Operations Management Lesson 13

ENTREPRENEURSHIP
Lecture #13
OPERATIONS
MANAGEMENT
OPERATIONS MANAGEMENT
 An area of business concerned with the production of
goods & services & involves the responsibility of
ensuring that business operations are efficient (using
as little resources as needed) & effective (meeting
customer requirements).
 Is concerned with managing the processes that
convert inputs ( material, labour & energy) into
outputs (goods & services)

 Historically the field of operations was focused on
manufacturing organizations & was called
industrial or production management.
 Now-a-days concepts of quality, process analysis,
job design, facility location, capacity, layout,
inventory & scheduling are applied equally to
manufacturing & provision of services
 Benefits are: improved quality, reduced costs, &
increased value to customers
Areas Covered
 1. Plant location and layout
 2. Inventory management
 3. Cost control
 4. Quality Control
 5. Risk management
Interfunctional Connections
Marketing
Engineering
Accounting
Operations
Human Finance
Resources
OPERATIONS MANAGEMENT SYSTEM
External environment
Customer or client
participation
Inputs
Operations &
•Workers
Transformations
•Managers
•Equipment
•Facilities 1 3 Outputs
•Materials •Goods
•Services 5 •Services
•Land
•Energy 2 4
Information on
performance
 All businesses (manufacturing or non-
manufacturing) should include an
operations plan as part of the business
plan.
Retail Operation or Service
If the business contains a Retail Operation or Service:
From whom will merchandise be purchased?
1.
How will the inventory control system operate?

2.
What are the storage needs of the venture and how will
3.
they be promoted?
How will the goods flow to the customer?
4.
Chronologically, what are the steps involved in a business

5.
transaction?
What are the technology utilization requirements to
6.
service customers effectively?

Plant location and layout
 Entrepreneur may need information on:
1. Location
2. Manufacturing operations
3. Raw materials
4. Equipment
5. Labor skills
6. Space
7. Overhead
 Most of the information should be incorporated directly into the
business plan.
 Location:
• The company’s location and its
accessibility to customers, suppliers,
and distributors need to be determined.
 Manufacturing Operations:
• Basic machine and assembly operations
need to be identified, as well as whether
any of these operations would be
subcontracted and to whom
 Manufacturing Operations:
• Assembly Lines have significantly
increased productivity in manufacturing
establishments
 Raw Materials:
• The raw materials needed and suppliers’
names, addresses, and costs should be
determined.
 Equipment:
• The equipment needed should be listed,
with its cost and whether it will be
purchased or leased
 Labour skills:
• Each unique skill needed, the number of
personnel required for each skill, pay
rate, and a assessment of where and
how these skills will be obtained should
be determined
 Space:
• The total amount of space needed
should be determined, including
whether the space will be owned or
leased.
Inventory management
 Just-in-time Systems
• Reduce the need for large stocks of
inventory
• Reduce overhead costs – warehousing
 Entrepreneur needs to:
• Determine value of inventory.
• Determine how inventory affects the
cost of goods sold (income statement).
• Decide on FIFO (First Items In
Inventory) or LIFO (Last Items In
Inventory).
Managing Fixed Assets
Managing Fixed Assets
 Involve long-term commitments and large
investments for the new venture.
 Equipment
• require servicing and insurance.
• affect utility costs.
• depreciate over time.
 Leasing can be an alternative to buying.

Production Plan
Production Plan
 Details how the product(s) will be
manufactured.
1. Will you be responsible for all or part of the
manufacturing operation?
2. If some manufacturing is subcontracted, who will be
the subcontractors? (Give names and addresses.)
3. Why were these subcontractors selected?
4. What are the costs of the subcontracted
manufacturing? (Include copies of any written
contracts.)
Production Plan
6. What will be the layout of the production process?
(Illustrate steps if possible.)
7. What equipment will be needed immediately for
manufacturing?
8. What raw materials will be needed for
manufacturing?
9. Who are the suppliers of new materials and what
are the appropriate costs?
10.What are the costs of manufacturing the product?
11.What are the future capital equipment needs of the
venture?
Cost control
Cost control
 Entrepreneur needs to:
• Assess each item to determine cost reduction

• Determine raising prices to ensure positive
profits.
• Compare current actual costs with prior
incurred costs.
• Allocate expenses as effectively as possible, by
product.
• Avoid arbitrary cost allocation.
Record Keeping
Record Keeping
 Helpful to consider using a software
package.
 Maybe necessary to enlist the
support and services of an
accountant/ consultant.
 Vitally important to use a system for
storing and using customer
information.
Taxes
Taxes
 Entrepreneur will be required to:
• Withhold taxes for employees.
• Pay a number of taxes
• Allocate taxes as part of any budget.
• File end-of-year returns of the business.
• Consider use of a tax accountant.
Quality control
Quality control
 Two problems for the entrepreneur:
1. Maintaining quality control of

products and services
2. Establishing effective managerial

controls
Quality control
 Standardization in the supplies,
products, and services provided
helps ensure that quality standards
are maintained.
 Standardization also supports a

consistent image on which the
business depends for expansion.
Risk management
Risk management
 Identifies potential hazards and alternative
strategies to meet business plan goals and
objectives.
 Assessment of risk should be based on:

• Potential risks to the new venture.
• Discussion of what might happen if risks
become reality.
• Strategy employed to prevent, minimize, or
respond.
Risk management
 Major risks for a new venture could result from:
• Competitor’s reaction.
• Weaknesses in marketing/ production/ management
team.
• New advances in technology.
Management/ Supervision of
Workers
Management/ Supervision of Workers
 Preparation of job descriptions.
 Itemizing specifications.
 Outsourcing of HR responsibilities:
• Recruiting.
• Hiring.
• Establish benefit programs.
• Payroll.
• Firing.
• Permanent vs. part-time.
• Corporate Culture.
Overcoming Pressures on
Employee Management
 Activities to institute a more
participative style of management:
• Establishing a team spirit.

• Communicating with employees.
• Providing feedback.
• Delegating some responsibility to
employees.
• Providing continuous training for employees.
Overcoming Entrepreneur’s
Time Management Pressure
Overcoming Entrepreneur’s
Time Management Pressure
 Benefits of effectively managing
time:
• Increased productivity.
• Increased job satisfaction.
• Improved interpersonal relationships.
• Reduced time anxiety and tension.
• Better health.
Basic Principles of Time
Management (1 of 2)
 Principle of desire: a recognition of the need to
change personal attitudes and habits regarding
the allocation of time.
Management (1 of 2)
 Principle of effectiveness: a focus on the most
important issues.
Management (1 of 2)
 Principle of analysis: understanding how time is
currently being allocated, and where it is being
inefficiently invested.
Management (2 of 2)
 Principle of teamwork: acknowledgment that only a small
amount of time is actually under one’s control and that
most of one’s time is taken up by others.
Management (2 of 2)
 Principle of prioritized planning: categorization of tasks by
their degree of importance and then the allocation of time
to tasks based on this categorization.
Management (2 of 2)
 Principle of reanalysis: periodic review of one’s time
management process.
The End

Operations Management Lesson 13

Uploaded by

Copyright:

Available Formats

Operations Management Lesson 13

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Operations Management Lesson 13

Uploaded by

Copyright:

Available Formats

ENTREPRENEURSHIP

outputs (goods & services)

How will the inventory control system operate?

Chronologically, what are the steps involved in a business

service customers effectively?

 Leasing can be an alternative to buying.

• Assess each item to determine cost reduction

1. Maintaining quality control of

2. Establishing effective managerial

 Standardization also supports a

 Assessment of risk should be based on:

• Establishing a team spirit.

You might also like