Topic 8 - Operations Plan-030412_050519

7/31/2019 Topic 8 - Operations Plan-030412_050519

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Operations

Management

Topic 8


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Operations Plan

Operations Management

Definition of transformation process

Productivity Index

The process planning Production Schedule

Material requirement planning

Capacity planning

Layout planning Physical location planning

Operations costs


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Introduction

Operations section

How to produce your product or service and

run your business

The status of the development of a

product or service


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Operations Model and Procedures

Objective

Fully understand operational details oflaunching and running your business

How inventory will be stored

Production cycle

Bottlenecks

Seasonal production loads

Quality control


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Operations Management

Operations management can be defined as the processof marshalling / bring together resources to produceoutput through the transformation process.

The operation process consists of three (3) maincomponents:

Input

Transformation system

Output


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Definition of Transformation Process

Transformation process is activities to change input into output.

Input:

all resources required to produce a particular output

example: manpower, raw materials, machines and equipment

Output:

end products created as a result of the transformation process

end products can be either products or services


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Transformation Process

There are also external environmental factors and internal feedbackthat need to be considered during the transformation process:

External environmental factors

Factors: politics, economics, new technology, socio-cultural

factors, climactic conditions, suppliers, customers,competitors, new entrants, substitutes products/services

Each factor could be an opportunity or threat to input,transformation process and output

Internal feedback By constantly monitoring the quality of the input, processes

and the output

To improve the whole production system


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Productivity Index

The efficiency of the transformation process is measured bycomparing the ratio of the total value of output to the total value ofinput.

The ratio is called Productivity Index

Formula:

Productivity Index = Total Value of Output

Total Value of Input

Ratio > 1 : indicates the business operation is running efficiently

Ratio < 1 : indicates the business operation is inefficient


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Calculating the Productivity Index

Total sale per month = RM 15,000

Total operational cost per month = RM8,000

Productivity Index (PI) = Total Value of Output

Total Value of Input

= Total Sale Per Month

Total Operations Cost Per Month

= RM 15,000

RM 8,000

= 1.88


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The Process Planning

Process planning involves identifying the step-by-step processesfrom beginning to end to make the product or to provide the services.

The process can be illustrated by using a flow chart activity chart,process chart:

Activity chart:

Entrepreneur must identify all the activities involved in themanufacture of the product

Activities will be arranged in sequence

Process chart:

A schematic representation of the step-by-step sequence thattakes place in a production process/service using recognized

symbols


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Symbol Type ofActivity

Description

Operation Activities that modify, transform orgive values to the input.

Transportation Transport activity occurs when

materials are transported from onepoint to another.

Inspection Activity that measure standard of thein-process material, finished productsor services.

Delay When in-process material isrestrained in a location waiting fornext activity.

Storage When the in-process materials orfinished products are stored in the

storage area.


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To prepare process chart:

Step 1: identify all the operational activities required for theproduction of the product/service

Step 2: arrange these activities according to sequence

Step 3: draw the process chart

Note:

The symbols used in the process chart can also be used tomake a job activity chart.

Job activity chart show the sequence of jobs need to be done bya worker (example refer to Figure 7.7 page 159: Fundamentalsof Entrepreneurship)


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Production Schedule

Objective of production schedule:

To ensure the quantity of production is enough to fulfill expectedmarket demand or sale forecast over the scheduled period.


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Material Requirement Planning

Delivery of materials must be planned and controlled to ensure theentrepreneurs get those materials at the right quantity, quality timeand cost.

The quality and timely delivery of products or services depend verymuch on the quality and delivery of materials.

Material requirement planning involves four (4) steps:

Step 1: identify and list down the raw materials required

Step 2: prepare the bill of materials Step 3: calculate the quantity of raw material required

Step 4: identify supplier

Refer to page 160

165


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Capacity Planning

Refers to the amount of output that can be producedwithin a specified time.

A method to calculate machinery and manpowerrequirements so that production demand based on salesforecast can be met.

To determine the daily production capacity.

Formula:Daily production rate = Monthly sales forecast

No. of working days per month


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Layout Planning

Definition of Layout:

The arrangement of machinery, equipment, workers and otherfacilities used in the operation.

Why? To ensure production of goods and services can be doneefficiently

Layout planning should take into consideration other factorssuch as:

work station, tool room, store, office, prayer room, and toilet.

Safety and conducive working environment


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Layout Planning

Types of Layout:

Type 1: Layout based on product

Layout based on the sequence of activity

Example: food processing factory

Type 2: Layout based on process

Layout based on the production process

Suitable for factory producing several products that undergo asimilar process

Examples: steel workshops, clothing factory

Type 3: Layout based on marketing

Layout designed to utilize the available space to display goods

Example: retail business such as bookshop


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Physical Location Planning

It is crucial to choose the right location for the business.

Strategic location can contribute to the success of the business i.e.higher sales, lower operational costs

In general, choice of physical location will depend on the followingfactors:

Distance from the source of raw materials

Availability of manpower

Transportation facilities

Distance from customer

Price of premises

Other factors (such as utilities, banks, schools, housing,

government policies)


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Operations Costs

It is essential to determine the total operational cost. Why? To enable us to calculate the cost per unit of the foods

produced.

Operations costs include:

Costs of direct material: the money spent on materials that are directly used to

produce the products/services

Direct labor costs: the money paid as wages, salaries and benefits to the

workers involves directly in the production.

Overheads: expenses include rent, insurance, wages of indirect labor,

maintenance and depreciation


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Operations Costs

Operations cost : Direct materials cost+ Direct labour cost

+ Overhead costs

Cost per unit : Total operations cost (RM)Total Number of Outputs (Units)


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Conclusion

Types of operation facilities differ greatly betweenindustries.

Therefore, the entrepreneur have to study in detail theuniquenessof each industry operations process, andmake the necessary modifications and adjustments tohis production plan to suit his business requirements.

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Topic 8 - Operations Plan-030412_050519