Business Plan Development:
Production Plan
Session 9
Powerpoint Presentation by:
RD VELASCO
Entrepreneurship and Business
Planning
1
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
3
INPUT-OUTPUT RELATIONSHIP
Inputs (money, machine, materials, manpower, management, information)
Technology
Outputs
(shoes, bags, books, rice, houses, cars)
4
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
5
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
6
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
7
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)
8
COST OF PRODUCTION
RULES OF PRODUCTION Continuation…
Under the short-run period, the following shall apply:
TR > VC, operate
TR < VC, shut down
9
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)
11
HOW TO PURCHASE
EXAMPLE:
S = 160, 0 = P5, C = P1
EOQ = (2)(160)(5)/1
= 1,600
= 40 units
12
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
13
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
14
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)
15
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
16
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)
17
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
18
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
20
REFERENCES
Entrepreneurship, Fajardo, Feliciano R.; Capitol Publishing House Inc.
1994
Management, Robbins, Stephen & Coulter, Mary; Prentice Hall, 2009
21
Other Matters
Learning Materials and Powerpoint
Lectures are available online
http://istudyguide.weebly.com
22
End of Presentation
23