10.

0
BUSINESS PLAN
(OPERATIONAL PLAN)
CLO3:
Demonstrate entrepreneurial skills in preparing a business
plan
10.0 Business Plan – Operational
Plan
Learning Outcome
At the end of the session, students should be
able to:
1. understand the concept of operations function in
business
2. understand the topics that are included in an
operations plan
3. prepare an operations plan for their proposed
project
INTRODUCTION

▪ Operation is one of an important function

in a business organization
▪ Managing operations is crucial to make
sure that the business is able to produce
product or deliver services according to
the specification, quality and time
specified by the customer
▪ Operations management can be defined
as the process of marshaling business
input to transform them into output in the
form of product or services
Components in an operations system

The components of an operations system that

is involved in the transformation of business
input into output comprises of the following:
▪ Business Input
▪ Transformation Process
▪ Output
▪ Feedback
▪ External Environment
Schematic Diagram of an Operations System

The components of an operations system can be portrayed in

the schematic diagram as shown below:

External Environment Factors

Input Transformation Output

Transformation
Process
Process

Feedback
OPERATIONS PLAN
▪ The operations plan is the one of the section
that is included in the business plan
▪ This section will demonstrate the operational
aspect of the business that is crucial in
transforming the business input into output
▪ The operations plan will ensure the business is
able to produce the product or to provide the
services that the business had planned in the
marketing plan
The operations plan comprises of the following topics:
1. Process Planning
2. Operations Layout
3. Production Planning
4. Material Planning
5. Machine and Equipment Planning
6. Manpower Planning
7. Overheads Requirement
8. Location Plan
9. Business and Operations Hours
10. License, Permits and Regulations Required
11. Operations Budget
12. Implementation Schedule
PROCESS PLANNING
▪ Process planning involve the identification
of the step-by-step processes from
beginning to end in making the product
or in providing the services
▪ For manufacturing business, the processes
involved will be explained clearly such as
the activity involved, its duration and the
equipment used
▪ For service business, the process planning
will explain all the steps that should be
taken from start to finish to provide the
service to the customer
PROCESS PLANNING (cont.)
▪ The step by step processes can be
illustrated using diagram such as a flow
chart or a process chart
▪ The process chart will use symbols that
are universally recognized in the
operations management field
▪ These symbols are also used in the job
activity chart to show a worker’s activity
Symbols Used in the Process Chart

Symbol Activity Description

Operation Activity that modify, transform or give added

value to the input
Transportation Movement of materials or goods from one
place to another

Inspection Activity that measure the standard or quality

Delay Process is delayed because in process materials

are waiting for next activity

Storage Finished product or goods are stored in the

storage area or warehouse
Activity Chart for Web Designing Services
Greet the client

Invite the client into the discussion room

Get the relevant information from the client

Brief the client about terms and conditions

Get the agreement from the client regarding terms

and condition

Send the client to the door

Work on the design of the web

Make a presentation to the client

Get the feedback from the client

Make the amendment accordingly

OPERATIONS LAYOUT
▪ Illustrate the layout of the operations
▪ Layout refers to the arrangement of
machine, equipment, workers and other
facilities used in the operations
▪ The layout must be design in such a way
that the production of goods and services
can be done smoothly and efficiently
▪ There are three types of layout:
o Layout based on process
o Layout based on product
o Layout based on marketing
Layout based on product
▪ This type of layout is suitable for a business that
has product focus or continuous flow production
▪ The design of this layout is made according to the
sequence of activities to product the product
▪ Example of a business that have this kind of layout
is a food processing factory
 Example of Layout Based on Product

Office

Filling Area
Finished
Goods

Steaming
Storage

Fruits Chopper
Fruits Cleaning Area

Receiving
Area
Washing Area
Layout based on process
▪ This layout is suitable for a business that produce
several products using similar processes
▪ This type of layout is design based on the similarity
of processes where by machine and equipment that
perform similar function will be grouped together
▪ Example of business with this type of layout is a
steel workshop and a tailor store
 Example of Layout Based on Process

Office

Milling Grinding
Machine Machine

Drilling
Machine
Tool
Storage
Room
Area
Layout based on marketing
▪ This layout is designed with an intention to
maximized the area available to display goods
▪ Examples of layout based on marketing can be
observed in the retail business such as book store
or departmental store
 Example of Layout Based on Marketing

Frozen Food
Pastry Products

Store

Aisle Aisle

Aisle

Cashier
 Example of Layout in a Restaurant

Counter
Food
Store

Cashier

Kitchen

Dining Area

Toilet
Beverages Food Display Counter
PRODUCTION PLANNING
▪ It is important to make sure that the
business is able to produce output or to
provide services that is enough to fulfill the
expected market demand or sales
▪ This can be achieved by having a good
production planning
▪ In production planning, the business will
determine how much output to produce
for a certain period of time such as in a
day, a week or a month
▪ The business may need the information
from the marketing plan, e.g. average
sales forecast
Example of calculation for output per day
 Average sales forecast per month = RM 25,200.00
 Price per unit = RM 15.00
 Number of output per month = RM 25,200.00
 RM 15.00
 = 1,680 units
 If the number of working days per month is 24 days
 The amount of output to be produced per day is:
 = 1,680 units
 24 days
 = 70 units per day
MATERIAL PLANNING
▪ Material planning is done to determine
the type and amount of raw materials
need for the production
▪ Material planning involved four steps:
1. Identify and list down the raw materials
required
2. Prepare the Bills of Materials
3. Calculate the quantity of raw material
required
4. Identify the suppliers of raw materials
Identify and list down the raw materials required

▪ Usually in manufacturing business, the raw

materials used is easily identified
▪ For example, to manufacture pencils, raw
materials needed are hollow wood, lead,
eraser, metal band, paint, glue and
packaging box
▪ In case of retail business, the raw materials
is known as goods. The business need to
estimate the amount of initial goods to be
purchased to start the business operation
Prepare the bills of materials
▪ The bills of materials will contains a complete
list of materials, parts or components and the
amount needed to produce a unit of product
▪ To prepare the bill of material, the
entrepreneur must understand the design of
the product
▪ This bill of material is important information for
purchasing activities
Example of Bills of Materials
 To
produce a unit of pencil, the bills of
materials is as follows:
Product No. Description Specification Quantity
101 Half hollow wood 17 cm long 2
102 Lead 17 cm long 1
1.5mm diameter
103 Eraser 0.75 cm long 1
6mm diameter
104 Metal band 2 cm long 1
105 Paint 0.5 ml 1
106 Glue 0.5 ml 1
Examples of Materials Requirement Schedule

Material Quantity Safety Total Material Price / Total price

Stock Requirement unit (RM)
(RM)

Flour 50 Kg 5 kg 55 1.20 66.00

Sugar 50 Kg 5kg 55 2.80 154.00

Eggs 200 units 60 260 0.10 26.00

Corn Syrup 100 Liter - 100 2.00 200.00

Margarine 100 Kg - 100 2.00 200.00

Total 646.00
MACHINE & EQUIPMENT PLANNING
Steps to determine machine and equipment
requirement:

1. List out all machine and equipment

required base on the process flow chart or
process plan
2. Determine the amount of machine and
equipment required based on the venture
capacity requirement
3. Identify the suppliers that are reliable in
term of price and after sale services
Factors to be considered in purchasing machine
and equipment

1. Price
2. Quality and reliability
3. Availability of spare parts
4. Break down maintenance facility
5. Technology & user friendly
6. Supplier reputation
7. After sale services
Examples of Machine & Equipment Requisition
Planning Schedule

No. Machine Quantity Price / Unit Total

(RM) Price
(RM)
1. Mixer 1 2000 2000
2. Cutter 2 1000 2000
3. Oven 1 1500 1500
Total 5500
Steps to determine quantity for machine &
equipment

1. Determine the planned rate of production per day

2. Determine the standard production time per unit
for the planned machine
3. Determine the machine productive time:
Operation hours – (Setting up time + Down Time)
4. Calculate the amount of machine required using
the formula given in the next slide
Formula To Calculate the amount of machine
require:

No. of Planned Rate of Production per day Standard

Machine = X Production
Required Machine Productive Time per day
Time / Unit
MANPOWER PLANNING
 Steps to determine the amount of direct
labor required by the venture:
1. Determine the planned rate of production per day for
the particular section of job
2. Determine the standard time for a worker to produce
one unit of product or to complete a particular job
3. Determine workers productive hours:
Working hours per day – rest time or workers idling time
4. Calculate the amount of direct labor required
Formula To Calculate the amount of direct labor
required

No. of Planned Rate of Production per day Worker Standard

Worker = X Production Time /
Required Worker Productive Time per day Unit
Example of Direct Labor Planning Schedule
No Position No. of Salary/ EPF Socso Total
Staff Month
Required (RM) (RM) (RM) (RM)
1 Operation 1 2000.00 260.00 2260.00
Assistance
Total 1 2000.00 260.00 2260.00

Note: EPF & SOCSO, please refer to the latest table of contribution
OVERHEADS REQUIREMENT

▪ Determine the overheads that are

required in the operations
▪ Overheads refers to requirements other
than direct raw materials and direct labor
▪ Examples of overheads are indirect labor
costs, indirect material, insurance,
maintenance and utilities
LOCATION PLAN
▪ The entrepreneur has to make decision which
premise is the best for the business to operate
▪ Choice of location is important because it will
affect:
•Sales revenue
•Business operation cost
•Long term investment
Factors that Influence the Choice of Location

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

2. SERVICE ACTIVITY
 In service priority should be given to distance from
market or customers.
 Distance from customers will influence sales
revenue
 In service business cost saving may not contribute
to sales revenue
 Increase in revenue will contribute to increase in
profit
Factors to be considered for Choice of Location

• Distance from raw • Local Government

material / suppliers Policy
• Labor supply • Security
• Transportation
• Facility for
• Price of Land or expansion and
rentals business
• Infrastructure development
• Climate
BUSINESS AND OPERATIONS HOURS

▪ Business hours refer to the time the business

is open to the customers
▪ Operation hours refer to the hours the
workers have to work.
▪ For manufacturing, usually the business will
operate on 8-hours per shift. Thus the
entrepreneur will only decide whether the
business will runs for one shift or more. This
will depends upon the planning for
production
BUSINESS AND OPERATIONS HOURS (cont.)
▪ For service business, the entrepreneur will has to
state the business hours in terms of days and hours
▪ For example, a restaurant may open to the
customer from 7 a.m. to 10 p.m. every day
▪ However, the operations hours for the workers will
be different
▪ The working hours may be from 5 a.m. to 12.a.m
▪ The entrepreneur may have 2 shifts for the
workers; the first shift will starts from 5 a.m. to 3
p.m. and the second shift starts from 3p.m. to 12
a.m.
LICENSE, PERMITS and REGULATIONS
▪ Find out and list down all the
license/permits/ regulations that are
required to operate the business
▪ Identify which agency is responsible to
approve the particular license/permit
▪ For example, a restaurant among others
will need the following
license/permit/regulations:
o License for signboard
o Permits for emigrant workers
o Typhoid injection for the workers
OPERATIONS BUDGET

▪ The business need to estimate the budget for the

operations activities
▪ The operations budget can be categorized into:
• Fixed asset expenditure
• Monthly expenses
• Other expenses
▪ This operation budget is important because it will
be one of the input to prepare the financial plan
OPERATIONS BUDGET (cont.)
•Fixed Asset Expenditure
oRefers to the investment on long term assets used
in the operations to produce the product or
services
oExamples are the purchase of machines and
equipment
•Monthly Expenses
oRefers to the payment made every month in the
operations department
oExamples are wages for workers and raw
materials purchased
OPERATIONS BUDGET (cont.)

•Other Expenses
oThese are expenses that are made and could not be
categorized as fixed asset expenditure or monthly
expenses
oExamples are deposits and insurance
 Example of Operations Budget
Item Fixed Asset Monthly Other Expenses
Expenses
(RM) (RM) (RM)

Fixed Assets 35,500

Machine and Equipment 45,000
Premise Renovation

Working capital
Raw Materials 20,000
Remuneration 6,500
Utilities 600
Warehouse Rental 3,000

Other expenditures
Deposit for rent 6,000
Deposit for utilities 1,000
Total 80,500 30,100 7,000
IMPLEMENTATION SCHEDULE
▪ Implementation scheduling involves sequencing
and allotting time to all project activities
▪ To prepare implementation schedule,
entrepreneurs has to decide how long each activity
and compute the requirement on people and other
resources
▪ Scheduling normally use Gantt Chart which is a
planning chart used to schedule resources and
allocate time
The Importance of Project Scheduling

Project scheduling serves several purposes:

1. It shows the relationship of each activity to
others and to the whole project
2. It identifies the precedence relationship
among activities
3. It encourages the setting of realistic time and
cost estimate for each activity
4. It helps make better use of people, money and
material by identifying critical bottlenecks in
the project
Example of Project Implementation Schedule

Activities Deadlines Durations

Incorporation of business Jan – Mac 2019 3 months
Application for permits and Jan – April 2019 4 months
license
Searching for business premise Feb – Mac 2019 3 months
Renovation of premise April 2019 1 month
Procurement of machines and April – June 2019 3 months
raw material
Recruitment of labours June 2019 1 month
Installation of machines June 2019 1 month