LEARNING OUTCOMESLEARNING OUTCOMES1.1. To work out on material To work out on material

requirement in producing a requirement in producing a product.product.

2.2. To calculate cost per unit, To calculate cost per unit, selling price, and profit margin.selling price, and profit margin.

3.3. To construct process flow of To construct process flow of production.production.

ACTIVITY 1ACTIVITY 1Work in group. Assuming that you Work in group. Assuming that you are about to start a selling burger are about to start a selling burger business via roadside stall at business via roadside stall at Taman Seroja.Taman Seroja.

List down all the raw materials List down all the raw materials needed to produce burger.needed to produce burger.

ACTIVITY 2ACTIVITY 2

• Burger Bun – 40pcs @ RM15.00Burger Bun – 40pcs @ RM15.00• Tomato Sos – 340g @ RM2.20 (enough for 40 pcs of Tomato Sos – 340g @ RM2.20 (enough for 40 pcs of finished burger)finished burger)• Chili Sos – 330g @ RM2.00 (enough for 40 pcs of finished Chili Sos – 330g @ RM2.00 (enough for 40 pcs of finished burger)burger)• Beef Paste – RM4.20 of 10 pcs of Ramly beef paste.Beef Paste – RM4.20 of 10 pcs of Ramly beef paste.• Mayonaise – 230g @ RM3.30. (enough for 40 pcs of Mayonaise – 230g @ RM3.30. (enough for 40 pcs of finished burger)finished burger)• Cucumber – RM0.60 per piece. (enough for 70 pcs of Cucumber – RM0.60 per piece. (enough for 70 pcs of finished burger)finished burger)

Assuming the following list of raw Assuming the following list of raw materials, work out on materials, work out on cost per unitcost per unit of of your burger. Suggest your your burger. Suggest your selling priceselling price and calculate your and calculate your profit marginprofit margin..

ACTIVITY 2ACTIVITY 2Work in group. Assuming that you Work in group. Assuming that you are about to start a selling burger are about to start a selling burger business via roadside stall at business via roadside stall at Taman Seroja.Taman Seroja.

List down all the raw materials List down all the raw materials needed to produce burger.needed to produce burger.

Operation ManagementOperation Management

1.1. The Transformation ProcessThe Transformation Process

2.2. Productivity IndexProductivity Index

3.3. Process PlanningProcess Planning

4.4. Material Requirement PlanningMaterial Requirement Planning

5.5. Layout PlanLayout Plan

6.6. Selection of LocationSelection of Location

7.7. Calculation of Operational CostsCalculation of Operational Costs

1. The Transformation 1. The Transformation ProcessProcess

INPUTINPUT______ ______ • LABOURLABOUR• RAW MATERIALSRAW MATERIALS• MACHINES & MACHINES & EQUIPMENTSEQUIPMENTS• TECHNOLOGY & TECHNOLOGY & METHODSMETHODS• CAPITALCAPITAL

TRANSFORMATIONTRANSFORMATIONPROCESSPROCESS

OUTPUTOUTPUT______

SERVICESSERVICES

OROR

PRODUCTSPRODUCTS

External Environment ForcesExternal Environment Forces

2. Productivity Index2. Productivity Index

The productivity index (P.I) can be more or The productivity index (P.I) can be more or less than 1. less than 1. P.I > 1 = business running P.I > 1 = business running efficientlyefficiently

P.I < 1 = business running P.I < 1 = business running inefficientlyinefficiently

InputofValueTotal

OutputofValueTotalIndextyProductivi

3. Process Planning3. Process Planning

SymbolSymbol Type of Type of ActivitiesActivities

DescriptionDescription

OperationOperation Activities that modify, transform or Activities that modify, transform or give values to the outputgive values to the output

TransportatiTransportationon

When materials are transported from When materials are transported from one point to another.one point to another.

InspectionInspection Measures standard of the in-process Measures standard of the in-process material, finished product or servicesmaterial, finished product or services

DelayDelay When in-process material is restrained When in-process material is restrained in a location waiting for next activityin a location waiting for next activity

StorageStorage When in-process materials or finished When in-process materials or finished products are stored in the storage products are stored in the storage area.area.

4. Material Requirement 4. Material Requirement PlanningPlanning

Step I :Step I : Identify and list down the Identify and list down the raw raw materials required materials required

Step II :Step II : Prepare the bill of Prepare the bill of materialsmaterials

Step III: Step III: Calculate the quantity of Calculate the quantity of raw raw material required material required

Step IV:Step IV: Identify supplierIdentify supplier

Step IStep I

Identify and list all the raw materials Identify and list all the raw materials required to manufacture the product required to manufacture the product or provide the service.or provide the service.– Restaurant:Restaurant: the raw materials required the raw materials required

depend on the menu for the daydepend on the menu for the day– Cleaning service:Cleaning service: the materials required the materials required

include consumable items like detergents and include consumable items like detergents and scrubbing pads.scrubbing pads.

– Retail business:Retail business: fresh goods, sundry goods, fresh goods, sundry goods, canned goods.canned goods.

– Burger Stall:Burger Stall: the raw materials used are the raw materials used are proportionate to each layer of ingredients proportionate to each layer of ingredients inside the burger.inside the burger.

Step IIStep II• Prepare a bill of Prepare a bill of

materials required materials required for a unit of product.for a unit of product.

IngredieIngredientnt

Amount required Amount required for 100 cookiesfor 100 cookies

FlourFlour 2 kg2 kg

Margarine Margarine 0.5 kg0.5 kg

SugarSugar 1 kg1 kg

EggsEggs 4 units4 units

WaterWater 0.5 litre0.5 litre

• Therefore, the bill of materials Therefore, the bill of materials for a unit of cookies will be:for a unit of cookies will be:

IngredientIngredient Amount Amount Required/CookieRequired/Cookie

FlourFlour 0.02 kg0.02 kg

Margarine Margarine 0.005 kg0.005 kg

SugarSugar 0.01 kg0.01 kg

EggsEggs 0.04 of an eggs0.04 of an eggs

(1 egg for 25 cookies)(1 egg for 25 cookies)

WaterWater 0.005 litre0.005 litre

Step IIIStep III

• Estimate the raw material Estimate the raw material requirement by multiplying the bill of requirement by multiplying the bill of materials with the total number of materials with the total number of cookies to be produced monthly.cookies to be produced monthly.

• The number of units to be produced The number of units to be produced must be based on the sales forecast must be based on the sales forecast in the marketing plan.in the marketing plan.

Example:Example:

If the If the forecast demandforecast demand per month is per month is 50,000 units of cookies.50,000 units of cookies.

If the amount of stock at the end of the If the amount of stock at the end of the month is 5% of the amount.month is 5% of the amount.

nthcookies/mo500,52

500,2000,50

)000,50%(5000,50

The materials required for the month:The materials required for the month:

IngredientIngredient Amount Required/MonthAmount Required/Month

FlourFlour 0.02kg/unit x 52,500 = 1050kg0.02kg/unit x 52,500 = 1050kg

Margarine Margarine 0.005kg/unit x 52,500 = 2025kg0.005kg/unit x 52,500 = 2025kg

SugarSugar 0.01kg/unit x 52,500 = 525kg0.01kg/unit x 52,500 = 525kg

EggsEggs 0.04/unit x 52,500 = 2100 units0.04/unit x 52,500 = 2100 units

WaterWater 0.005litre/unit x 52,500 = 262.5 0.005litre/unit x 52,500 = 262.5 litrelitre

Step IVStep IV

Identify supplierIdentify supplier• Look through internet/publications/survey Look through internet/publications/survey

by trade associations, and seek quotations by trade associations, and seek quotations from suitable suppliers.from suitable suppliers.

1.1. Price and discount Price and discount offeredoffered

2.2. Quality of materialsQuality of materials

3.3. Sales terms & Sales terms & conditions e.g payment conditions e.g payment termsterms

4.4. After sale service and After sale service and warrantywarranty

5. Lead time i.e the 5. Lead time i.e the time between orders time between orders and deliveryand delivery

6.6. Delivery terms e.g Delivery terms e.g free transportationfree transportation

7.7. Reliability of supplier Reliability of supplier

Capacity PlanningCapacity Planning

• The capacity of any production The capacity of any production operation refers to operation refers to the amount the amount of output that can be produced of output that can be produced within a specified timewithin a specified time..

• It is a method to calculate It is a method to calculate machinery machinery and and manpower manpower requirementsrequirements so that so that productionproduction demand demand based on sales forecastbased on sales forecast can be met.can be met.

• Based on monthly sales forecast, Based on monthly sales forecast, the the daily productiondaily production capacity can capacity can be determine by be determine by dividingdividing it it byby the the numbernumber of of working days per working days per monthmonth..

• This capacity should be divided This capacity should be divided by the number of working hours by the number of working hours per day to give the per day to give the capacity per capacity per hourhour..

• If sales forecast is 520 units of If sales forecast is 520 units of ‘tudung’ per month. ‘tudung’ per month.

• If working days per month is If working days per month is assumed to be 26 days per month, assumed to be 26 days per month, the daily production rate is:the daily production rate is:

daypertudung''35days26

910

hourpertudung''5hours7

35

Purchasing of Purchasing of ‘tudung’ materials‘tudung’ materials

Storage of ‘tudung’ Storage of ‘tudung’ materialsmaterials

Cutting of raw materials to Cutting of raw materials to size. i.e large, medium and size. i.e large, medium and smallsmall

Quality inspectionQuality inspection

Transport the materials Transport the materials that have been cut to that have been cut to tailor’s tabletailor’s table

Sewing by Sewing by tailorstailors IroningIroning PackagingPackaging Storage before Storage before

shipping outshipping out

Activity: ‘Tudung’ cuttingActivity: ‘Tudung’ cuttingIf one cutter can cut 1 ‘tudung’ in If one cutter can cut 1 ‘tudung’ in 1/3 hour, the reciprocal of this is:1/3 hour, the reciprocal of this is:= the cutter’s capacity to cut per = the cutter’s capacity to cut per hourhour= 3 ‘tudung’ per hour= 3 ‘tudung’ per hour

Therefore, the number of cutter Therefore, the number of cutter required is:required is:= Production capacity per = Production capacity per hour/cutter’s capacity per hourhour/cutter’s capacity per hour= 5/3 = 1.67 (needs 2 cutters)= 5/3 = 1.67 (needs 2 cutters)

Manpower Requirement

Determine the number of workers Determine the number of workers requiredrequired

If one tailor can sew 1 ‘tudung’ in ½ If one tailor can sew 1 ‘tudung’ in ½ hour, then his hourly capacity is:hour, then his hourly capacity is:

= 1/0.5 hr= 1/0.5 hr

= 2 ‘tudung’ per hour= 2 ‘tudung’ per hour

Therefore, the number of tailors Therefore, the number of tailors required is:required is:

= 5/2= 5/2

= 2.5 tailors (3 tailors) and also, at = 2.5 tailors (3 tailors) and also, at least 3 sewing machines + 1 (standby)least 3 sewing machines + 1 (standby)

If one tailor requires a working If one tailor requires a working space of 8 ft by 10 ft, than the space of 8 ft by 10 ft, than the total space required for 4 tailors total space required for 4 tailors is:is:

= 8ft x 10 ft x 4 tailors= 8ft x 10 ft x 4 tailors

= 320 square ft= 320 square ft

5. Layout5. Layout

• Layout refers to the arrangement of Layout refers to the arrangement of machinery, equipment, workers and machinery, equipment, workers and other facilities used in the operation.other facilities used in the operation.

• The arrangement should be made in The arrangement should be made in such a way that the production of such a way that the production of goods and services can be done goods and services can be done efficiently.efficiently.

• It should take into consideration the It should take into consideration the integration of several factors integration of several factors including work station, tool room, including work station, tool room, store, office, prayer room and toilet.store, office, prayer room and toilet.

Types of layoutTypes of layout

Layout based on productLayout based on product– The design is done according to the The design is done according to the

sequence of activity to produce the sequence of activity to produce the product.product.

Packaging AreaArea for soaking the Soya Bean

Grinding

Sieving Area

Boiler room

Office

Toilet

Prayer room

Pumping Area

Layout based on processLayout based on process– The design is based on the The design is based on the

production process. production process. – It is suitable for a factory producing It is suitable for a factory producing

several products that undergo a several products that undergo a similar process.similar process.

Cutting Machine

Forming Machine

Pra

ying

A

rea

Toi

let

Welding Area

Office

Storefor

RawMaterials

Display of Finished Goods

Inspection

Painting and Spraying

Layout based on marketingLayout based on marketing– The layout is designed to utilise the The layout is designed to utilise the

available space to display goods.available space to display goods.– Example: retailed shop and Example: retailed shop and

bookshop.bookshop.•Arrangement of goods are Arrangement of goods are interactiveinteractive

•Goods are easily accessible and Goods are easily accessible and convenient for the customersconvenient for the customers

•It is easy for the entrepreneur to It is easy for the entrepreneur to protect goods from theftprotect goods from theft

•The entrepreneur can maximize The entrepreneur can maximize the return of investment form the the return of investment form the space used.space used.

6. Physical Location6. Physical Location• It is crucial to choose the right It is crucial to choose the right

location for the business because location for the business because a strategic location can contribute a strategic location can contribute to the success of the business.to the success of the business.

• The choice of location will depend The choice of location will depend on the following factors:on the following factors:– Distance of operation Distance of operation

centre/factory is near from the centre/factory is near from the source of raw materialssource of raw materials

– Near to the source of manpowerNear to the source of manpower

– Easy access to transportation Easy access to transportation facilities.facilities.•Highways e.g. LPTHighways e.g. LPT•Port e.g. KlangPort e.g. Klang•Airport e.g. SepangAirport e.g. Sepang

– Distance from targeted customers.Distance from targeted customers.– Other factorsOther factors

•Basic infrastructure, Utilities, Basic infrastructure, Utilities, banks, schools and housing, banks, schools and housing, government policies and safety of government policies and safety of surrounding.surrounding.

7. Operations Costs7. Operations Costs

• It is essential to determine the It is essential to determine the total operational cost in order to total operational cost in order to calculate the cost per unit of the calculate the cost per unit of the goods produced.goods produced.

• Operations costs include costs of Operations costs include costs of direct material, direct labour and direct material, direct labour and overheadsoverheads

• Direct materials costsDirect materials costs– Money spend on materials that are Money spend on materials that are

directly used to produce the products directly used to produce the products or services.or services.

• Direct labour costsDirect labour costs– The money paid as wages, salaries The money paid as wages, salaries

and benefits to the workers involved and benefits to the workers involved directly in the production of the directly in the production of the products and services.products and services.

• Overhead costsOverhead costs– Include electricity, water, rents, Include electricity, water, rents,

insurance, wages of indirect labour, insurance, wages of indirect labour, maintenance and depreciation.maintenance and depreciation.

(Units)OutputofNumberTotal

(RM)CostOperationsTotalUnitperCost

OverheadlabourDirectmaterialDirectCostsOperations

Q&A

THANK YOU!!