Production/ Operation Plan

10/28/2022
 Production/ Operation Plan
Session Objectives
At the end of the session, students
should be able to:
 Understand the transformation process in a
production system
 Design the process flowchart for a particular
production system
 Prepare the production/operation plan for their
proposed business/project

10/28/2022
 Topics Covered
• Definition of Production/Operation Plan
• Transformation Process
• Material/Inventory Requirement Planning
• Acquisition of Plant, Machinery & Equipment
• Manpower Planning
• Layout Plan
• Selection of Location
• Production/Operation Budget
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 Definitio
n
Production/Operation plan involves the
production of a product or service according to
the quantity, quality, specification and time to
fulfill customers’ requirements at the lowest
possible cost
Operation activities comprise of:
• Business inputs
• Transformation process
• Output

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 The Transformation
Process
Inputs Output
•Labor •Product
•Raw material Transformation
Transformation •Service
•Machinery Process
Process
•Technology
•Capital

Controlling

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 Transformation Process (Manufacturing)
A Biscuit
Factory
 Materials (e.g. flour, sugar, yeast, water)
 Machinery & Equipment (e.g. weighing
machine, mixer, blender, oven, rack)
 Technology/Method (e.g. mixing, blending,
baking, packaging)
 Man (e.g. machine operator, general worker,
supervisor)

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 Transformation Process (Service)
A Restaurant
 Materials (e.g. fish, meat, onion, vegetables)
 Machinery (e.g. stoves, utensils, tables and
chairs)
 Technology/Method (e.g. cooking, frying,
cutting)
 Man (e.g. chef, service-man, cashier)

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 Efficiency of the Transformation Process
The productivity index (P.I.) is used to measure the
effectiveness of the transformation process
Formula: P.I = Output/Total Cost of Input
For Example, In a Restaurant:
• Sales = RM2,000/day
• Operational cost = RM1,200/day
• P.I = RM2,000/RM1,200 = 1.67
P.I of more than 1 indicates the efficiency of the
transformation process

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 Process Flowchart
It is a schematic representation of the
production/operation process from the start
until the product or service is completed
It must show the followings:
Sequence (step by step)
Explanation of each process/activity
Time (days,hours or minutes)

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 Flow Chart: Conventional Symbols

Symbol Activity Description

Operation Materials are being processed or
information are being processed or the process
of planning and calculating

Transporting Movement of materials or goods from one place

to another

Inspection Inspection of the quality or quantity of the product

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 Flow Chart: Conventional
Symbols (cont.)

Symbol Activity Description

Delay Process is delayed. Materials are waiting for
further process

Storage Materials are stored in the storage

area or warehouse

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 Material Requirement Planning

 List all materials needed to produce

the product or service
 Estimate in terms of quantity needed
based on forecasted sales
 Determine safety stocks
 Estimate the cost of materials (monthly
& annually)
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 Acquisition of Machinery and
Equipment
 List all machinery and equipment needed to
produce the product or service
 Determine the number of machinery and
equipment based upon its capacity and
production period, to meet sales forecast
 Identify suppliers that can offer the
machines and equipment at competitive
price

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 Purchase of Machinery
Factors To Be Considered:
• Price
• Quality
• Availability of spare-parts
• Maintenance
• Technology & simplicity of operation
• Supplier’s track-record
• After sales service
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 Manpower Planning
• Determine the rate of production
• Determine the standard time in producing a
unit of product
• Man productive hours
• Determine number of workers
• Identify sources of labor
• Calculate the cost of direct and indirect
labor

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 Operational Layout Plan
Factors to be considered:
 Arrange the machinery and equipment
so that man and materials can move
freely from one place to another
 Minimize delay/waiting time
 Ensure that different types of
processes/output are separated

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 Layout
Layout refers to the arrangement of machinery
and equipment, workers and other facilities in
the operations area. Layout should take into
considerations space allocated for the work
stations, tool room, store, office, toilets, prayer
room, etc.

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 Operational Layout Plan (cont.)
Types of Layout
Plan
Layout Based on Product

Layout Based on Process

Layout based on Marketing

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 Layout
• Layout based on product
The design of this layout is made according to the
sequence of activities to product the product. This
type of layout can be observed in a food processing
factory.

• Layout based on process

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.

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 Layout
• Layout based on process (Cont.)
This layout is suitable for a business that produce
several products using similar processes. This type of
layout can be seen in a steel workshop.

 Layout based on marketing

This layout is designed with an intention to maximized
the area available to display goods. It can be observed
in the retail business such as book store or sundry
shop.

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 Operational Layout Plan (cont.)
A Good Layout Should:
• Minimize movement of materials
• Utilize floor space efficiently
• Establish effective supervision
• Establish conducive and pleasant working
environment
• Minimize movement of workers
• Minimize machinery and workers idling
• Establish a flexible layout plan
• Minimize accident risks
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 Selecting a
Location
Factors to be considered:
• Nature of business
• Distance from source of materials
• Supply of labor
• Transportation
• Distance from target market
• Price of the property
• Basic infrastructure & facilities
(Schools, housing, banks etc.)

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 Production/Operation Budget
• Fixed Asset
• machinery and equipment
• renovation
• Monthly Expenditure
• direct materials
• direct labour
• overheads
• Other Expenditure
• deposits
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