Entrep Quarter 2- Module 2 PDF

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ENTREPRENEURSHIP QUARTER 2 – MODULE TWO

MELCS: Demonstrate understanding of the 4Ms of operations (CS_EP11/12ENTREP-0h-j-12) Describe the 4Ms (Manpower, Method, Machine, Materials) of operations in relation to the business opportunity

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Republic of the Philippines DEPARTMENT OF EDUCATION Region I Schools Division of Pangasinan II Binalonan, Pangasinan

ENTREPRENEURSHIP Quarter 2 Module 2 MELCS: Demonstrate understanding of the 4Ms of operations

(CS_EP11/12ENTREP-0h-j-12) Describe the 4Ms (Manpower, Method, Machine, Materials) of operations in relation to the business opportunity • • •

Test the product prototype Validate the service description of the product with potential customers to determine its market acceptability Select/pinpoint potential suppliers of raw materials and other inputs necessary to produce the product or service

Prepared by: ANNA MARY B. DE VERA SHS Teacher II

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The Nine Critical Sub-Processes Or Sub-Systems in the Transformation Process

The transformation process or throughput system is what differentiates a well-managed from a poorly-managed EDS. There are nine critical sub-processes or sub-systems in the transformation process namely: A. B. C. D. E. F. G. H. I.

Production Programming and Scheduling Quality Control Operating Systems and Procedures Layouting Operating Workflow Worker Motivation, Skilling, Deployment, Compensation, and Control Operations Management, Supervision, and Control Technology Application and Utilization Support Services

The first three that we will discuss in this module are Production Programming and Scheduling, Quality Control, and Operating Systems and Procedures. Production Programming and Scheduling Operations management is responsible for Production Programming and Scheduling (PPS). It is the proper determination of (1) what goods or services to produce, (2) in what sizes and packaging, (3) in what machinery and equipment (or production/service line), (4) in how many units, and (5) precisely when. For enterprises with multiple products or services, PPS can be a very daunting and complicated activity. Operations must consider four critical factors in determining the right PPS. These are (1) market demand in terms of volume expectations, trends, cycles, a seasonality; (2) capital investment and financing requirements. (3) product line profitability and capacity utilization; and (4) the number of products and market segments the enterprise wants to serve and their implications on the complexity and dexterity of the production system. Market demand is the hardest to figure out. The enterprise should not produce too many goods, otherwise, there would be a lot of excesses or obsolete inventory. It cannot produce too little because there might be a stock out, hence, substantial opportunity losses. Thus, enterprises prefer to produce just enough goods or services to meet the demand. Good market forecasting should therefore dictate the PPS. However, consumers’ tastes change over time, competing products become more aggressive, substitutes enter the marketplace, and seasons of the year create peaks and valleys of demand. One solution is to have the excess production capacity to meet unexpected sales increases. Another solution is to outsource or subcontract production to other producers. However, these have capital and cost implications. Having sufficient production capacity to meet excess demand will require a Page 3 of 7

fairly large production facility. Unfortunately, the larger the facility, the larger the capital investment and financing requirements needed. Because of this, the enterprise must decide whether it is better to have a very large production capacity in order to meet peak demand periods, or to have just a small capacity but accumulate the needed inventory during the lean months of the year. The third critical factor in determining the PPS is a good product line analysis. Each product line of the enterprise has its own demand and supply analysis. At the end of the day, the operations manager must figure out how much production capacity a particular product line would potentially consume. This would depend on two things: (1) the estimated demand for the product line; and (2) the number of machine and labor hours the product line would consume in the factory or service shop. The operations manager must also compute the contribution margin of each product line. This can be derived by subtracting the unit variable cost of the product from the unit price of the product. This unit contribution margin should then be multiplied by the total expected sales volume of the product line to derive the total profit contribution of the product line. Of course, it would be natural for the operations manager to give priority to the product lines that yield the greatest profit contribution. The fourth critical factor is the number of products and market segments the enterprise wants to serve. Without discussing the marketing ramification of having too many products, the production system is bound to become more and more complex as product lines are added.

Quality Control The Quality, Delivery, and Price expectations of customers must be matched with the Quality, Delivery, and Productivity measurement, monitoring, and evaluation system at every stage of the Enterprise Delivery System. Before the input is accepted by the Transformation Process, it must conform strictly to certain QDP specifications at this acceptance stage. The materials and supplies used must adhere to strict technical standards that would produce the desired output. The input must be delivered to the factory or service shop at optimal schedules. They should also come at a reasonably low cost, arrive in sufficient quantities, and be adequately prepared for easy convertibility into output in order to ensure high productivity. Every step in the Transformation Process must also be measured, monitored, and evaluated according to the QDP standards of the transformation stage. Every machine, every worker, and every conversion process has an impact on the customers’ QDP expectations. Some of these machines, workers, and processes are critical because they are the major determinants of Quality, or of Delivery, or of Productivity and Cost, which affects Price. Some affect all three. More rigor and emphasis should be exerted on these critical factors. Finally, there are QDP specifications at the output stage. If the QDP at the Page 4 of 7

input and throughput stages were done properly, then the output should pass the final QDP tests. The output should be very acceptable to customers. They should be produced at high levels of productivity and at relatively low costs, enabling the enterprise and its customers to settle at a mutually acceptable price. Operating Systems and Procedures Operating Systems and Procedures (OSP) are the enterprise standards for running the entire operations of the factory or service shops. T hey are “engineered methods”. This means that these operating systems or methods have been subjected to conceptual, analytical, critical, and creative thinking processes. They have been experimented on and tested successfully in the actual work setting. They have been judged optimally for the market being served. They have been proceduralized and standardized for consistency and manualized for replicability (i.e., Operations Manual). the optimal OSP would differ from enterprise to enterprise depending on the environmental conditions and the market dynamics of supply and demand.

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ENTREPRENEURSHIP QUARTER 2 – MODULE 2 Activity Sheets Name: ____________________________________________ Score: _________________ Grade &Section: ___________________________________ Date: __________________ Activity 1. Direction: TRUE or FALSE. Shade the correct answer below the statement.

1. For enterprises with multiple products or services, Production Programming, and Scheduling can be a very daunting and complicated activity. o TRUE o FALSE

2. Market demand is the hardest to figure out. o TRUE o FALSE 3. Consumer tastes change over a long period of time. o TRUE o FALSE 4. The larger the facility, the smaller the capital investment and financing requirements needed. o TRUE o FALSE 5. The materials and supplies used must adhere to strict technical standards that would produce the desired output. o TRUE o FALSE

6. Every step in the Transformation Process must also be measured, monitored, and evaluated according to the QDP standards of the transformation stage. o TRUE o FALSE

7. The input must be delivered to the factory or service shop at mediocre schedules. o TRUE o FALSE 8. Operating Systems and Procedures are engineered methods. o TRUE o FALSE 9. Operating systems have been experimented on and tested successfully in the actual work setting.

o TRUE o FALSE 10. Operating systems and methods have been judged optimally for the market being served. o TRUE o FALSE Page 6 of 7

Activity 2. Directions: MULTIPLE CHOICE. Read and analyze the statements below and identify the correct answer. Write the letter of your answer in the space provided.

A. Production Programming and Scheduling B. Quality Control C. Operating Systems and Procedures 1. Each product line of the enterprise has its own demand and supply analysis. 2. The enterprise should not produce too many goods, otherwise, there would be a lot of excesses or obsolete inventory. 3. The materials and supplies used must adhere to strict technical standards that would produce the desired output. 4. The input must be delivered to the factory or service shop at an optimal schedule. 5. These are “engineered methods”. 6. The larger facility, the larger the capital investment and financing requirements are needed. 7. Every step in the transformation process must be measured, monitored, and evaluated according to the QDP standards in the transformation process. 8. Consumer tastes change over time and competing products become more aggressive. 9. They have been subjected to conceptual, analytical, critical, and creative thinking processes. 10. They should be delivered at the right times and under the best terms and conditions. Activity 3. Directions: Answer the question below (5 pts. each). 1. Why is it that the Quality, Delivery, and Price expectations of the customers should be considered in the transformation process?

2. Why are Operating Systems and Procedures called “engineered methods?”

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