Resource Management
7- Recruitment
8- Types of Development
9- Job Analysis
10- Performance Appraisal
11- Pay and Benefit

Definition of Organizations 161
 An organization is a collection of people

working together in a coordinated and
structured fashion to achieve one or more
goals.
 Organizations exist to allow accomplishment
of work that could not be achieved by
people alone.
 As long as the goals of an organization are
appropriate, society will allow them to exist
and they can contribute to society.

Organizations and People 162
 Organizations are strongly influenced by the

people that form part of them.
 Organizations can take in part of the
personality of the people within them and
their attitudes, perceptions and behaviors
affect how an organization will operate.
 Organizations use management to
accomplish the work that is required to
achieve the goals.

The Nature of 163
the Organizational Environment
 The external environment is everything
outside an organization that might affect
it.
 The internal environment consists of
conditions and forces within the
organization.

The External Environment (1) 164
 The general environment is the

nonspecific dimensions and forces in its
surroundings that might affect its activities.
 The task environment consists of specific
organizations or groups that are likely to
influence an organization.

General Environment (1.1.) 165
 The economic dimension inflation, interest rates,
unemployment, and demand.
 The technological dimension refers to the methods
available for converting resources into products or services.
 The socio-cultural dimension, customs, mores, values, and
demographic characteristics of the society in which the
organization functions.
 The political-legal dimension refers to government
regulation of business and the relationship between
business and government.
 The international dimension refers to the extent to which an
organization is involved in or affected by business in other
countries.

Task Environment (I.2.) 166
 Organizations exist to accomplish one or
more tasks
Task Environment Actors (a) :
 Competitors are other organizations that

compete for resources.
 Customers are whoever pays money to
acquire an organization's product or service.
 Suppliers are organizations that provide
resources for other organizations.

The Internal Environment (2) 167
 Board of Directors
 Employees
 Culture

Board of Directors (2.1.) 168
 A board of directors is only required of

organizations that are incorporated; however,
many other firms have them.
 The board of directors is elected by the
stockholders and is charged with overseeing the
general management of the firm to ensure that
it is being run in a way that best serves the
stockholders' interests.

Employees (2.2.) 169
 When the organization's employees hold the

same values and goals as its management,
everyone wins.
 However, when managers and employees work
toward different goals everyone suffers.
 The composition of the organization's employees
is changing, and managers must learn how to
deal effectively with these changes.

Culture (2.3.) 170
 The culture of an organization is the set of values

that helps its members understand what the
organization stands for, how it does things, and
what it considers important.
 A strong organizational culture can shape the
firm's overall effectiveness and long-term
success and help employees to be more
productive.

171
Traditional Organizational Structure
Stockholders
Board of directors
President
Legal Staff
Vice Vice
Vice President Vice Vice Vice
President of President of
of President of President of President of
Research and Sales and
Administration Manufacturing Finance Purchasing
Engineering Marketing
Industrial Industrial Market
Research Budgeting Purchasing
Relations Engineering Analysis
Manufacturing General Customer Price

Personnel Engineering
Engineering Accounting Liaison Estimating
Employee Mechanical Plant Cost Contracts

Sales
Relations Design Engineering Accounting Management
Electrical Production Supply

Training Payroll Subcontracts
Design Operations Support
Materials
Safety Tooling Forecasting Field Service
Engineering
Medical Sytems Financial

Fabrication
Engineering planning
Management Design
Subassembly
Services Support
Reliability Assembly
Security
and testing
Food Maintainability
Services Inspection
Value
Technical Production
Engineering
Services Shops
Logistical
Report Publ. Support Quality
Control
Prototype
Library Development
Test and
Drafting
Evaluation

172
Functional Organizations
 “Functional organizations, as an organization type,
are best when a firm makes only one or a few
products and where technology does not change.The
traditionalists in shipbuilding look simplistically at the
entire as the end product of the shipyard.”
 The product-oriented organization, on the other hand

is “ . . . a structure based on a Product Work
Breakdown Structure and Group Technology which
permits diversification . . . aimed at interim products .
. . That makes it possible for large firms to cope with
technological change and multiple markets.”

Product Design: Old Approach 173
Old
Approach Design Production
Sell
Contract it System
Market Functional Manufacture Assembly Test
Design Arrangement
Material
Ordering

Product Design: Intermediate Approach 174
Intermediate
Approach
Design
Contract System Multi-System Final

Market Functional
Design Arrangement Arrangement Arrangement
Long Lead General

Material Material
Ordering
Planning Production
Central Shop Manufacture Assembly Test

Product Design: New Approach 175
New
Approach Planning and Design Production
Zone or
Market Contract Functional Zone/Stage Zone/Stage Test
Module
Long Lead General

Material Material
Ordering

The Nature of Management 176
 Management is a set of activities directed at an
organization’s resources with the aim of achieving
organizational goals in an efficient and effective
manner.
 Management Process :
▪ Planning
▪ Decision Making
▪ Organizing
▪ Leading
▪ Controlling

The Management Process (1) 177
 Planning: Setting an organization’s goals and deciding how

best to achieve them.
 Decision Making: Selecting a course of action from a set of
alternatives.
 Organizing: Grouping activities and resources in a logical
fashion.
 Leading: The set of processes used to get people to work
together to advance the interests of the organization.
 Controlling: Monitoring the progress of the organization as
it works toward its goal to ensure that it is effectively and
efficiently achieving them.

Organizations Resources 178
 Human
 Financial
 Physical
 Information
Should be used in :
 Efficient means using resources wisely and
without unnecessary waste.
 Effective means doing the right things
successfully.

Kinds of Managers - Levels 179
 Top: CEO, VP, etc. – Set organizational

goals, overall strategy and operating
policies.
 Middle: Plant Manager, Operations
Manager, etc. – Put into effect the strategies
designed by top managers.
 First Line: Foreman, Supervisor, etc. –
Supervise and coordinate the activities of
operating employees.

Kinds of Managers – Areas 180
 Marketing: Find ways to sell the organization’s products and

services.
 Financial: Deal with accounting, cash management, and
investment functions.
 Human Resource: Responsible for hiring and developing
employees.
 Administrative: Generalists who have some basic familiarity
with all functional areas of management rather than
specialized training in any one area.
 Operations: Concerned with creating and managing the
systems that create an organization's products and services.
They achieve their goals through production control, inventory
control, quality control, and plant site selection and layout.

Managerial Roles 181
 Interpersonal: representative, leader,

liaison.
 Informational: monitor, disseminator,
spokesperson.
 Decisional: entrepreneur, disturbance
handler, resource allocator, negotiator

182
Managerial Skills
 Conceptual: Ability to think in abstract terms and
understand the "big picture" or the overall
workings of the organization and its environment.
 Diagnostic and Analytical: Ability to recognize the
symptoms of a problem and determine an action
plan to fix it.
 Technical: Ability to understand and accomplish
tasks.
 Interpersonal: Ability to communicate with,
understand, and motivate individuals and groups

183
part 7.2.
Human Resource Management

184
Human Resource Management
 The process of planning, organizing, directing

(motivating), and controlling the procurement,
development, compensation, integration,
maintenance, and separation of organizational
human resources to the end that organizational,
individual, and societal needs are satisfied.

Human Resource Management 185
Human Resource Management includes all activities

used to attract & retain employees and to ensure
they perform at a high level in meeting
organizational goals.
These activities are made up of

1. Recruitment & selection.
2. Training and development.
3. Performance appraisal and feedback.
4. Pay and benefits.

Human Resource Planning 186
HR Planning includes all activities managers do

to forecast current and future HR needs.
 Must be done prior to recruitment and
selection
 Demand forecasts made by managers
estimate the number & qualifications the
firm will need.
 Supply forecasts estimate the availability
and qualifications of current workers and
those in the labor market.

HRM Components 187
Component should be consistent with the others,
organization structure, and strategy.
 Recruitment: develop a pool of qualified applicants.
 Selection: determine relative qualifications &
potential for a job.
 Training& Development: ongoing process to develop
worker’s abilities and skills.
 Performance appraisal & feedback: provides
information about how to train, motivate, and reward
workers.
 Managers can evaluate and then give feedback to
enhance worker performance.
188
HRM Components
Pay and Benefits: high performing employees should be
rewarded with raises, bonuses.
 Increased pay provides additional incentive.
 Benefits,
such as health insurance, reward
membership in firm.
Labor relations: managers need an effective relationship
with labor unions that represent workers.
 Unions help establish pay, and working conditions.
If management moves to a decentralized structure, HRM

should be adjusted as well.

189
(1) Recruitment
External recruiting: managers look outside the firm for people who have
not worked at the firm before.
Managers advertise in newspapers, hold open houses, recruit at
universities, and on the Internet.
 External recruitment is difficult since many new jobs have
specific skill needs.
A multi-prong approach to external recruiting works best.
Internal Recruiting: positions filled within the firm.
Internal recruiting has several benefits:
 Workers know the firm’s culture, may not have new ideas.
 Managers likely already know the candidates.
 Internal advancement can motivate employees.

HRM Planning: Outsourcing 190
Outsourcing: managers can decide to contract with

outside workers rather than hiring them.
 Outsourcing is more flexible for the firm.
 Outsourcing often provides human capital at a
lower cost.
 Outsource problems: managers lose control over
output.
 Outsource contractors are not committed to
the firm.
 Unions typically are against outsourcing that has
potential to eliminate member’s jobs.

Selection Tools 191
Figure 10.3
Background
Information
Interviews References
Selection
Performance tests Paper tests
Physical
Ability tests

Selection Process 192
After a pool of applicants are identified, qualifications related
to the job requirements are determined:
 BackgroundInformation: includes education, prior
employment, college major, etc.
 Interview: almost all firms use one of two types:
 Structuredinterview: managers ask each person the
same job-related questions.
 Unstructured interview: held like a normal conversation.
 Usually structured interviews preferred; bias is possible.
 Physical Ability Test: measure strength & endurance.
 Good for physically demanding jobs.

Selection Process 193
Paper & Pencil Tests: Either an ability and personality test.

 Ability test: assess if applicant has right skills for the job.
 Personality test: seek traits relevant to job performance.
 Be sure test is a good predictor of job performance.
Performance Tests: measure job performance.
 Typing speed test is one example.
 Assessment Center: candidates assessed on job-related
activities over a period of a few days.
References: outside people provide candid information about
candidate.
 Can be hard to get accurate information.

194
Reliability & Validity
Selection tools must be reliable and valid.
 Reliability:
the degree to which the tool measures the
same thing each time it is used.
 Scoresshould be close for the same person taking the
same test over time.
 Validity:
Does the test measure what it is supposed to
measure?
 Example: does a physical ability test really predict the
job performance of a firefighter?
 Managers have an ethical and legal duty to develop
good selection tools.
195
(2) Training & Development
 Training:teach organizational members how
to perform current jobs.
 Help worker’s acquire skills to perform
effectively.
 Development: build worker’s skills to enable
them to take on new duties.
 Training used more often at lower levels of firm,
development is common with managers.
 A Needs Assessment should be taken first to
determine who needs which program and what
topics should be stressed.

Types of Development 196
 Varied Work Experiences: Top managers must build

expertise in many areas.
 Workers identified as possible top managers
given many different tasks.
 Formal Education: tuition reimbursement is common
for managers taking classes for MBA or similar.
 Long-distance learning can also be used to
reduce travel.
Whatever training and development efforts used, results

must be transferred to the workplace.

Job Analysis 197
 Job Analysis-the act of examining positions within

an organization
 Job Description-narrative explaining the scope of
a position
 Job Characteristics-tasks involved in a position
 Job Requirements-personal characteristics
necessary to fill a position

(3) Performance Appraisal 198
 Process of evaluating employee performance
 job related strengths
 development needs
 progress toward goals
 determine ways to improve performance
 Pay an promotion decisions
 More systematic is better, for the most part

Performance Appraisal (cont) 199
 Self Appraisal
 Peer Appraisal
 360 Degree appraisal
 Central Tendency Error-everyone ranked
as average
 Leniency-individuals are ranked higher
than they deserve

Who Appraises Performance? 200
Figure 10.6
Supervisors
Peers Customers &

Clients
Sources of
performance
appraisals
Self Subordinates

201
(4) Pay and Benefits
 Pay level: how the firm’s pay incentives compare to other firms in
the industry.
 Managers can decide to offer low or high relative wages.
 PayStructure: clusters jobs into categories based on
importance, skills, and other issues.
 Benefits: Some are required (social security, workers comp).
 Others (health insurance, day care, and others) are
provided at the employers option.
 Cafeteria-style plan: employee can choose the best mix
of benefits for them. Can be hard to manage.

202
Pay
Base Wage
 Job Based Pay-paid for the job that is done
 Competency Based Pay-pay is linked to job-
relevant skills, knowledge, and experience
Incentive Pay-linked to job performance
 can increase motivation
 links employees to firm performance
 works well when employees trust firm

203
Individual Incentives
 Piece-Rate - Pay for each unit of output
 Commissions - Pay from percentage of
sales or profits
 Bonuses - Lump sum payments
 Merit Pay - Permanent increases in base
pay linked to individual’s previous
performance
 Seniority - Increases over time

204
Team or Organizational Incentive
 Gain Sharing - teams of employees share in
gains from improvements in productivity or
cost saving measures
 Profit Sharing - A percentage of profits
earned by a department or company
 Stock Ownership
 Options
 Employee Stock Ownership Plans

205
Module 8
FINANCE IN FISHERIES

MODULE 8 206
Topic : FINANCE IN FISHERIES BUSINESS
Aims : To provide exercises of how to set up a
capital budgeting and principle of break
even point. While running a business,
understanding about a financial statement
such as profit and loss account, balance
statement and cash flow statement is a
must. Comprehensive knowledge should be
demonstrated to analyze the corporate
financial performance as a whole.
Sub Topic :1 – CAPITAL BUDGETING AND BEP
2 – FINANCIAL STATEMENT
3 – CORPORATE FINANCIAL PERFORMANCE
Reference : - _____________,
Coursework : Design of a capital budgeting and BEP

Topic : FINANCE IN FISHERIES BUSINESS
Keyword :
1- Definition of Finance
2- Setting up Capital Budgeting
3- Estimating Break Even Point
4- Understanding Financial Statement
5- Profit and Loss Statement
6- Balance Statement
7- Cash Flow Statement
8- Corporate Financial Performance
9- Understanding Ratios

208
Introduction
 This chapter introduces financial statement

analysis techniques that are used to evaluate a
company’s performance.

Major Financial Statements 209
 Balance sheet
Shows the firms assets & liabilities as of a certain date
(such as December 31, 200X)
 Income statement
Measures the flow of revenue and expenses over a
reporting period (such as a year or a quarter)
 Cash flow statement
A statement of the organization’s sources and uses of
cash resources during a reporting period

(1) BALANCE SHEET - EXAMPLES
210

Common – Size Analysis 211
 Common size balance sheet: a balance

sheet in which a firm’s assets and liabilities
are expressed as a percentage of total
assets
 Common size income statement: an income

statement in which a firm’s income and
expense items are expressed as a
percentage of sales

Balance Sheet Quality Issues 212
 Charging off assets
 Hidden liabilities
 Hidden assets
 Off balance sheet financing

Quality and Financial Analysis 213
The quality of a firm’s earnings is positively related to:

• the proportion of cash earnings to total earnings
• the proportion of recurring income to total
income.
The quality of a firm’s balance sheet is:

• positively related to the ratio of the market value
of the firm’s assets to book value of the assets
• inversely related to the amount of its hidden
liabilities

(II) INCOME STATEMENT - EXAMPLES 214

Forecasting Methods 215
 Percent of sales
 Cash budgets
 Pro forma statement of cash flow
 Computerized financial forecasting models
 Forecasting with financial ratios

Percent of Sales Forecasting 216
▪ Used to forecast amount of additional financing

required, due increased sales :
Total Forecasted Forecasted

Financing = Increase in – Increase in
Needed Assets Current Liabilities
▪ Some portion of the financing will be generated

internally, as shown below:
Increase in Forecasted
Retained = Earnings after – Dividends
Earnings Tax

Problems in Reporting 217
 Time of revenue recognition
 Establishment of reserves
 Amortization of intangible assets
 Including all losses and debt
 “Pro forma” profitability measures

218
(III) CASH FLOW STATEMENT - EXAMPLES

219
The Cash Flow Concept
 Accounting income is not the same as cash flow

 Cash flow is the relevant source of value
for the firm
 After Tax Cash Flow
 Earnings After Taxes + Noncash charges
 Noncash charges = Depreciation + Deferred
Taxes

Cash Flow Statement 220
 Presents the effects of operating, investing, and

financing on the cash balance
 Direct method presents the effects to net cash
provided by operating, investing, and financing
 Indirect method presents the adjustments to net
income showing the effects to net cash

Cash Budgeting 221
 Forecasts receipts and disbursements over future

periods of time.
 Budgeting considerations:
 Receipt of credit sales lag projected sales
 Payments for purchases may precede sales
based upon available credit terms.
 Other scheduled receipts and disbursements
Long-term loans, capital expenditures,
dividend payments, wages, rent…

Pro Forma Cash Flow Statement 222
 Measures the increases (and decreases) in cash and cash

equivalents arising from:
 operations
 investing activities
 financing activities
 Amounts from operating, investing and financing activities
are added to cash and cash equivalents at the start of
year
 Total of the above should equal the balance of expected
cash and cash equivalents at the end of year

Accuracy of Financial Statement 223
 External auditor
 Generally accepted accounting
principles
 Corporations pose for a financial
statement like people pose for a
picture

Types of Ratios 224
 Liquidity
 Asset management
 Financial leverage
 Profitability
 Market-based
 Dividend policy

Abbreviations Used 225
 EBIT – Earnings Before Interest & Taxes
 ROI – Return on Investment
 ROE – Return on Equity
 P/E Ratio – Price to Earnings Ratio
 EAT – Earnings After Tax
 r – Return on total capital
 k – Cost of capital

Financial Ratios Are Used By 226
 Management:
Planning and evaluating
Identifying and assessing merger candidates
 Credit Managers
Estimate the riskiness of potential borrowers
 Investors
Evaluate corporate securities

Words of Caution 227
 Ratios are only as good as the information on which they

are based
 Ratios become most valuable when:
 Compared to the ratios of a peer group
 Analyzed over time
 Ratios are symptoms, not causes
 Ratios should cause one to ask questions; rarely do they
provide answers themselves
 When comparing ratios among different firms, ensure the
ratios are calculated using the same method

(i) Liquidity Ratios 228
Current Assets
Current Ratio =
Current Liabilities
 Used to indicate the ability of the firm to fund its liabilities

as they come due.
 Higher ratio normally preferred to a lower ratio
 High ratio may indicate poor asset management.
 Low ratio may indicate difficulty meeting short-term
financial obligations

(2) Asset Management Ratios 229
Accounts Receivable
Collection Period =
( Annual Credit Sales  365)
 Indicates number of days that, on average, it takes to
collect an account receivable.
 Long collection period may indicate problems with credit
quality or credit granting procedures.
 The collection period should always be compared to the
firm’s stated credit policy.

(2) Asset Management Ratios 230
Sales
Total Asset Turnover =
Total Assets
 Indicates the number of dollars of sales

generated per dollar of total assets
 Similar to the Fixed Asset Turnover Ratio, but
the Total Asset Turnover ratio includes both
current and fixed assets in the denominator

(3) Financial Leverage Ratios 231
Total Debt
Debt-to-Equity Ratio =
Total Equity
 The amount of debt per dollar of equity

 A high ratio indicates that more of the firm is
financed by creditors (higher risk of default)
 A low ratio indicates that more of the firm is
financed by the shareholders (but harder to
earn a high return on equity)

(4) Profitability Ratios 232
Sales - Cost of Goods Sold

Gross Profit Margin =
Sales
 Percentage “Gross Profit” from each $1 of

sales
 The Gross Profit Margin must cover all
other costs, including profit (the return to
the investors)

(4) Profitability Ratios 233
Earnings After Taxes

Net Profit Margin =
Sales
 The proportion of each dollar of sales that the

firm retains as profit, after all expenses,
including taxes, have been paid
 A Net Profit Margin of 0.05 indicates that the
firm retains $5.00 in profit from each $100 of
sales that it makes

234
(4) Profitability Ratios
Earnings After Taxes

ROI =
Total Assets
 The ROI indicates the annual percentage

return on each dollar of capital invested in
the firm (by both creditors and shareholders)
 Both shareholders & creditors prefer a high
ROI

(5) Market Based Ratios 235
Market Price Per Share

P/E Ratio =
Earnings Per Share
 Indicates how much the market is willing to

pay for each $1 of firm earnings
 A high number suggests the firm has
excellent growth prospects, is very low risk or
both
 Based on accounting earnings, which differ
substantially from cash flow over short periods
of time

(6) Dividend Policy Ratios 236
Dividends Per Share

Payout Ratio =
Earnings Per Share
 Indicates the percentage of each $1 of net

income that is paid out to its shareholders in the
form of a dividend
 High growth firms usually have a low dividend
payout ratio
 Slow growth firms have fewer investment
opportunities and thus pay out a larger
percentage of income to their shareholders

Relationships Among Ratios 237
EAT Sales EAT

ROI =  =
Sales Total Assets Total Assets
EAT Sales Total Assets

ROE =  
Sales Total Assets Equity
Sometimes called
the equity multiplier

Major Points 238
 There are a variety of financial ratios

analyzing various financial features of a firm
(i.e. liquidity, profitability, etc)
 Most information for ratio analysis derives from
primary financial statements
 Ratios indicate symptoms of problems
 Findings should be placed in context with the
firm’s historical and industry trends
 Forecasting models help management avoid
potential financial problems

239
Course Works 5
Plan the organization structure and need for man

power, and finally, prepare a forecasting for
revenue generation, operation cost/ cost of good
sold (cogs), estimated net profit, and also
calculate the ROI/ IRR/ payback period of your
investment.

240
THANK YOU

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1

Jakarta, 7 February 2022

Prof. Ir. R. Sjarief Widjaja, PhD.

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

Name of Course : Fisheries Business

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

• Kementerian Kelautan dan Perikanan RI, “RENSTRA KKP 2020-

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

• MODULE 1 - Nature of Fisheries Business

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

Topic : NATURE OF FISHERIES BUSINESS

CONTENT AND ESSENCE OF DJUANDA DECLARATION

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

Before UNCLOS 1982 :

After UNCLOS 1982 :

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

• Sea transportation for cargo, car and passenger

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

• Indonesia is a country with the biggest marine Mega-

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

• FISHERIES : US$ 31.935.651.400/year

• LOCAL COASTAL AREA : US$ 56.000.000.000 (total)

• MARINE BIOTECHNOLOGY : US$ 40.000.000.000 (total)

• CRUDE OIL : US$ 6.643.000.000/year

• MARINE TRANSPORTATION : US$ 20.000.000.000/year

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

INTEGRATED MARITIME BUSINESS OPPORTUNITY IN

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

POPULATION 282,775 people 320,804 people 603,579 people

COASTLINE 99.69 KM 260.71 KM 360.40 KM

SMALL ISLAND 20 islands 35 islands 55 islands

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

Captured fishery, farming, water tourism,

B. ECO MARINE CLUSTER AWANG :

Marine industry, salt field, Livestock,

C. ECO MARINE CLUSTER SRUMBUNG :

Salt field, captured fisheries, culinary, marine

D. ECO MARINE CLUSTER EKAS :

Marine industry, captured fishery, farming,

E. ECO MARINE CLUSTER SEREWEH :

Captured fisheries, eco tourism, energy,

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

Brackish Water Aquaculture SALT

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

Gb. Aperangkap lat penangkapan baby

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

Identify the fisheries business environment and

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

MSc COURSE IN FISHERIES BUSINESS – AUP FISHERIES POLYTECHNIC

carrying capacity industry life cycle