ENTREPRENEURSHIP

Quarter 2: Week 1
MELC:

 Describe the 4M’s (Manpower, Method, Machine, Materials) of operations in

relation to the business opportunity;

DAY 1

PRODUCTION MANAGEMENT
E.S. Buffa defines production management as that which, “ “ deals with decision
making related to production processes so that the resulting goods or services are
produced according to specifications, in the amount and by the schedule
demanded and out of minimum cost.”

Operations Management, is about how organizations produce or deliver the goods

and services that provide the reason for their existence. Operations can be seen as
one of many functions (e.g. marketing, finance, personnel) within the organization.
The operations function can be described as that part of the organization devoted
to the production or delivery of goods and services. This means all organizations
undertake operations activities because every organization produces goods and/or
services.

Production management also deals with decision-making regarding the quality,

quantity, cost, etc., of production. It applies management principles to production.
Also, production management is a part of business management. It is also called
“production function.”
Production management is slowly being replaced by operations management.
According to Elwood Spencer Buffa,( year?) Production management deals with
decision-making related to production processes so that the resulting goods or
service is produced according to specification, in the amount and by the schedule
demanded and at minimum cost.”It also tries to improve the efficiency of
organizations. An efficient organization can face competition effectively. As such,
production management ensures full or optimum utilization of available production
capacity.

IMPORTANCE OF PRODUCTION MANAGEMENT

The importance of production management to the business firm:

1. Accomplishment of firm’s objectives: Production management helps the business
firm to achieve all its objectives. It produces products, which satisfy the customers’
needs and wants. So, the firm will increase its sales. This will help it to achieve its
objectives.
2. Reputation, Goodwill and Image: Production management helps the firm to
satisfy its customers. This increases the firm’s reputation, goodwill and image. A
good image helps the firm to expand and grow.
3. Helps to introduce new products: Production management helps to introduce
new products in the market. It conducts Research and development (R&D). This
helps the firm to develop newer and better quality products. These products are
successful in the market because they give full satisfaction to the customers.

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4. Supports other functional areas: Production management supports other
functional areas in an organization, such as marketing, finance, and personnel.
The marketing department will find it easier to sell good-quality products, and the
finance department will get more funds due to increase in sales. It will also get
more loans and share capital for expansion and modernization. The personnel
department will be able to manage the human resources effectively due to the
better performance of the production department.
5. Helps to face competition: Production management helps the firm to face
competition in the market. This is because production management produces
products of right quantity, right quality, right price and at the right time. These
products are delivered to the customers as per their requirements.
6. Optimum utilization of resources: Production management facilitates optimum
utilization of resources such as manpower, machines, etc. So, the firm can meet its
capacity utilization objective. This will bring higher returns to the organization.
7. Minimizes cost of production: Production management helps to minimize the
cost of production. It tries to maximize the output and minimize the inputs. This
helps the firm to achieve its cost reduction and efficiency objective.
|8. Expansion of the firm: The Production management helps the firm to expand
and grow. This is because it tries to improve quality and reduce costs. This helps
the firm to earn higher profits. These profits help the firm to expand and grow.

The importance of production management to customers and society:

1. Higher standard of living: Production management conducts continuous
research and development (R&D). So they produce new and better varieties of
products. People use these products and enjoy a higher standard of living.
2. Generates employment: Production activities create many different job
opportunities in the country, either directly or indirectly. Direct employment is
generated in the production area, and indirect employment is generated in the
supporting areas such as marketing, finance, customer support, etc.
3. Improves quality and reduces cost: Production management improves the quality
of the products because of research and development. Because of large-scale
production, there are economies of large scale. This brings down the cost of
production. So, consumer prices also reduce.
4. Spread effect: Because of production, other sectors also expand. Companies
making spare parts will expand. The service sector such as banking, transport,
communication, insurance, BPO, etc. also expand. This spread effect offers more
job opportunities and boosts economy.
5. Creates utility: Production creates Form Utility. Consumers can get form utilityin
the shape, size and designs of the product. Production also creates time utility,
because goods are available whenever consumers need it.
6. Boosts economy: Production management ensures optimum utilization of
resources and effective production of goods and services. This leads to speedy
economic growth and well-being of the nation.

PRODUCTION
The process and methods used to transform tangible inputs (raw materials, semi-
finished goods, subassemblies) and intangible inputs (ideas, information,
knowledge) into goods or services. Resources are used in this process to create an
output that is suitable or has exchange value.Production is the process by which
raw materials and other in-outs are converted into finished products.

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The objective of production management is “to produce goods and services of right
quality and quantity at the right time and right manufacturing cost.
1. Right quality. The quality of product is established based upon the customer
needs. The right quality is not necessarily best quality. It is determined by the cost
of the product and the technical characteristics as suited to the specific
requirements.
2. Right quantity. The manufacturing organization should produce the products
in right number. If they are produced in excess of demand, the capital will block up
in the form of inventory and if the quantity is produced in short of demand, it leads
to shortage of products.
3. Right time. Timeliness of delivery is one of the important parameters to judge
the effectiveness of production
department. So, the production department has to make the optimal utilization of
input resources to achieve its objectives.
4. Right manufacturing cost. Manufacturing costs are established before the
product is actually manufactured. Hence, all attempts should be made to produce
the products at pre-established cost, so as to reduce the variation between actual
and the standard (pre-established) cost.

WHAT IS OPERATIONS?
Operations: Activities involved in the day-to-day functions of the business
conducted for the purpose of generating profits.
According to the business dictionary, operations is defined as jobs or tasks of one
or more elements or subtasks, performed typically in one location. Operations
transform resource or data into desired goods, services, or results, and create and
deliver value to the customers. Two or more connected operations constitute a
process, and are generally divided into four basic categories: (1) processing, (2)
inspection, (3) transport, and (4) storage.

Production is the drive train that gets us where we are going. Production is both
reactive and proactive, almost simultaneously. It reacts to what is sold today and
must meet the expectations set by the sales team; also it must anticipate what
most likely will be needed in the near future. The key for production is to have
procedures and processes that can accomplish both. Once our procedures are set
up to maximize efficiency, it is time to train the production staff on their individual
responsibilities centred on the 4 Ms of Production.

4 M’s of Operations in Relation to the Business Opportunity and

Developing Business Model

In your previous lesson, you learned about the 7P’s of Marketing Mix -
Product, Place, Price, Promotion, People, Packaging and Positioning in relation to
business opportunity, wherein marketing is about creating and accumulating
customers. Marketing plans are intended to capture a market portion and to
setback competitors. Brand name was also introduced, where it is a name, symbol,
or other feature that distinguishes a seller’s goods or services in the marketplace.
Your brand is one of the greatest assets because your brand is your customers’
over-all experience of your business. Experts believed that a good brand can result
in better loyalty for its customers, a better corporate image and a more relevant
identity.

The most serious issues in the whole production system are the inputs and the
transformation process. Their quality determines the quality of the output.

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The factors involved in the input and the production process are usually referred
to as the Four M’s of production, namely Manpower, Method, Machine, and
Materials.

Manpower
Talks about human labor force involved in the manufacture of products. It is
measured as the most serious and main factor of production. The entrepreneur
must determine, attain and match the most competent and skilled employees with
the jobs at the most appropriate time period. Educational qualifications and
experience, status of employment, numbers of workers required, skills and
expertise required for the job are some of the manpower criteria that must be
highly considered by the entrepreneur.

Material
Talks about raw materials necessary in the production of a product. Materials
mainly form part of the finished product. Just in case the resources are below
standard, the finished product will be of unsatisfactory as well. The entrepreneur
may consider cost, quality, availability, credibility of suppliers and waste that the
raw material may produce.

Machine
Discusses about manufacturing equipment used in the production of goods or
delivery of services. In the process of selecting the type of equipment to purchase,
the entrepreneur may consider types of products to be produced, production
system to be adopted, cost of the equipment, capacity of the equipment, availability
of spare parts in the local market, efficiency of the equipment and the skills
required in running the equipment.

Method
Production method discusses the process or way of transforming raw materials
to finished products. The resources undergo some stages before it is finalized and
becomes set for delivery to the target buyers. The selection of the method of
production is dependent on product to produce, mode of production,
manufacturing equipment to use and required skills to do the work.

Product Description
It is the promotion that explains what a product is and why it’s worth buying?
The purpose of a product description is to provide customers with details around
the features and benefits of the product so they’re obliged to buy. Know who your
target market is, focus on the product benefits, tell the full story, use natural
language and tone, use power words that sell, and use good images. These are
guidelines for you to have a good product description; since some customers are
very particular with it since they consider the welfare of their family, if it is safe to
use.

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Prototyping
A duplication of a product as it will be produced, which may contain such details
as color, graphics, packaging and directions. One of the important early steps in
the inventing process is making a prototype. Benefits are the reasons why
customers will decide to buy the products such as affordability, efficiency or ease of
use. The features of the product or service merely provide a descriptive fact about
the product or service. It is better to test your product prototype to meet customers’
needs and expectations; and for your product to be known and saleable. Pretesting
of the product or service is similar to a sample of the product or service given to the
consumer free of cost in order that he/she may try the product before committing
to a purchase.

Supplier
An entity that offers goods and services to another business. This entity is
among of supply chain of a business, which may offer the main part of the value
contained within its products. Certain suppliers may even involve in drop shipping,
where they ship goods directly to the customers of the buyer.

Suppliers are your business partners; without them your business will not live.
You need them as much as you need your customers to be satisfied. But as an
entrepreneur you have to choose a potential supplier that has loyalty and value
your partnership; a supplier that would lead you to the fulfillment of your business
objectives, mission and vision.

Value chain is a method or activities by which a company adds value to an

item, with production, marketing, and the provision of after-sales service. The main
goal and benefit of a value chain, and therefore value chain analysis, is to make or
support a competitive benefit.

A supply chain is a structure of organizations, people, activities, data, and

resources involved in moving a product or service from supplier to customer. The
main objective of supply chain management includes management of a varied
range of components and procedures, for instance, storing of raw materials,
handling the inventory, warehousing, and movement of finished product from the
point of processing to the point of consumption.