ENTREPRENEURSHIP 1st Trimester SY 2021-2022

Governor Pack Road, Baguio City, Philippines 2600

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: STEM 12
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 3 – ENTREP Subject Teacher: Kenny Jones A. Amlos

Operations and Production Management

At the end of this module, the learners should be able to:

1. explore key concepts operation and production management;
2. explain the importance of SIPOC in a business;
3. analyze the different techniques in measuring productivity; and
4. formulate a SIPOC analysis of a business.

What is Management?
Management is the science of coordinating and overseeing work performance of individuals working
together in organizations, so that they could efficiently and effectively accomplish their chosen aims
or goals.

Weihrich and Koontz (2005) defines management as the process of designing and maintaining an
environment for efficiently accomplishing selected aims.

Definition of Terms
• Business Operations is everything that happens within a company to keep it running and
earning money.
• Production is defined as the creation of goods and services.

OPERATIONS MANAGEMENT is involved with managing systems and processes that create goods
and/or provide services.

Operations Management in Manufacturing

To compete with other organizations, a company must convert resources (materials, labor,
money, information) into goods or services as efficiently as possible. The upper-level manager who
directs this transformation process is called an operations manager. The job of operations management
(OM) consists of all the activities involved in transforming a product idea into a finished product. In
addition, operations managers are involved in planning and controlling the systems that produce
goods and services. In other words, operations managers manage the process that transforms inputs
into outputs. Figure 6.1 illustrates these traditional functions of operations management.

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 ENTREPRENEURSHIP 1st Trimester SY 2021-2022
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: STEM 12
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 3 – ENTREP Subject Teacher: Kenny Jones A. Amlos

Figure 6.1. Transformational Process

Making the decisions involved in the effort to attain these goals is another job of operations
managers. Their responsibilities can be grouped as follows:
● Production planning. During production planning, managers determine how goods will be
produced, where production will take place, and how manufacturing facilities will be laid out.
● Production control. Once the production process is underway, managers must continually
schedule and monitor the activities that make up that process. They must solicit and respond
to feedback and make adjustments where needed. At this stage, they also oversee the
purchasing of raw materials and the handling of inventories.
● Quality control. The operations manager is directly involved in efforts to ensure that goods are
produced according to specifications and that quality standards are maintained.

Products: Goods and Services

Products that are manufactured or created or done are either goods or services. Some
characteristics of a good are the following:

- It is a tangible product.
- Consistent product definition.
- Production is usually separate from consumption.
- Good can be inventoried.
- Low customer interaction.

Some examples of goods are can of soft drinks, cell phones, ball pens, refrigerators, or cars.

Some characteristics of a service are the following:

- Intangible product
- Produced and consumed at the same time.
- Often unique
- High customer interaction
- Inconsistent product definition
- Often knowledge-based

4M’s of Operations Management

• METHODS
How entrepreneur will run the business from all the facets of the business
• MANPOWER
The expertise of qualified employees that can handle operational functions
- Job Description
Enumerates the duties and responsibilities of the potential employee, including the scope,
limitations, and terms and conditions of employment.
- Employee’s Qualification
a. Educational attainment – degree of the candidate’s knowledge of basic things.
b. Work experience- what to expect from the applicant and what he or she can
potentially contribute.
c. Specific Skills
d. Work Attitude – deals with the worker’s integrity and how he or she deals with his or her
coworker, bosses
● MACHINES
“best friend” of manpower in producing goods and offering services.
● MATERIALS
Entrepreneurs should decide on what route to choose when it comes to materials
requisitioning.
• Manufacturing own product

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 ENTREPRENEURSHIP 1st Trimester SY 2021-2022
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: STEM 12
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 3 – ENTREP Subject Teacher: Kenny Jones A. Amlos

• Outsourcing of manufacturing
• Purchasing own product

What Is SIPOC? How to Use a SIPOC Diagram in Operations management?

SIPOC is a tool that summarizes the inputs and outputs of one or more processes in table form. It’s an
acronym that stands for Suppliers, Inputs, Process, Outputs, and Customers. Some organizations use the
opposite acronym COPIS, which puts the customer first and illustrates the value of the customer to the
organization.

How to construct a SIPOC Diagram?

1. Start with the process

If you decide to construct a SIPOC diagram, you probably already know which process you want
to analyze. Write the name of the process into the middle column and briefly describe its key steps.
You can either list them or draw a simple flowchart to make it easier to comprehend. When
completing this step, keep a few things in mind:
• Make sure you know the exact starting and ending points of the process. If you don’t, this
can mess up the whole diagram once you move to the other columns.
• Don’t go into too much detail. Remember, SIPOC diagram is a high-level process map and
is designed to get a birds-eye overview of the process. Do not include decision points or
feedback loops.

2. Identify the outputs of the process

As with the previous step, focus on the key outputs of the process. In this step, write down the three
or more main outputs. Use nouns for the most part and keep the tone neutral. Your goal is to avoid
categorizing your outputs into good or bad ones – that’s not the point of the diagram.

3. Identify the customers

In this step, list the people who benefit from the process. These don’t have to be the literal
“customers.” E.g., if you are working on a diagram for an internal process, the “customers” are your
coworkers. Think of who benefits from this process. Who would be upset if the process is not
complete?
• When researching for this, step up your game by noting customers’ requirements in the
“Output” column.

4. List the inputs for the process

Here you write down the inputs required for the process to function properly. Just like with every
previous step, focus on the most important ones. Four to six main inputs should do.

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 ENTREPRENEURSHIP 1st Trimester SY 2021-2022
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: STEM 12
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 3 – ENTREP Subject Teacher: Kenny Jones A. Amlos

5. Identify the suppliers of the inputs

In the Suppliers column, write down the suppliers based on what inputs the process uses. Be sure
to mention any specific suppliers whose input has a direct influence on the output. For example,
imagine you’re doing a SIPOC diagram for the process “Making tomato sauce.” If the supplier has
an impact on the variation of “Taste” output, you definitely want to list them.

Sample SIPOC

Production Management can be defined as the management of the conversion process, which
converts land, labor, capital, and management inputs into desired outputs of goods and services. It is
also concerned with the design and the operation of systems for manufacture, transport, supply or
service.

Objective of Production Management

The objective of Production Management is to produce the desired product or specified
product by specified methods so that the optimal utilization of available resources is met with. Hence
the production management is responsible to produce the desired product, which has marketability
at the cheapest price by proper planning, the manpower, material and processes. Production
management must see that it will deliver right goods of right quantity at right place and at right price.
When the above objective is achieved, we say that we have effective Production Management
system.

Product vs. Service vs. Project

Product
Manufacturing system often produces standardized products in large volumes. The plant and
machinery have a finite capacity. The facilities constitute fixed costs, which are allocated to the
products produced. Variable costs, such as, labor cost and materials costs. While manufacturing the
product use value and economic values are added to the product. Hence the product is a store of
values added during manufacture. Because the input costs and output costs are measurable, the
productivity can be measured with certain degree of accuracy. Product can be transported to the
markets and stored physically until it is sold.

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 ENTREPRENEURSHIP 1st Trimester SY 2021-2022
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: STEM 12
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 3 – ENTREP Subject Teacher: Kenny Jones A. Amlos

Service
Service system present more uncertainty with respect to capacity and costs. Services are
produced and consumed in the presence of the customer. We cannot store the service physically.
Because of this the service organizations, such as Hotels, Hospitals, Transport Organizations and many
other service organizations the capacity must be sufficiently or consciously managed to
accommodate a highly variable demand. Sometimes services like legal practice and medical
practice involve Professional or intellectual judgments, which cannot be easily standardized. Because
of this the calculation of cost and productivity is difficult.

Project
Project system does not produce standardized products. The Plant, Machinery, Men and Materials are
often brought to project site and the project is completed. The project is of big size and remains in the
site itself after completion. As the costs can be calculated and allocated to the project with
considerable accuracy, Productivity can be measured. Once the project is completed, all the
resources are removed from site.

Functions of Production Management Department

The functions of Production Management depend upon the size of the firm. In small firms the
production Manager may have to look after production planning and control along with Personnel,6
Production and Operations Management, Marketing, Finance and Purchase functions. In medium
sized firms, there may be separate managers for Personnel, marketing and Finance functions. But the
production planning and control and Purchase and stores may be under the control of Production
management department. In large sized firms the activities of Production Management is confined to
the management of production activities only. As such, there are no hard and fast rule or guidelines
to specify the function of Production Management, but in the academic interest we can mention
some of the functions, which are looked after by the Production Management department.

They are:
• Materials: The selection of materials for the product. Production manager must have sound
Knowledge of materials and their properties, so that he can select appropriate materials for
his product. Research on materials is necessary to find alternatives to satisfy the changing
needs of the design in the product and availability of material resumes.

• Methods: Finding the best method for the process, to search for the methods to suit the
available resources, identifying the sequence of process are some of the activities of
Production Management.

• Machines and Equipment: Selection of suitable machinery for the process desired,
designing the maintenance policy and design of layout of machines are taken care of by
the Production Management department.

• Estimating: To fix up the Production targets and delivery dates and to keep the production
costs at minimum, production management department does a thorough estimation of
Production times and production costs. In competitive situation this will help the
management to decide what should be done in arresting the costs at desired level.

• Loading and Scheduling: The Production Management department has to draw the
timetable for various production activities, specifying when to start and when to finish the
process required. It also has to draw the timings of materials movement and plan the
activities of manpower. The scheduling is to be done keeping in mind the loads on hand
and capacities of facilities available.

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 ENTREPRENEURSHIP 1st Trimester SY 2021-2022
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: STEM 12
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 3 – ENTREP Subject Teacher: Kenny Jones A. Amlos

• Routing: This is the most important function of Production Management department. The
Routing consists of fixing the flow lines for various raw materials, components etc., from the
stores to the packing of finished product, so that all concerned knows what exactly is
happening on the shopfloor.

• Dispatching: The Production Management department has to prepare various documents

such as Job Cards, Route sheets, Move Cards, Inspection Cards for each and every
component of the product. These are prepared in a set of five copies. These documents
are to be released from Production Management department to give green signal for
starting the production. The activities of the shopfloor will follow the instructions given in
these documents. Activity of releasing the document is known as dispatching.

• Expediting or follow up: Once the documents are dispatched, the management wants to
know whether the activities are being carried out as per the plans or not. Expediting
engineers go round the production floor along with the plans, compare the actual with the
plan and feedback the progress of the work to the management. This will help the
management to evaluate the plans.

• Inspection: Here inspection is generally concerned with the inspection activities during
production, but a separate quality control department does the quality inspection, which
is not under the control of Production Management. This is true because, if the quality
inspection is given to production Management, then there is a chance of qualifying the
defective products also. For example, teaching and examining of students is given to the
same person, then there is a possibility of passing Production and Operations Management
7all the students in the first grade. To avoid this situation an external person does correction
of answer scripts, so that the quality of answers is correctly judged.

• Evaluation: The Production department must evaluate itself and its contribution in fulfilling
the corporate objectives and the departmental objectives. This is necessary for setting up
the standards for future. Whatever may be the size of the firm; Production management
department alone must do Routing, Scheduling, Loading, Dispatching and expediting. This
is because this department knows very well regarding materials, Methods, and available
resources etc. If the firms are small, all the above-mentioned functions (i to x) are to be
carried out by Production Management Department. In medium sized firms in addition to
Routing, Scheduling and Loading, Dispatching and expediting, some more functions like
Methods, Machines may be under the control of Production Management Department. In
large firms, there will be Separate departments for Methods, Machines, Materials and others
but routing, loading and scheduling are the sole functions of Production Management. All
the above ten functions are categorized in three stages, that is Preplanning, Planning and
control stages as shown in figure.1.1

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 ENTREPRENEURSHIP 1st Trimester SY 2021-2022
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: STEM 12
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 3 – ENTREP Subject Teacher: Kenny Jones A. Amlos

Types of Production Systems

The organization of manufacturing systems, also planning and control of production greatly
depends on type of product type of the product line. Basic principles that guide the formation of
planning policy and its execution may be the same for all the manufacturing concerns. But emphasis
on a particular aspect of production management in fulfilling of specific requirement of the plant and
the management approach to the problems of inventory, machine selection, machine setting, tooling,
routing, scheduling, loading, follow up and general control will differ depending on the type of
production system.

Three main factors generally determine this aspect are:

• Type of Production i.e., quantities of finished products and regularity of manufacture. For
example, whether Job production or Batch Production or Continuous Production.
• Size of the Plant i.e., Small Industry, Medium sized Industry or Large Industry.
• Type of Production: In general, there are three classifications in types of Production
system. They are discussed below.
o Job Production: In this system Products are manufactured to meet the
requirements of a specific order. The quality involved is small and the
manufacturing of the product will take place as per the specifications given by
the customer. This system may be further classified as.
▪ The Job produced only once: Here the customer visits the firm and book his
order. After the completion of the product, he takes delivery of the product
and leaves the firm. He may not visit the firm to book the order for the same
product. The firm must plan for material, process, and manpower only after
receiving the order from the customer. The firms have no scope for pre-
planning the production of the product.
▪ The job produced at irregular intervals: Here the customer visits the firm to
place orders for the same type of the product at irregular intervals. The firm
will not have any idea of customer’s visit. Here also planning for materials,
process and manpower will start only after taking the order from the
customer. In case the firm maintains the record of the Jobs Produced by it,
it can refer to the previous plans, when the customer arrives at the firm to
book the order.

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 ENTREPRENEURSHIP 1st Trimester SY 2021-2022
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: STEM 12
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 3 – ENTREP Subject Teacher: Kenny Jones A. Amlos

▪ The Jobs Produced periodically at regular intervals: In this system, the

customer arrives at the firm to place orders for the same type of product at
regular intervals. Here firm knows very well that the customer visits at regular
intervals, it can plan for materials, and process and manpower and have
them in a master file. As soon as the customer visits and books the order,
the firm can start production. If the volume of the order is considerably large
and the number of regularly visiting customers are large in number, the Job
Production system slowly transform into Batch Production system.

o Batch Production: Batch Production is the manufacture of number of identical

products either to meet the specific order or to satisfy the demand. When the
Production of plant and equipment is terminated, the plant and equipment can
be used for producing similar products. This system also can be classified under
three categories.
▪ A batch produced only once: Here customer places order with the firm for
the product of his specification. The size of the order is greater than that of
job production order. The firm must plan for the resources after taking the
order from the customer.
▪ A Batch produced at irregular intervals as per Customer order or when the
need arises: As the frequency is irregular, the firm can maintain a file of its
detailed plans and it can refer to its previous files and start production. 10
Production and Operations Management.
▪ A Batch Produced periodically at known Intervals: Here the firm either
receives order from the customer at regular intervals or it may produce the
product to satisfy the demand. It can have well designed file of its plans,
material requirement and instructions for the ready reference. It can also
purchase materials required in bulk in advance. As the frequency of regular
orders goes on increasing the Batch Production system becomes Mass
Production System. Here also, in case the demand for a particular product
cease, the plant and machinery can be used for producing other products
with slight modification in layout or in machinery and equipment.

o Continuous Production: Continuous Production system is the specialized

manufacture of identical products on which the machinery and equipment is fully
engaged. The continuous production is normally associated with large quantities
and with high rate of demand. Hence the advantage of automatic production is
taken. This system is classified as
▪ Mass Production: Here same type of product is produced to meet the
demand of an assembly line or the market. This system needs good
planning for material, process, maintenance of machines and instruction
to operators. Purchases of materials in bulk quantities is advisable.
▪ Flow Production: The difference between Mass and Flow Production is the
type of product and its relation to the plant. In Mass Production identical
products are produced in large numbers. If the demand falls or ceases, the
machinery and equipment, after slight modification be used for
manufacturing products of similar nature. In flow production, the plant and
equipment are designed for a specified product. Hence if the demand falls
for the product or ceases, the plant cannot be used for manufacturing
other products. It is to be scrapped.

The examples for the above discussed production system are:

▪ Job Production Shop: Tailors shop; cycle and vehicles repair shops, Job
typing shops, small Workshops.
▪ Batch Production Shop: Tyre Production Shops, Readymade dress
companies, Cosmetic manufacturing companies...etc.

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 ENTREPRENEURSHIP 1st Trimester SY 2021-2022
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: STEM 12
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 3 – ENTREP Subject Teacher: Kenny Jones A. Amlos

▪ Mass Production Shops: Components of industrial products,

▪ Flow Production: Cement Factory, Sugar factory, Oil refineries...etc.,

Producing for Quality

But what is quality? According to the American Society for Quality, the term quality refers to “the
characteristics of a product or service that bear on its ability to satisfy stated or implied needs.” When
you buy a DVD player, you expect it to play DVDs. When you go to a drive-through window, you expect
to be served in a reasonable amount of time. If your expectations are not met, you’ll conclude that
you’re the victim of poor quality.

Quality Management
Total quality management (TQM), or quality assurance, includes all the steps that a company
takes to ensure that its goods or services are of sufficiently high quality to meet customers’ needs.
Generally speaking, a company adheres to TQM principles by focusing on three tasks:
● Customer Satisfaction. Companies that are committed to TQM understand that the purpose of
a business is to generate a profit through customer satisfaction. Thus, they let their customers
define quality by identifying desirable product features and then offering them. They encourage
customers to tell them how to offer services that work the right way.
● Employee Involvement. Successful TQM requires that everyone in the organization, not simply
upper-level management, commits to satisfying the customer. When customers wait too long
at a drive-through window, it’s the responsibility of a number of employees, not the manager
alone. A defective DVD isn’t solely the responsibility of the manufacturer’s quality control
department; it’s the responsibility of every employee involved in its design, production, and even
shipping. To get everyone involved in the drive for quality assurance, managers must
communicate the importance of quality to subordinates and motivate them to focus on
customer satisfaction. Employees have to be properly trained not only to do their jobs but also
to detect and correct quality problems. In many companies, employees who perform similar
jobs work as teams, sometimes called quality circles, to identify quality, efficiency, and other
work-related problems, to propose solutions, and to work with management in implementing
their recommendations.
● Continuous Improvement. An integral part of TQM is a continuous improvement: the
commitment to making constant improvements in the design, production, and delivery of
goods and services. Improvements can almost always be made to increase efficiency, reduce
costs, and improve customer service and satisfaction. Everyone in the organization is constantly
on the lookout for ways to do things better.

References:

Edralin,D.M. Entrepreneurship. Quezon City: Vibal Group Inc.

Kawasaki, G. (2004). Art of start: The time-tested, battle-hardened guide for anyone starting anything.
USA: Penguin Group
Skripak, S. J. (2016). Fundamentals of business. USA: Pamplin College of Business and Virginia Tech
Libraries

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