Business Plan Development:

Production Plan

Session 9

Powerpoint Presentation by:

RD VELASCO

Entrepreneurship and Business

Planning

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PRODUCTION DEFINED

is the driving force to which most

other functions react

Is the creation of goods and

service

Is the creation of utility. Utility

means satisfaction

Process of converting resources

into goods and services 2

FACTORS OF PRODUCTION

LAND

LABOR

CAPITAL

ENTREPRENEURIAL ABILITY

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INPUT-OUTPUT RELATIONSHIP

Inputs (money, machine, materials, manpower, management, information)

Technology

Outputs

(shoes, bags, books, rice, houses, cars)

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TYPES OF MANUFACTURING PROCESSES

1. Intermittent Manufacturing – where one

produces a product for only a limited

period and which product will re-appear in

a schedule after some time

EXAMPLE:

Cyclical/Non-standard (Made to order)

Standard products produced off season

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TYPES OF MANUFACTURING PROCESSES

2. Continuous Manufacturing – where a

product is produced continuously or for

specified long period of time

EXAMPLE:

Mass production in quantity outputs

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COST OF PRODUCTION

Represent the payments for the factors of

production

Total Cost of Production – sum total of

expenses in producing a good or service

- sum of fixed cost and variable cost

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COST OF PRODUCTION

RULES OF PRODUCTION

TR = Total Revenue

TC = Total Cost Under long run period, the following shall apply:

TR > TC, produce more

TR < TC, stop producing

TR = TC, maintain production (break even

point)

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COST OF PRODUCTION

RULES OF PRODUCTION Continuation…

Under the short-run period, the following shall apply:

TR > VC, operate

TR < VC, shut down

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HOW TO PURCHASE

Criteria for selecting good suppliers

Price

Quality

Reliability

In the case of purchase planning, its

objective is to balance two opposing

forces; absence or lack of materials and

over supply of materials 10

HOW TO PURCHASE

An important factor in purchase planning is

lead time. This is the time that elapses

between placement of the order and its

receipt.

A good model is the Economic Order

Quantity (EOQ)

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HOW TO PURCHASE

EXAMPLE:

S = 160, 0 = P5, C = P1

EOQ = (2)(160)(5)/1

= 1,600

= 40 units

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INVENTORY CONTROL

Three types of inventory:

Raw materials inventory – stockpiles of

materials for inputs of production

Work in process inventory – partially

completed products that require further

processing

Finished goods inventory – completed

goods for delivery to customers

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Scheduling

Is the process of ensuring the delivery of

materials at the right place and right time.

PERT-CPM Method

Program Evaluation and Review Technique-

Critical path Method

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FACTORS TO CONSIDER IN DETERMINING

PROJECT SITE

A. Climate

Air temperature (min,max,ave), humidity,

sunshine (duration, per season), wind

(direction, min,max,ave velocity), rainfall

(duration, per season), dust and fumes (for

neighboring plants, environment),

extremities: floods (average height, season),

earthquakes (frequency, magnitude)

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FACTORS TO CONSIDER IN DETERMINING

PROJECT SITE

B. On Site Terrain

Address, neighbors, heights (above/below

sea level), topography, demographical

orientations, environmental orientations,

existing right of way (roads, power, water

etc), prices of adjacent real estate.

C. On transportation and facilities

Roads and bridges, railway, water transport,

air transport, passenger transport system

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FACTORS TO CONSIDER IN DETERMINING

PROJECT SITE

D. Fiscal and legal regulations

Fiscal regulations (taxes, customs)

Legal regulations (building legislations,

restrictions, zoning, safety regulations,

compensation laws, standards)

Insurance (fire, accident, liability, flood

and storm damage)

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FACTORS TO CONSIDER IN DETERMINING

PROJECT SITE

E. Other factors

Proximity to raw materials and input

sources, markets and other important

centers necessary for project operations

National programs

Centers and institutions

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UTILITIES AND THEIR FACTORS FOR THEIR

CONSIDERATION

A. Water Supply

A. Characteristics (temperature, pressure etc)

B. Sources

A. From public utilities

B. From private utilities

C. Methods of treatment

B. Power Supply

A. Electricity from public/private utilities

B. Fuel and gas oil

C. Coal and gas 19

UTILITIES AND THEIR FACTORS FOR THEIR

CONSIDERATION

C. Communication system

A. Telephones

B. Wireless

A. Fax

B. Internet

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REFERENCES

Entrepreneurship, Fajardo, Feliciano R.; Capitol Publishing House Inc.

1994

Management, Robbins, Stephen & Coulter, Mary; Prentice Hall, 2009

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Other Matters

Learning Materials and Powerpoint

Lectures are available online

http://istudyguide.weebly.com

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End of Presentation

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