The 4M’s of Operations

Operations Plan- an important part of the business plan because it simply states the details in operating the
business
Operations Management- controls the implementation of the business plan. A strong operations
plan should have the four operational aspects called the 4Ms of Operations.

The 4Ms of Operation

1. Methods- the process to be followed in effectively manufacturing or delivering a product or service. It is

the day-to-day operations of a business. Internally, the process must abide with industry standards and
policies (ex. ISO Certification). The

entrepreneur must set SOP’s.

a. Manufacturing of Goods

Manufacturing- the process of translating raw materials into finished goods that are acceptable to the
customer’s standards 3 Elements of Manufacturing

1. Inputs- the materials or ingredients to be used in creating the product

2. Process- the transformation phase where inputs are processed by manpower and
machines to come up with the final product.
3. Output- the final product of the process stage, which is intended to be sold to target customers

Manufacturing Site- the manufacturing process will take place.

 Home-based- this option is the cheapest and highly flexible. Most start-ups do not have the
capacity to establish a manufacturing site.
 Commercial space for rent- this advisable if the business really requires a commercial
space for the processing of goods and if the home option is not viable anymore. It gives the
entrepreneur a more specialized and suited manufacturing site than manufacturing at
home.
 Commercial space purchase- this option requires the biggest amount of capital
expenditure, but it also provides the entrepreneur substantial freedom and flexibility to design
and run the commercial space.

LOCATION- for delivery of raw materials and finished goods, the transportation routes from
manufacturing site should be efficient. It should be accessible to major types of transportation
vehicles. It must operate in an environmental- friendly manner.

INTERNAL LAYOUT/FLOOR PLAN- affects efficiency of business operations. Each space should be
maximized to save on manufacturing cost.

 Product-based layout- facilities are prearranged according to the flow of the manufacturing
operations.
 Process-based layout- facilities are grouped according to their function.

MANUFACTURING PROCESS FLOW- a step by step guide of the employees and the manufacturing
equipment. The objective of The Process flow is to ensure that the right inputs are properly used in
production, that the process is performed according to the set standards, and that the acceptable outputs
are produced.
ULTIMATE OBJECTIVE: To ensure that maximum efficiency are met- from the requisition of
materials to processing them into finished goods up to the distribution to the customers.
 b. Service Delivery Process

 The entrepreneur who will engage in a service business must be more meticulous
when it comes to the service delivery process because services are intangible, and the
only way the customer can appreciate the service is by remembering how pleasant his
or her experience was. It is cost efficient.

Service blueprint- detailed flowchart of the service business. Every process in the
blueprint should be relevant to the service business to minimize wastage.
Bottleneck- part of the process where there is an apparent inefficiency and where the
customers wait longer

c. Distribution of Goods and Services

Distribution- it is the process of bringing products or services to customers. In selling physical goods,
the entrepreneur should plan the location, the processes, and the distribution of the products to the
customers. It is not a straight process from the entrepreneur to customers.

Supply Chain/ Distribution Channel- the manufacturer will deliver the products to the
distributors, to the wholesalers, to the retailers, and then finally to the customers.

1. Manufacturer- handles the invention, development and production of the product or service.
Take charge of acquiring materials, production and delivery schedules, product quality, and inventory
or safety management. Manufacturers handle product delivery, marketing and selling activities.
2. Distributors- are entrepreneurs who often buy products or services from the manufacturers and
sell them at a markup price to either wholesalers or retailers; He/She is the new owner of the
product. Usually buys the product in bulk for a discounted price. Distributors become wholesalers
when they sell the product to another distributor.
3. Agents- don’t own the products or services because they do not buy these from the manufacturer.
Instead, they negotiate with buyers as to how much or how many are to be sold, so the manufacturer
will be able to deliver the goods directly to the buyer. They will get commission for every product sold.

Consignment- agents get the product in advance to demonstrate them live to the
customers. If unsold, agents just return the merchandise to the
manufacturers.

The distributor or agent can help the manufacturer in any of the ff activities:

1. Sharing industry knowledge, behavior and activities of the primary target market.
2. Pertinent rules and regulations imposed by the government
3. Best practices in operating the business
4. Best practices in operating the business
5. Their respective sticky relationship with business associates such as suppliers, financial
institutions or retailers.

d.Payment Process- the entrepreneur must also establish a seamless payment process. There are
instances when the customers do not want to pay in cash and are usually attracted by flexible and
customer-friendly payment terms such as credit cards, installment plans, or simple accounts
payable or pautang.
2. Manpower- the right human resources who will handle certain business operations

As the business grows, the entrepreneurs should hire qualified employees that can handle
operational functions, so that he or she will be free from daily activities and thus can focus on
the strategic and management functions of the business.

-one of the highest cost of operating the business but is also the most instrumental to its success.
A. Job Description- enumerates the duties and responsibilities of the potential employee, including
the scope, limitations, and terms and conditions of employment.

PARTS OF THE JOB DESCRIPTION

1. Job Title- the heading of the job description, it is the summary of what the employee will do. It
should be respectable and decent because it will boost the self-confidence of the employee.
2. Compensation and Benefit Range- details the potential salary and benefits that the employee will
get
3. Duties- usually high level descriptions only.
4. Responsibilities and Accountabilities- must be communicated well to the employee so that
he or she knows what to expect with the job.
5. Work Schedules- including work hours. The specific days and working hours must be written so
that the employee will be able to align the work schedule with his or her personal schedule.
B. Employee Qualification

CRITERIA FOR HIRING

1. Educational Background- degree of candidate’s knowledge of basic things.

2. Work Experience- will tell the entrepreneur what to expect from the applicant and what he
or she can potentially contribute to the business based on his or her past positions an
experiences.
3. Specific Skill or knowledge- important especially on technical jobs that require high proficiency.
Ex. Engineers, scientists, accountants, IT specialist.
4. Work Attitude- deals with the worker’s integrity and how he or she deals with his or her
coworkers, bosses, and customers. Ex. of good work attitude: punctual, leadership and
communication skills, team player, making ethical decisions, obeying superiors, passionate
and dedicated to the company.
C. Preparatory Selection of Job Applicants

 After the job description and employee qualifications are finalized by the entrepreneur, he or
she now preselects a set of candidates for the positions required.
 When the business already sizeable, the entrepreneur may establish a Human Resource
department (HRD) that will handle the selection and recruitment of candidates.
 Choices where to look for potential candidates:
o Personal list of trustworthy people
o Employment agencies or manpower agencies
o Headhunters- help companies find a set of people suited for their requirements
o Manpower Agencies- recruit temporary employees under a short contract (usually 6
mos.)
o Advertise job vacancies via print such as newspaper and other publications
o Referrals and recommendations from friends, relatives or business partners.
o Business networks or the people whom the entrepreneur has worked within the past.
o Digital media (website, social media, emails, online affiliates, search engines, podcasts,
or blogs)
o Mobile (SMS, mobile apps)

D. Selection of Job Applicants

- Screening and picking the most qualified and most suited candidate for the job.
- Preliminary screening is through qualifications.
- Conduct qualifying exams in Math, English and Logic
- Qualitative Exams or Psychology tests (essay form or multiple-choice)
- Conduct interview for the shortlisted candidates
 SOME COMMON QUESTIONS BEING ASKED IN AN INTERVIEW

1. What are your strengths that you can contribute to our organization?
2. What are your weaknesses that can prevent you from working effectively in our organization?
3. What exactly did you do in your previous job(s)? How will these past experiences contribute to our
organization?
4. What were your significant milestones in your previous job(s), and why do you consider them as such?
5. Can you discuss the things you know about our organization? Why are you interested to join our
organization?
6. What are your career plans for the next five years if given the chance to work with our organization?
7. Can you describe you work ethic? How do you work with a team and
with your superior? In an interview the Entrepreneur- promotes the
business to a candidate.

the Candidate- sells himself or herself by citing his or her work experience or
educational background

E. Job Offer

 Once the entrepreneur has been convinced already of the job credentials and the
interview answers of the candidate, the job contract is now prepared.
 JOB CONTRACT- generally summarizes the terms and conditions of the candidates employment
with the business.
1) Rank or position of the candidate
2) List of responsibilities or deliverables and its scope and limitations
3) The salary and benefits including vacation and sick leaves
4) Work schedule
5) Probationary period if any and qualifications to become regular employee
6) The duration of the contract
7) Resignation procedure

F. Employee Development

 Training people- one of the biggest investments of an entrepreneur or a businessman

 Entrepreneur should devise strategies on how to keep employees satisfied working in the company.

TRAINING TOOLS FOR EMPLOYEES

1. Employee Orientation- one to two-day session that summarizes the

history of the business, its vision and mission, policies and procedures,
culture and norms of the business. Also includes introduction to the co-
employees and superiors, the tour of the workplace, discussion of daily
responsibilities and accountabilities including Key Performance Indicators
(KPI) and KEY Result Areas (KRA) of the employee.
 KPIs and KRAs are the bases of the entrepreneur for
rating the performance of the employee.
2. On-the-Job Training (OJT)- most practical tool in training the employee
under the supervision of a team leader or manager. The employee is already
productive and exposed to the real job. The

team leader’s job is to closely supervise, train and monitor the employee and give
constructive feedback.

3. Buddy System- training program wherein an expert team member is

assigned to assist a new employee in his or her function.
4. Mentor-Mentee Program- training program for supervisors, wherein they
will be mentored by a senior executive or senior officer of the business.
 5. Succession Plan- ensure business operations will continue even in their
absence or the absence of key employees, or when they decide to retire or
resign.
6. Further Training- extensive leadership trainings, part-time or full-time
bachelor’s or master’s degree programs, or short-term
technical/specialized courses.
7. Online Learning Programs or Webinars- practical way of training
employees because they do not need to go abroad or out-of-town just to get
the necessary training.
8. Internal Training Programs- led by competent subject matter experts to
discuss the intricacies of each department to the newly hired employees.
Annual strategic planning and include key employees to devise tactics and
strategies for the business in the next coming years.
9. International or local Symposia, workshops, conferences, and
seminars- to keep abreast of the external factors, the entrepreneur or the
employees can be sent to attend these kind of activities.
 Employee Training and Development- is a major thrust of every entrepreneur
because employees are the best assets of a business enterprise.

IMPORTANCE OF EMPLOYEE TRAINING AND DEVELOPMENT

1. Helps business reduce costs

2. Productivity increases
3. Full potential of employees is optimized esp. when skills and talents are recognized
4. Employees feel important and needed and thus continue to be motivated and
committed
5. Employees become brand ambassadors of the organization’s products or services
6. Employees build camaraderie when put together in one training session.
Improving working relationships with one another.

 CHALLENGES and STRATEGIES

1) Constantly motivating and keeping high-performing employees.

2) Entrepreneurs must devise an effective talent management program to gain the
employees loyalty.

 SEVERAL STRATEGIES FOR TALENT MANAGEMENT/EMPLOYEE MANAGEMENT

1) Providing employees with a very competitive salary package that

includes guaranteed bonuses, performance bonuses, commissions, and
other monetary incentives.
2) Providing non-monetary benefits- medical coverage, leave credits, decent job
titles, flexible work schedules, awards and recognitions, inspirational leaders,
transparency and fairness in performance evaluation, channels where employees
can provide constructive feedback without the risk of being fired.
3) Additional benefits- annual trips, work-from-home opportunities, scholarships,
transportation and communication allowances, free meals and drinks, fitness
programs, sports programs, and other work-life balance programs.

3. Machines- technology used in efficiently operating the business

 Can be described as the “best friend” of manpower in producing goods and offering
services.
 Machines are not limited only to physical equipment but can also pertain to new
technologies.
 Without machines, business operations will be cumbersome, costly, and with low quality.
 A. Equipment and Other Facilities

Must be strategically placed in the manufacturing site or in the service delivery area.
Must prepare facility plan that details the most economical way to
manufacture product. Place the facility where they can be efficiently
used.
Site must be adapt to how big or small the pieces
of equipment are Site must be conducive, well-
ventilated and well-lit
There should be fire exits and safety reminders
Employees/machine operators should undergo rigorous trainings before they operate
equipments.

B. Telecommunications and Information Technology

Landline Phones- for order-taking, telemarketing, and teleconferencing

Mobile phones- mobile apps for order taking, for payments, marketing, marketing
research, mobile banking, internet promotions.

Laptop and desktop computers- order taking, internet marketing, reports etc.

POS Machines- charging debit/credit card, tracking sales, storing data, analyzing purchases
etc.

Accounting & Inventory Software- accounting business transactions, profitability, sales,

inventory etc.

Web site- order taking, 24/7 marketing, online conversations, collecting customer
information etc.

Entrepreneurs Responsibilities in Safeguarding Machines

1. Protect against fraudsters by creating strong passwords and used only by

authorized employees.
2. Employees should be trained to keep information confidential, including
passwords.
3. Software programs should always be updated checked against viruses and
hackers.
4. POS machines must be in working condition
5. There must be business continuity opportunity (BCP) should machines not work
properly.
6. Appoint IT experts in the business’ software and computers
7. Insurance coverage for both physical and nonphysical equipments

4. Materials- materials to be used in creating a product or performing a service, which includes supply chain
management.
 The supplier of the raw materials should have a consistent and sufficient amount of raw
materials and supplies that can accommodate the demand of the entrepreneur.
 Selection of suppliers depends on how the suppliers will not cause interruptions in the production of
goods and serving the customers.
 MATERIALS REQUISITIONING OPTIONS
o Manufacturing own products or offer services
 Huge capital must be prepared because all expenses in the manpower, machines
andmaterials will be borne by the entrepreneur.
 Risk is larger
 Set of competent employees must be employed to handle machines or service the
 customers
 The entrepreneur can closely monitor the quality of products or services
 The entrepreneur has the opportunity to build his or her own brand identity.
o Outsourcing of manufacturing or service activities to a third party
 Process of appointing third party manufacturer to do the manufacturing operations of the
business.
 These third party companies already have an expertise in handling and
manufacturing these products or services tailored to the entrepreneur’s needs at
lower cost.
 No changes in the brand name and the identity will be implemented because the
entrepreneur still holds the rights to such.
 Saves the entrepreneur from buying expensive machineries
 Risks of outsourcing
 When the outsource party closes its business
 Runs out of supplies
 Breaches the service-level agreement
 When it produces substandard products
 When the service stops
 Profits are shared with the third party
 The outsource party knows how the entrepreneur’s business works
 May shift to other companies
 The entrepreneur must protect its product through a trademark or a patent
and a noncompeting agreement or nondisclosure agreement.
 PATENT- the right to protect the entrepreneur regarding the product or service
 TRADEMARK- a sign or symbol that helps distinguishes the product from others.
 NONDISCLOSURE AGREEMENT- states that the third party will be
given full access to any confidential information provided that it
should not be disclosed to anyone else.
 Multiple Outsource Parties Advantages
 It helps continue the operation even if one of the third party stops
 The entrepreneur will have great bargaining power on the price and scope of the
product
 The entrepreneur may have choice to switch to other parties if one of them does
not perform well.
o Purchasing own products or service from present suppliers
 Purchasing finished products from a manufacturer or offering the services of another
company.
 The entrepreneur cannot own the brand name of the product or service.
 The manufacturer is allowed to sell to the entrepreneurs competitors
 The entrepreneur is one of the distribution hubs of the manufacturer (distribution
business, retailers, sari- sari stores, and franchises)
 Saves the cost of machines and manpower
 It allows entrepreneurs to buy and sell a broad range of finished products and established
services
 Switching to another manufacturer or service provider will be easy
 Will have a hard time establishing USP because all competitors offer exactly the same
products as yours
 The manufacturer can easily take the entrepreneur off the list when it wants to
 The manufacturer can charge unreasonable prices or go directly to end customers.
 LOGISTICS
o Entrepreneurs can also venture distributing their own products on their own without the aid of
distributor or agent.
o The entrepreneur will be the one in charged in manufacturing, warehousing, transportation,
inventory management, marketing, and selling the product or service.
 WAREHOUSING- storing the finished goods manufactured in a facility until they
are distributed to end users. Cost is usually substantial. Entrepreneur should
choose whether to buy a warehouse or rent an inexpensive space.
 TRANSPORTATION- process of efficiently transferring the products to retailers or
consumers
 Purchase energy-efficient vehicles
 Use the presence of distribution hubs- where the entrepreneur/manufacturer
combines the goods before delivery to retailers or end consumers
 INVENTORY- should be tracked religiously. Each of the inventories in the
warehouse, distribution hubs and manufacturing sites should be monitored.
 The law of supply and demand must be taken into account
 There shouldn’t be surplus of inventory especially if the product is perishable
 Make sure there is enough space to store and stock inventory
 Get insurance for your products
 Manufacture just enough products for the demand. Do not produce too much
product than what is demanded by the customers.