Business Planning and Production Processes PDF

# Unlocking of Difficulty ## Material - It is the source of the raw materials needed in the production. - The manager must secure that all the materials are made available. - Materials should be high quality in a low cost of price. ## Production Process - The production process utilizes raw m...

# Unlocking of Difficulty ## Material - It is the source of the raw materials needed in the production. - The manager must secure that all the materials are made available. - Materials should be high quality in a low cost of price. ## Production Process - The production process utilizes raw materials to create a finish product for the customer. ## Identifying Material - This is one of the most important factors in production. - After identifying the necessary material to produce your product, you are ready to convert the raw materials into a final product, until it reaches the customer. ## Value Chain - Its a process where a company will add value to the raw materials to make a finished product that will be sold to the customer. - It is a system to enhance the value of raw materials in the production process, with the following stages: 1. **Inbound Logistics:** This is where the receiving of raw materials happens (store room and inventory control). 2. **Operations:** This is where the value-creating activities happen. Inputs and materials become a finished product (Baking, assembling). 3. **Outbound Logistics:** This is where activities like inventory, fulfillment of the customer's order, and shipping the product to the receiver are being processed. 4. **Marketing and Sales:** This is where the marketing and sales activities happen. The company makes the product known by the consumer, encouraging them to buy it. 5. **Service:** The last step is giving customer service and maintaining the value of the product. This includes offerings like customer support and warranty services to enhance the product and help the consumer. ## Supply Chain - It is composed of activities linked together from the creation of the product to the delivery to the customer. - The key stages in the supply chain are: - **Supplier:** Raw materials are sourced from here. - **Manufacturing:** The raw materials are converted into a finished product. - **Distribution Warehouse:** The product is stored until it is ready to ship. - **Consumer:** The final product is delivered to the customer. ## How to Select The Right Supplier For Your Business? - Establish a list of potential suppliers and create a simple standard for comparison (benchmarking and prequalifying). - The following factors should be considered when selecting a supplier: 1. **Company supplier records:** Evaluate their past performance. 2. **Financial risks:** Assess their liquidity, profitability, and long-term financial strength. 3. **Delivery performance:** Evaluate their lead time, quality, and on-time delivery capabilities. 4. **Capacity and flexibility:** Determine their ability to meet changing demand and adjust production. 5. **People risks:** Evaluate the quality of their management, key staff, and skills retention. 6. **Diversity and ethical considerations:** Ensure they operate responsibly. ## Simple Standards May Include: - Minimum and maximum order quantities. - Payment terms. - Their return policy - Delivery time - Quality of their product - Price ## Constructing A Product Description - Product descriptions explain what your product is and why the consumer would buy it. - They should include the features and benefits of your product. - The following factors must be considered in deciding on the labeling of a product: 1. **Establish the image or personality of the product:** - Know your target market: Understand their interests and personality. - Make it simple to visualize: Use different fonts, sizes, bullet points, or short paragraphs. - Use persuasive words: Include inspiring language like "amazing and sensational." - Use normal language and tone: The description should feel like a conversation. 2. **Determine the most important features of the product:** - **Emphasis on the product benefits:** Highlight your product's qualities and benefits to the consumer. - **Write the full story:** Give relevant details like the history and facts about the main product or services. ## Example of a Product Description - **Product Name:** Uvembrella - **Image:** *An illustration of a curved umbrella is provided as a visual.* - **Product Description:** **Sure, to be one of your favorites.** Our Uvembrella is a fashionable umbrella that is stunner. To change the look of the regular umbrella, we have developed a more curved umbrella that will protect your whole body from the sun exposure. It is doubled-layered and has a good texture. - **UV Protection** - **Automatic open-close** - **Waterproof and Water repellent** - **3-folded umbrella** ## Unlocking of Difficulty (W2) - This module focuses on the keys of successful production. ## Manpower - Are the people working to produce the product. ## Job Analysis - Is gathering and analyzing information about the requirements of the job position. ## Machine - Are the needed equipment in the production process. ## Prototype - Creating a visual representation of your idea. ## Keys to Successful Production - The keys to a successful production are the **Manpower, Machine, Materials**, and **Method**. ## Machine and Manpower - **Machine:** An equipment with moving components that operate when it is given power from electricity, gasoline. - **Product Prototype:** An original model of your product with features like your later product. It can start with sketching your idea and turn it into a physical prototype. - **Manpower:** The sum of persons available and equipped to work and produce the product. - **Job Analysis:** Gathering and analyzing information about the requirements of the job position. - **Job Description:** Describes the responsibilities of the position. - **Job Specification:** Indicates the qualifications, skills, and personal traits required to perform the job. ## Example of Job Analysis - **Kuripot Restaurant** needs an additional restaurant chef due to excessive demand. - **Job Title:** Restaurant Chef - **Job Status/Classification:** Permanent/Regular - **Skills, Experience, and Qualifications:** - Minimum 3-5 years of experience in a high-volume restaurant environment. - Ability to mentor other staff. - Excellent communication skills. - Ability to work in high-pressure environments. - Ability to produce menus and specials. - Knowledge of health and safety and FOODSAFE rules and regulations. - Culinary degrees and management programs. - **Job Description:** - **Duties and Responsibilities:** - Creating the daily schedule of kitchen staff. - Supervising the requesting, buying, and inventory management of the restaurant's supply. - Overseeing the movements of kitchen staff. - Supervising the training of apprentices. - Establishing daily specials and special menus. - Ensuring adherence to health and safety standards. - **Working Conditions:** - Night shifts 5 days per week. - Weekend and holiday shifts are mandatory. - Must be able to work standing for long periods. ## Unlocking of Difficulty (W3) - This module focuses on the importance of the production method and prototype in achieving a successful business model. ## Method - It is the production method that discusses the process or way of transforming raw materials to finished products. - The selection of the production method depends on product to produce, mode of production, manufacturing equipment to use, and the required skills. ## Prototype - An original model of your product with features of your later product. - It starts with sketching your idea, turning it into a physical prototype for testing. ## Business Model - A company's core strategy for profitably doing business. ## Importance of the Prototype - The prototype is essential for product development. - It helps you conceptualize to have a great business model. - This will ensure your products thrive in the marketplace. ## How To Properly Test A Product Prototype - The goal of the prototyping phase is to create a finished product to use as a sample for mass production. **Steps:** 1. **Usability Test:** Have strangers try your product prototype and get feedback from them. 2. **Task-Oriented Testing:** Develop a series of tasks for testers to complete and prepare guide questions to avoid confusion. 3. **Gather Suggestions:** Allow testers to offer suggestions about how to make the prototype better and more user-friendly. ## Importance of Testing - Testing helps to gather feedback on whether your product meets customer expectations. - This ensures that your product is known and saleable. ## Five Ways to Validate Your Product Or Service 1. **Surveys:** Use tools like Typeform, Survey Monkey, or Google forms to gather feedback on your product. You can target specific groups or conduct interviews with your ideal clients. 2. **Beta Testing:** Create a test version of your product and get feedback from a small group or audience. The feedback can be paid or free. 3. **Early Bird Offer:** Offer subscribers, survey attendees, or interested individuals a discounted price for early access to your product. 4. **Be Yourself:** Focus on your unique skills and experiences. Don't be afraid to create your own business model. 5. **Community Feedback:** Gather feedback from your community, such as your network and peers. ## Developing Business Model - To develop an effective business model, draw a picture that establishes a structure for your employees to produce products or services in a profitable way. - **Components:** - A description of your customers. - How customers use your product. - How you distribute your product. - Details about how you promote your business. - **Visual Representation:** This is typically done on a single page, using visual images. - **Business Plan:** A more detailed document that describes your business. ## Food Stall Business Model - Front and back views of a food stall are described. - Example of a business model, using a food stall. ## Business Model Canvas - Invented by Alexander Osterwalder. - A chart used to visualize the concept of the business. - It helps to show the process that the business will go through, linking the idea and how it will work. - It allows everyone to see the idea through a chart. ## Parts Of The Business Model Canvas 1. **Value Propositions:** A list of your business goals. They tell the customer what benefits they can get from your product. - They are solving a problem or a need for the customer. 2. **Customer Segments:** The group of people who will buy your product, specifically rather than generally. - They are the paying customers. - You can classify them according to age, ethnicity, profession, gender, spending behavior, interests, and motivations. 3. **Channel:** How to connect and reach your customer. - **Physical Channel:** Producer - Wholesaler - Retailer - Consumer. - **Virtual Channel:** Websites and mobile applications. 4. **Customer Relationship:** Explains the kind of relationship a company creates with customers. - How to GET, KEEP, and GROW customers. - How to foster Smooth Interpersonal Relationship (SIR) 5. **Revenue Stream:** How your business will generate cash from each customer segment. - Think of what the customer is paying for. - How they are paying. - Their preference in paying. 6. **Key Resources:** The resources necessary for the operation of the business. - **Categories:** - **Physical:** Buildings, vehicles, machines, raw goods, etc. - **Intellectual:** Brand, proprietary knowledge, partnerships, etc. - **Human:** Creativity, experience, skills, etc. - **Financial:** Cash, credit, stock, etc. 7. **Key Activities:** The activities that the business is involved in. - **Examples:** Production, manufacturing, or servicing. 8. **Key Partners:** Those you must work with to create and deliver your product. - **Examples:** Supplier, creditors, and referrals. 9. **Cost:** The cost of making a business model work, including the most expensive and important costs. ## Note About Value Propositions and Customer Segments - If you are an entrepreneur with a good idea but don't know your customer, you should start with value preposition. - **If you know your market segment, you can start with the customer segments and then continue to value proposition.** ## Illustrative Example of JB Mobile Vegetable Market - **Business Owner:** Jomar - **Location:** This mobile vegetable market operates in Puerto Princesa City. - **Value Proposition:** Door to Door Delivery of fresh vegetables at your own convenience and safety, especially during pandemics. - **Key Activities:** - Services: Customer services - Customer Relationship: "Suki and Tingi System" - **Customer Segments:** - Individuals or groups who are craving for fresh vegetables. - Health conscious, but unable to go outside due to pandemic. - People who want to surprise family and friends with fresh vegetables. - People who want fresh, healthy vegetables without risking safety during a pandemic. - **Key Partners:** - Households - Restaurants - Sari-Sari stores - Malls - Hotels - **Key Resources:** - Human resources (users and drivers) - Vehicles - Delivery equipment - Vegetable suppliers - **Cost Structure:** - Delivery equipment maintenance - Salaries and wages. - Hazard pay and other incentives. - Vegetable procurement costs. - **Channels:** - Word-of-mouth advertising. - Social media platforms. - Mobile applications. - **Revenue Stream:** Cash on delivery (COD) ## Unlocking of Difficulty (W4) - This module focuses on forecasting revenue and costs within a business. ## Forecasting - A method to predict the future, based on estimated or predicted future developments. - **Examples:** Sales, expenditures, and profits. ## Types of Forecasting 1. **Judgment Forecasting:** This uses your own intuition and experience. It involves setting a general pattern of income and expenses for the year, based on your past experience and understanding of the business. 2. **Quantitative Forecasting:** This is more scientific, using actual and past income and expense data. - It tracks trends and predicts changes. ## Real-Life Application - When working with real-life business scenarios, you may not always need to give the exact figures of profit or loss. - You can use estimation or forecasting as long as it is close enough to the real figures. ## Revenue - The amount of money a company receives during a specific period, including discounts and deductions for returned merchandise. - **Formula:** Revenue = (Price per unit * Number of units sold). - **Examples:** - **Sales:** Used for merchandising or retailing. - **Service Income:** Used for record revenues earned by rendering services. ## Cost - The purchase price of the product, including the total outlay required in producing it. - **Examples:** - **Start-up capital:** Money needed for facilities, equipment, registration, licenses, and certificates. - **Working capital:** Expenses related to raw materials, packaging, staff training, product promotion, etc. - **Types of Operating Costs:** - **Fixed Costs:** Expenses that must be paid regardless of production levels, such as rent and salaries. - **Variable Costs:** Expenses that depend on the amount of production, such as raw materials and production labor. ## Gross Profit (or Gross Loss) - The difference between the expected income and the total operating costs over the first year, including loan repayments. - **Formula:** Gross Profit = (Selling price * Number of units sold) - Total operating costs. ## How to Forecast Revenue 1. **Choose between Judgement Forecasting or Quantitative Forecasting.** 2. **Start with last year's revenue and cost statements.** 3. **Consider any changes in personnel, products, pricing, competition, and other factors.** 4. **Calculate anticipated revenue.** 5. **Separate income sources.** 6. **Constantly review and update the forecast to reflect changes in your business.** ## Factors in Forecasting Revenues and Costs 1. **The economic condition of the country.** When the economy grows, businesses also grow. 2. **Competing businesses.** Analyze how your competitors are operating and how much stock you need to keep to meet customer demand. 3. **The changes happening in the community.** Adapt to customer demographic profiles, lifestyles, and buying behaviors. 4. **The internal aspect of the business.** Consider plant capacity, which plays a crucial role in forecasting. ## Forecast The Revenue of The Business - **Example:** Mr. JB opened "Just Wear Online Selling Business," which specializes in selling ready-to-wear clothes online. - **Assumptions:** - The projected daily sales of t-shirts and fashion shorts. - The cost per item. - A mark-up of 50% on each item. - **Table 1:** Projected Daily Revenue - **Type of RTW's:** T-shirts and Paired Shorts. - **Cost per unit (A):** The cost of each item. - **Mark-up 50% (B):** 50% of the cost per unit. - **Selling Price (C):** The cost per unit plus the mark-up. - **Projected Volume (D):** The average number of items sold daily. - **Projected Revenue (E):** The total revenue from each item based on daily sales. - **Table 2:** Projected Daily, Monthly, and Annual Revenue - **Projected Daily Revenue:** The total revenue from all items sold daily. - **Projected Monthly Revenue:** The daily revenue multiplied by 30 days in a month. - **Projected Annual Revenue:** The daily revenue multiplied by 365 days in a year. ## Forecast The Costs To Be Incurred Of The Business - **Cost of Goods Sold / Cost of Sales:** The amount of merchandise or goods sold by the business for a given period of time. - **Formula:** Cost of Goods Sold = Beginning Inventory + Net Cost of Purchases + Freight-in - Merchandise Inventory, End. ## Example of Calculating Cost Of Goods Sold - **Just Wear Online Selling Business:** - **Merchandise Inventory, beginning:** P0.00 - **Add: Net Cost of Purchases:** P 120,000.00 - **Add: Freight-in:** P 17, 010.00 - **Cost of Goods Available for Sale:** P 137, 010.00 - **Less: Merchandise Inventory, end:** P 0.00 - **Cost of Goods Sold:** P 137, 010.00 ## Operating Expenses - **Examples:** Internet connection, utilities, rent, and miscellaneous expenses. ## Income Statement - Shows the net profit (or net loss) from sales, after deducting the cost of goods sold and operating expenses. - **Formula:** Net Income = Revenue - Cost of Goods Sold - Operating Expenses. ## Table 5: Projected Monthly Revenue, Cost, and Income - Covers the first year of operation for Just Wear Online Selling Business. - **Components:** - **Revenue:** The total monthly revenue. - **Cost of Goods Sold:** The cost of goods sold each month. - **Operating Expenses:** Monthly operating expenses, including internet connection, utilities, rent, and miscellaneous expenses. - **Net Income:** The profit or loss for the month. - **Assumptions:** - **January:** The projected revenue, cost of goods sold, and operating expenses are for the month of January. - **February and March:** There is a 10% increase in revenue, cost of goods sold, and operating expenses from the previous month. - **April through August:** The projected revenue, cost of goods sold, and operating expenses remain the same. - **September and October:** There is a 5% decrease in revenue and cost of goods sold from the previous month. Operating expenses remain the same. - **November:** There is a 10% increase in revenue, 5% increase in the cost of goods sold, and 5% increase in operating expenses from the previous month. - **December:** There is a 15% increase in revenue, a 5% increase in the cost of goods sold, and a 5% increase in operating expenses from the previous month. ## Activity 1 - **Step 1:** This section focuses on business permits, specifically the process of recording business transactions in a systematic and chronological way. - **Step 2:** This section focuses on the bookkeeper. - **Step 3:** This section focusses on the book of original entry. - **Step 4:** This section focusses on the book of original final entry. - **Step 5:** This section focusses on the accounting principle of 'Value Received'. ## Activity 2 - **Account Classification:** This activity requires identifying the normal movements of accounts, placing them correctly under "Debit" or "Credit" columns. - **Debit:** Increased when there is an increase in assets or a decrease in liabilities, owner's equity, and revenues. - **Credit:** Increased when there is a decrease in assets or an increase in liabilities, owner's equity, and revenues. ## Activity 3 - This activity involves recording business transactions through journal entries. - The step-by-step guide shows how to journalize transactions. - **Transaction 1:** An investment of cash. - **Transaction 2:** The purchase of office supplies on account. - **Transaction 3:** Providing a service for cash. - **Transaction 4:** Paying salaries. ## Unlocking Difficulties - This section defines recurrent, financial period, purchasing price, and selling price concepts. - It also explores how to calculate profit and loss. ## Key Calculations - **Profit = Income - Expenses** - **Profit = P 150.00 income - P 100.00 expenses** ## Income, Expenses, and Purchases - **Income** is money received for services rendered or goods sold. - **Expenses** are costs incurred in running a business. - **Purchases** are the items acquired to sell. ## Profit and Loss - **Profit** is when income exceeds expenses. - **Loss** is when expenses exceed income. ## Examples of Calculating Profit and Loss - **Example 1A and 2A:** These examples calculate profit or loss using only the selling price and purchasing price. - **Example 1B and 2B:** These examples incorporate transportation costs as an expense, demonstrating how additional expenses affect the calculation. ## Important Notes - The definitions and explanations provide a foundation for understanding accounting and financial concepts. - The examples using a scenario of **Just Wear Online Selling Business** demonstrate how to apply these concepts in a real-world business context. - The activities included encourage active learning and practice. - The document provides a comprehensive overview of business planning, revenue and cost forecasting, and basic bookkeeping principles.