Ent300 11 Operation Plan RP

OPERATION PLAN
Dr. Azlin Shafinaz Mohamad Arshad

LEARNING OUTCOMES
 To understand the concept of operations

function in business
 To prepare an operations plan for their
proposed project
INTRODUCTION
 Operation is one of an important function in a

business organization
 Managing operations is crucial to make sure that the
business is able to produce product or deliver
services according to the specification, quality and
time specified by the customer
 Operations management can be defined as the
process of marshalling business input to transform
them into output in the form of product or services
COMPONENTS IN
OPERATIONS
The components of an operations system that is
involved in the transformation of business input into
output comprises of the following:
 Business Input
 Transformation Process
 Output
 Feedback
 External Environment
External Environment Factors
Input Transformation Output

Transformation
Process
Process
Feedback
OPERATION PLAN
 The operations plan is the one of the section that is
included in the business plan
 This section will demonstrate the operational aspect
of the business that is crucial in transforming the
business input into output
 The operations plan will ensure the business is able
to produce the product or to provide the services that
the business had planned in the marketing plan
Operations plan comprises of :
1. Process Planning
2. Operations Layout
3. Production Planning
4. Material Planning
5. Machine and Equipment Planning
6. Manpower Planning
7. Overheads Requirement
8. Location Plan
9. Business and Operations Hours
10. License, Permits and Regulations Required
11. Operations Budget
12. Implementation Schedule
Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

© Entrepreneurship Department, Faculty of Business Management, Universiti Teknologi MARA 2008
1. PROCESS PLANNING
 Identification of the step-by-step processes from beginning to end in
making the product or in providing the services.
 For manufacturing business, the processes involved will be explained
clearly such as the activity involved, its duration and the equipment
used.
 For service business, the process planning will explain all the steps that
should be taken from start to finish to provide the service to the
customer.
 The step by step processes can be illustrated using diagram such as a
flow chart or a process chart (use symbols that are universally
recognized in the operations management field).

Symbols Used in Process Chart
Symbol Activity Description
Operation Activity that modify, transform or give added

value to the input
Transportation Movement of materials or goods from one
place to another
Inspection Activity that measure the standard or quality
Delay Process is delayed because in process materials

are waiting for next activity
Storage Finished product or goods are stored in the

storage area or warehouse

Flow Chart for the Production of Mixed Fruits Jelly
Transfer the fruits from the store to the production area
Check the quality of the fruits and segregate the bad fruits
Clean the fruits under running water
Put the fruits into the fruit chopper for chopping process
Put the chopped fruits into the boiler for steaming process
Use electric ladle to stir the fruit until the fruits change
into pulp
Add ten parts of water into the mixture
Boil the mixture for 90 minutes

Activity Chart for Web Designing Services
Greet the client
Invite the client into the discussion room
Get the relevant information from the client
Brief the client about terms and conditions
Get the agreement from the client regarding terms and

condition
Send the client to the door
Work on the design of the web
Make a presentation to the client
Get the feedback from the client
Make the amendment accordingly

2. OPERATIONS LAYOUT
 Layout refers to the arrangement of machine,
equipment, workers and other facilities used in the
operations
 The layout must be design in such a way that the
production of goods and services can be done smoothly
and efficiently
 There are three types of layout:
o Layout based on process
o Layout based on product
o Layout based on marketing

Types of Layout
a. Layout based on product

 This type of layout is suitable for a business that has
product focus or continuous flow production
 The design of this layout is made according to the
sequence of activities to product the product
 Example of a business that have this kind of layout is
a food processing factory

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

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

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

c. Layout based on marketing
 This layout is designed with an intention to
maximized the area available to display goods
 Examples of layout based on marketing can be
observed in the retail business such as book store or
departmental store

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

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

3. PRODUCTION PLANNING
 It is important to make sure that the business is able to
produce output or to provide services that is enough to
fulfill the expected market demand or sales.
 This can be achieved by having a good production
planning.
 In production planning, the business will determine how
much output to produce for a certain period of time such as
in a day, a week or a month.
 The business may need the information from the marketing
plan, e.g. average sales forecast.

Example of calculation for output per day
 Average sales forecast per month = RM 25,200.00

 Price per unit = RM 15.00
 Number of output per month = RM 25,200.00
RM 15.00
= 1,680 units
 If the number of working days per month is 24 days
 The amount of output to be produced per day is:
= 1,680 units
24 days
= 70 units per day
4. MATERIAL PLANNING
 Material planning is done to determine the type and
amount of raw materials need for the production
 Material planning involved four steps:
o Identify and list down the raw materials required
o Prepare the Bills of Materials
o Calculate the quantity of raw material required
o Identify the suppliers of raw materials

Identify and list down the raw materials
required
 Usually in manufacturing business, the raw materials used is
easily identified.
 For example, to manufacture pencils, raw materials needed
are hollow wood, lead, eraser, metal band, paint, glue and
packaging box.
 In case of retail business, the raw materials is known as
goods. The business need to estimate the amount of initial
goods to be purchased to start the business operation.

Prepare the bills of materials
 The bills of materials will contains a complete list of

materials, parts or components and the amount
needed to produce a unit of product
 To prepare the bill of material, the entrepreneur must
understand the design of the product
 This bill of material is important information for
purchasing activities

Example of Bills of Materials
 To produce a unit of pencil, the bills of materials is as

follows:
Product No. Description Specification Quantity
101 Half hollow wood 17 cm long 2
102 Lead 17 cm long 1
1.5mm diameter
103 Eraser 0.75 cm long 1
6mm diameter
104 Metal band 2 cm long 1
105 Paint 0.5 ml 1
106 Glue 0.5 ml 1

Examples of Materials Requirement Schedule
Material Quantity Safety Total Material Price / Total price

Stock Requirement unit (RM)
(RM)
Flour 50 Kg 5 kg 55 1.2 66
Sugar 50 Kg 5kg 55 2.8 154
Eggs 200 units 20 220 0.15 33
Corn Syrup 100 Liter 10 110 3 330
Margarine 100 Kg 10 110 2 220
Total 803

5. MACHINE & EQUIPMENT
PLANNING
Steps to determine machine and equipment
requirement:
1. List out all machine and equipment required
base on the process flow chart or process plan.
2. Determine the amount of machine and
equipment required based on the venture
capacity requirement.
3. Identify the suppliers that are reliable in term of
price and after sale services.
Factors to consider in purchasing
machine & equipment
• Price
• Quality and reliability
• Availability of spare parts
• Break down maintenance facility
• Technology & user friendly
• Supplier reputation
• After sale services
Examples of Machine & Equipment Requisition
Planning Schedule
No. Machine Quantity Price / Unit Total

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

Steps to determine quantity for
machine & equipment
1. Determine the planned rate of production per day
2. Determine the standard production time per unit
for the planned machine
3. Determine the machine productive time:
Operation hours – (Setting up time + Down Time)
4. Calculate the amount of machine required using
the formula given in the next slide

Formula To Calculate the
amount of machine
No. of Planned Rate of Production per day Standard

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

6. MANPOWER PLANNING
Steps to determine the amount of direct labor required by the
venture:
1. Determine the planned rate of production per day for the
particular section of job
2. Determine the standard time for a worker to produce one
unit of product or to complete a particular job
3. Determine workers productive hours:
Working hours per day – rest time or workers idling time
4. Calculate the amount of direct labor required

Formula To Calculate
the amount of direct labor
No. of Planned Rate of Production per day Worker Standard

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

7. OVERHEADS REQUIREMENT
 Determine the overheads that are required in the

operations
 Overheads refers to requirements other than direct
raw materials and direct labour
 Examples of overheads are indirect labour costs,
indirect material, insurance, maintenance and
utilities

8. LOCATION PLAN
 The entrepreneur has to make decision which

premise is the best for the business to operate
 Choice of location is important because it will affect:
• Sales revenue
• Business operation cost
• Long term investment

Factors Influence the Location
MANUFACTURING ACTIVITY
 Priority should be given to the cost factors
 In manufacturing cost saving would contribute to profit
SERVICE ACTIVITY
 In service priority should be given to distance from market or
customers.
 Distance from customers will influence sales revenue
 In service business cost saving may not contribute to sales
revenue
 Increase in revenue will contribute to increase in profit

Factors to be considered
for Choice of Location
• Distance from raw

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

9. BUSINESS & OPERATION HOURS
 Business hours refer to the time the business is open

to the customers
 Operation hours refer to the hours the workers have
to work.
 For manufacturing, usually the business will operate
on 8-hours per shift. Thus the entrepreneur will only
decide whether the business will runs for one shift or
more. This will depends upon the planning for
production.

 For service business, the entrepreneur will has
to state the business hours in terms of days and
hours.
 For example, a restaurant may open to the
customer from 7 a.m. to 10 p.m. every day.
 However, the operations hours for the workers
will be different.
 The working hours may be from 5 a.m. to
12.a.m.
 The entrepreneur may have 2 shifts for the
workers; the first shift will starts from 5 a.m. to
3 p.m. and the second shift starts from 3p.m. to
12 a.m.
10.LICENSE, PERMITS
& REGULATIONS
 Find out and list down all the license/permits/
regulations that are required to operate the business
 Identify which agency is responsible to approve the
particular license/permit
 For example, a restaurant among others will need the
following license/permit/regulations:
o License for signboard
o Permits for emigrant workers
o Typhoid injection for the workers

11. OPERATION BUDGET
 The business need to estimate the budget for the
operations activities
 The operations budget can be categorized into:
• Fixed asset expenditure
• Monthly expenses
• Other expenses

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

12. IMPLEMENTATION SCHEDULE
 Implementation scheduling involves sequencing
and allotting time to all project activities.
 To prepare implementation schedule,
entrepreneurs has to decide how long each activity
and compute the requirement on people and other
resources.
 Scheduling normally use Gantt Chart which is a
planning chart used to schedule resources and
allocate time.

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


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OPERATION PLAN

Dr. Azlin Shafinaz Mohamad Arshad

 To understand the concept of operations

 Operation is one of an important function in a

Input Transformation Output

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Symbol Activity Description

Operation Activity that modify, transform or give added

Inspection Activity that measure the standard or quality

Delay Process is delayed because in process materials

Storage Finished product or goods are stored in the

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Transfer the fruits from the store to the production area

Clean the fruits under running water

Add ten parts of water into the mixture

Boil the mixture for 90 minutes

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Invite the client into the discussion room

Get the relevant information from the client

Brief the client about terms and conditions

Get the agreement from the client regarding terms and

Send the client to the door

Work on the design of the web

Make a presentation to the client

Get the feedback from the client

Make the amendment accordingly

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

a. Layout based on product

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

 Average sales forecast per month = RM 25,200.00

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

 The bills of materials will contains a complete list of

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

 To produce a unit of pencil, the bills of materials is as

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Material Quantity Safety Total Material Price / Total price

Sugar 50 Kg 5kg 55 2.8 154

Eggs 200 units 20 220 0.15 33

Corn Syrup 100 Liter 10 110 3 330

Margarine 100 Kg 10 110 2 220

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

No. Machine Quantity Price / Unit Total

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

No. of Planned Rate of Production per day Standard

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

No. of Planned Rate of Production per day Worker Standard

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

 Determine the overheads that are required in the

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

 The entrepreneur has to make decision which