baeb510 chapter 8: operation management

BAEB501 : ENTREPRENEURSHIPCHAPTER 8:Operation Management

© 2010 Cosmopoint

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Chapter 8: Operation Management

© 2010 Cosmopoint

Topic Outlines

8.1 The Transformation Process8.2 Productivity Index8.3 Example for Productivity Index8.4 Process Planning8.5 Symbol used in Process Chart8.6 Material Requirement8.7 Capacity Planning8.8 Example Capacity Planning

© 2010 Cosmopoint

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© 2010 Cosmopoint

Learning Outcomes

After completing this chapter, student should be able to: Explain the basic information of Operation Management Understand the Operation Management concept Apply the concepts learnt

Topics© 2010 Cosmopoint

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© 2010 Cosmopoint

8.1 The Transformation Process

Topics

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8.2 Productivity Index

Topics

The efficiency of the transformation process is measured by comparing the ratio of the total value of output to the total value of input. The ratio is also known as the Productivity Index

Productivity Index = Total Value of Output

Total Value of Input

Productivity index can be more or less than 1. A ratio greater than 1 indicates that the business operation is running efficiently. If less than 1, it indicates that the business operation is inefficient.

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© 2010 Cosmopoint

8.3 Example for Productivity Index

Topics

A restaurant makes a sale of RM60000 per month. The operational cost per month is RM40000. The productivity index for this restaurant can be calculated as follows:

Productivity Index = Total Value of Output Total value of Input

= Total sales per month Total operation cost per month

= RM60000 RM40000 = 1.5

The PI calculated for restaurant is 1.5. It is greater than 1.0 andindicates that the restaurant has an efficient business operation. Anefficient business operation will contribute to profitability andgrowth.

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8.4 Process Planning

Topics

Process planning involve 2 types of chart.

There are:

Activity Chart

Process Flow Chart

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8.6 Material Requirement

Topics

There are 4 steps involves in material requirement planning.

Identify and list down the raw material required

Prepare the bill of materials

Calculate the quantity of raw material required

Identify supplier

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8.7 Capacity Planning

Topics

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

Capacity planning is method to calculate machinery and manpower requirements so that production demand based on sales forecast can be met.

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8.8 Example Capacity Planning

Topics

If sales forecast is RM520 units of blouses per month, monthly production demand is 520 blouses. If working days per month is assumed to be 26days per month, the daily production rate is:

520/26 = 20 per day 20/7 = 2.85 per hour Assume; 1 tailor/1.5 hours Efficiency for 0.667 blouse per hour Therefore, the number of tailors required is: Production capacity per hour required/ tailor capacity per hour. 2.9 blouses per hour/0.667 blouse per hour 4.34 tailors

baeb510 chapter 8: operation management

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