Ent300 Module09

ENT/ETR300 – FUNDAMENTALS OF ENTREPRENEURSHIP
THE OPERATIONS PLAN
Module 9
THE OPERATIONS PLAN
Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

© Entrepreneurship Department, Faculty of Business Management, Universiti Teknologi MARA 2008
THE OPERATIONS PLAN
LEARNING OUTCOMES
At the end of the module, students should be able

to:
 understand the concept of operations function

in business
 understand the topics that are included in an
operations plan
 prepare an operations plan for their proposed
project

THE OPERATIONS PLAN
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
THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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
The operations plan comprises of the following topics:

 Process Planning
 Operations Layout
 Production Planning
 Material Planning
 Machine and Equipment Planning
 Manpower Planning
 Overheads Requirement
 Location Plan
 Business and Operations Hours
 License, Permits and Regulations Required
 Operations Budget
 Implementation Schedule
THE OPERATIONS PLAN
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
THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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
THE OPERATIONS PLAN
Types of Layout
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

THE OPERATIONS PLAN
Types of Layout (cont.)

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

THE OPERATIONS PLAN
Types of Layout (cont.)

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

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

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

THE OPERATIONS PLAN
Example of Layout Based on Marketing

Frozen Food
Pastry Products
Store
Aisle Aisle
Aisle
Cashier

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

THE OPERATIONS PLAN
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
THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
Factors to be considered in purchasing machine

and equipment
• Price
• Quality and reliability
• Availability of spare parts
• Break down maintenance facility
• Technology & user friendly
• Supplier reputation
• After sale services
THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
Formula To Calculate the amount of direct labor

required
No. of Planned Rate of Production per day Worker Standard

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

THE OPERATIONS PLAN
Example of Direct Labour Planning Schedule
No Position No. of Salary/ EPF Socso Total

Staff Month (RM) (RM) (RM)
Required (RM) 13 % 2%
1 Operation 1 2000.00 260.00 2260.00
Manager
2
Total

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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
THE OPERATIONS PLAN
Factors to be considered for Choice of Location
• Distance from raw • Local Government

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

THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
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.
THE OPERATIONS PLAN
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
THE OPERATIONS PLAN
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

THE OPERATIONS PLAN
OPERATIONS BUDGET (cont.)

•Fixed Asset Expenditure
o Refers to the investment on long term assets used
in the operations to produce the product or
services
o Examples are the purchase of machines and
equipment
•Monthly Expenses
o Refers to the payment made every month in the
operations department
o Examples are wages for workers and raw
materials purchased
THE OPERATIONS PLAN
OPERATIONS BUDGET (cont.)

•Other Expenses
o These are expenses that are made and could not be
categorized as fixed asset expenditure or monthly
expenses
o Examples are deposits and insurance

THE OPERATIONS PLAN
Example of Operations Budget
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

THE OPERATIONS PLAN
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 OPERATIONS PLAN
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
THE OPERATIONS PLAN
Example of Project Implementation Schedule
Activities Deadlines Durations

Incorporation of business Jan – Mac 2009 3 months
Application for permits and Jan – April 2009 4 months
license
Searching for business Feb – Mac 2009 3 months
premise
Renovation of premise April 2009 1 month
Procurement of machines and April – June 2009 3 months
raw material
Recruitment of labours June 2009 1 month
Installation of machines June 2009 1 month

THE OPERATIONS PLAN
END OF MODULE 9


Ent300 Module09

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ent300 Module09

Uploaded by

Copyright:

Available Formats

ENT/ETR300 – FUNDAMENTALS OF ENTREPRENEURSHIP

THE OPERATIONS PLAN

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

At the end of the module, students should be able

 understand the concept of operations function

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Components in an operations system

The components of an operations system that is

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Schematic Diagram of an Operations System

The components of an operations system can be portrayed in

External Environment Factors

Input Transformation Output

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

The operations plan comprises of the following topics:

PROCESS PLANNING (cont.)

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Symbols Used in the Process Chart

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

Flow Chart for the Production of Mixed Fruits Jelly

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

Activity Chart for Web Designing Services

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

Types of Layout (cont.)

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Types of Layout (cont.)

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Example of Layout Based on Product

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Example of Layout Based on Process

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Example of Layout Based on Marketing

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Example of Layout in a Restaurant

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Example of calculation for output per day

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Identify and list down the raw materials required

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Prepare the bills of materials

Nawawi Hj. Mohd Jan, Rahimah Sarmidy & Sodri Ariffin

Example of Bills of Materials