ENTREPRENEURSHIP PDF - Quipper School 4Ms of Operations

Unit 10: Method, Machine, Materials, and Manpower (4Ms of Operations) Lesson 1: The 4Ms of Operations Contents Engage 1 Introduction 1 Objective 1 Explore...

Unit 10: Method, Machine, Materials, and Manpower (4Ms of Operations) Lesson 1: The 4Ms of Operations Contents Engage 1 Introduction 1 Objective 1 Explore 2 Explain and Elaborate 3 Method 3 Machine 6 Materials 7 Manpower 9 Extend 10 Activity 10 Evaluate 11 Wrap Up 13 Bibliography 14 Unit 10.1: The 4Ms of Operations Engage Introduction Fig. 1. A photo of a man during the production of a product. Aside from making a unique distinction of a product through branding, what else should an entrepreneur need to focus on? In opening a business, the entrepreneur should also consider the other factors that need to be dealt with for it to become successful, particularly the method, machine, materials, and manpower needs. Objective In this lesson, you should be able to describe the 4Ms (method, machine, materials, and manpower) of operations of a business. DepEd Competency Describe the 4Ms (Method, Machine, Materials, Manpower) of operations in relation to the business opportunity. (CS_EP11/12ENTREP-0h-j-12) 1 Unit 10.1: The 4Ms of Operations Explore Assume that you are the owner of a business. Answer the following questions. 10 minutes Guide Questions 1. What are the qualifications that you will consider in hiring an employee for your business? 2. How will you ensure the success of the production of your product? 3. How will you ensure the continuous availability of the raw materials needed for production? 2 Unit 10.1: The 4Ms of Operations Explain and Elaborate Method Method refers to the process that is strictly followed in the manufacturing of a business product. The transformation of raw materials into a finished product is called manufacturing. The sequence of operations should be clearly defined to ensure proper execution that will guarantee the consistency of the quality of the product. There are three elements of manufacturing: 1. Input - This refers to the materials or ingredients that are being used in creating the product. 2. Process - This refers to the transformation phase where the raw materials or ingredients are being processed by manpower and machines to come up with the final product. 3. Output - This refers to the final product that is intended to be sold to the target customers. How will you describe the ideal set-up of your production area/site of your business? Manufacturing Sites Options There are three options that an entrepreneur can choose for the operation of the business: 1. Home-based - This site option is the cheapest among the three and highly flexible. This is the best choice for most start-up businesses that do not have the capacity to establish a manufacturing site yet. 2. Commercial space for rent - This is the recommended option if the business already needs a commercial space for the processing of the product and if the home-based option is not viable or feasible. 3 Unit 10.1: The 4Ms of Operations 3. Commercial space purchase - This is the ideal option for established businesses, but this requires the biggest amount of capital. It provides the entrepreneur with the freedom and flexibility to design, manage, and run the commercial space completely. Remember The manufacturing site and production schedule are determined based on the projected demand. The manufacturing site layout affects the efficiency of business operations. A good layout will result in a lower production cost. Depending on the size of the business, related areas are either grouped in a single area or separately in medium or large enterprises. In a bigger manufacturing setting, the receiving area is normally separated from the assembly and delivery area. Major manufacturing layouts are categorized into two: 1. Product-focused - These facilities are prearranged according to the flow of the manufacturing operations. It is recommended for a job-shop type of operation. 2. Process-based - These facilities are grouped according to their function. This is used for those with batch or continuous production operations set-up. Table 1. Comparison between product-focused and process-based manufacturing layouts Product-focused Process-based Product High volume but a low variety of Low volume but a wide variety of production products products Production High fixed cost Costing estimate is done before cost the production process. Equipment Uses special purpose equipment Uses general-purpose equipment and labor and has generally low-skilled labor and has skilled personnel Scheduling of Relatively simple scheduling Complex scheduling production 4 Unit 10.1: The 4Ms of Operations Remember In determining a site, take into consideration the applicable standards as well as necessary permits required by the authorities. Waste disposal and water treatment facilities are necessary to protect the environment. The requirements of the Department of Environment and Natural Resources (DENR), Department of Health (DOH), Local Government Units (LGU), and other government authorities should be considered. Example Fig. 2. A process-based manufacturing layout of a plant The plant is divided into several job shops. Each job shop is composed of uniquely skilled workers that process the product. Different processing requirements are done in each job shop to come up with a final product. 5 Unit 10.1: The 4Ms of Operations Why are machines important to a business? Machine Machine refers to the tools, facilities, and systems that are used to produce a product. The machinery and equipment required can be identified after the manufacturing layout of the business has already been determined. The determination of the equipment size should be closely monitored with the manufacturer or suppliers. The origin of the machine, whether local or imported, and the country where it came from should be known, and the availability of after-sales service and spare parts should be clarified with the suppliers. The delivery schedule, terms of payment, and other arrangements should be clearly stated in the quotation or contract agreement. Equipment and Other Facilities The equipment to be used must be strategically placed within the production site or within the service delivery area. A facility plan must be prepared to determine the economical way to manufacture products. The site should adapt to how massive or little of the sizes of equipment will be. It should be well-ventilated and well-lit. Employees or machine operators should bear rigorous training before they are allowed to operate the equipment. Information and Communications Technology Some businesses use the following information and communication technology equipment to better serve their customers: landline phones to be used for telemarketing and customer service; mobile phones to cater the option to have mobile applications for the business, for order-taking, payments, marketing, marketing research, mobile banking, and Internet promotion; computers for Internet marketing, taking orders, and online response and queries; point of sale (POS) machines for charging debit/credit card, tracking sales, storing data, and analyzing purchases; accounting and inventory software for accounting business transactions, profitability, sales, and inventory; and 6 Unit 10.1: The 4Ms of Operations website for order taking, 24/7 marketing, online conversations, and collecting customer information. Remember Machines are not limited to physical equipment only but can also pertain to new technologies. Entrepreneurs’ Responsibilities in Safeguarding Machines The entrepreneur has the foremost responsibility of safeguarding the machines used in production. These are: 1. protecting against fraudsters by creating strong passwords and used only by authorized employees; 2. training of employees in keeping information confidential, including passwords; 3. constant updating and checking of software programs against viruses and hackers; 4. assuring that there is a business continuity program (BCP) should machines not work properly; 5. Appointing experts in charge of the business’s software and computers; and 6. having insurance coverage for equipment. How are materials important in operating a business? Materials Materials refer to the raw items that are used in creating a product or performing a service. The materials’ specifications, quantity needed, and the schedule of delivery should be clearly planned. The reliability of the suppliers should also be proven, and single sourcing of materials should be avoided. 7 Unit 10.1: The 4Ms of Operations Materials Requisition Options 1. Manufacturing of own materials- In this option, a large amount of capital must be prepared because all expenses in the manpower, machines, and materials will be shouldered by the entrepreneur. 2. Outsourcing- In this option, a third-party manufacturer will do the manufacturing of the materials needed. These third-party companies are considered well versed in producing such material and have tailored it to the entrepreneur’s needs at a lower cost. It saves the entrepreneur from buying expensive machinery. Remember There are also risks in having outsourced materials. The third-party company may run out of supply or might produce substandard materials. When it breaches the service-level agreement, the entrepreneur may shift to other providers. 3. Purchasing own products from present suppliers - In this option, the entrepreneur will purchase finished products from a manufacturer. The manufacturer of the product is also allowed to sell to the entrepreneurs’ competitors. The entrepreneur becomes one of the distributors of the manufacturer (distribution business, retailers, sari-sari stores, and franchises). With that, the entrepreneur saves the cost of machines and manpower and allows him to buy and sell a broad range of finished products. Pricing Methods There are three methods in determining the price of a product or service: 1. Cost-oriented pricing - It refers to a method in which some percentage is added to the cost of the product in deciding the final price based on the desired margin. Example: grocery stores, fast food chains 8 Unit 10.1: The 4Ms of Operations 2. Competition-oriented pricing - It refers to a method in which the entrepreneur considers the prices of its competitors’ products to set the prices of its own products. Example: gasoline stations 3. Demand-oriented pricing - It refers to a method in which the demand dictates if the entrepreneur will make the price higher or lower. Example: An airline in off-peak days will charge less in tickets or will conduct promos, unlike in on-peak days like holidays, and on special occasions, they will spike up the ticket prices. Manpower Manpower refers to the human resources who will handle the business operations. As the business grows, the entrepreneur should hire qualified employees that can handle operational functions so that he can focus on the strategic and management functions of the business. Manpower requirement is one of the factors in the high expenses in business, but it is also the most instrumental to its success. Personnel should be arranged accordingly, from the managerial, supervisory to the staff or workforce needed in the operation of the business. In the selection process, the entrepreneur should identify applicants that have the necessary knowledge, skills, and other qualifications that will help the business achieve its goals. Why hiring employees for your business must be taken with great precaution? Qualification Standards There are three kinds of qualification standards: 1. Manpower - It refers to the personality required to a worker’s overall physical attributes. 2. Experience - It refers to the length of working experience in relation to the job criteria required as a worker. 9 Unit 10.1: The 4Ms of Operations 3. Academics - It refers to the workers’ academic qualifications or educational attainment required of them to perform the job. It is important to identify the key or the best people who will manage the business. The owner and management team should have a good track record of work experience and the ability to help the company grow and be successful. A more thorough discussion of these will be presented in a separate lesson in this unit. Extend Activity If you are a business owner, how will you utilize the 4Ms of operations? Draw an illustration of the 4Ms of operations in relation to the business you have in mind. 10 Unit 10.1: The 4Ms of Operations Guide Read the instructions carefully. Review and relate the discussions on 4Ms of operation to the business you have in mind. Evaluate A. Explain the meaning of the following concepts in relation to business operations. 1. Method 2. Machine 3. Materials 11 Unit 10.1: The 4Ms of Operations 4. Manpower 5. Manufacturing site options B. Search five products or services for each category of pricing methods. Provide a short explanation of why such a product falls under the identified category. Pricing Method Product Explanation 1. 2. Cost-oriented pricing 3. 4. 5. 12 Unit 10.1: The 4Ms of Operations Pricing Method Product Explanation 1. 2. Competition-oriented pricing 3. 4. 5. Pricing Method Product Explanation 1. 2. Demand-oriented pricing 3. 4. 5. Wrap Up ___________________________________________________________________________________________ Method refers to the process which is strictly followed in the manufacturing of a business product. Machine refers to the tools, facilities, and systems that are used to produce a product. Materials refer to the raw items that are used in creating a product or performing a service. Manpower refers to the human resources who will handle the business operations. 13 Unit 10.1: The 4Ms of Operations ___________________________________________________________________________________________ Bibliography “4 Types of Pricing Methods – Explained!” Economics Discussion. Accessed April 3, 2020. http://www.economicsdiscussion.net/price/4-types-of-pricing-methods-explained/38 41. “Boundless Business.” Lumen. Accessed April 3, 2020. https://courses.lumenlearning.com/boundless-business/chapter/pricing-methods/. “Four Process Strategies.” Bilingual Online. Accessed April 3, 2020. http://bilingualonline.net/contents/Turabo/MANA705/week_4/4_1.html. Peters, Michael & Robert Hisrich. Entrepreneurship 4th Edition. McGraw-Hill Book Co., 1999. Your Guide in Starting a Small Business. Department of Trade and Industry, 2015 14