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Module 5
PRODUCTION
PLAN

ECF3
ENTREPRENEURAL
Management

to your 5TH
module!

This module is a combination of

synchronous & asynchronous learning
and will last for one week
Long Test will be given via
Google Form in asynchronous test

Identify & Meet a Market Need

ARLENE F. MUSONES, MBA

Instructor

No part of this module may be

reproduced in any form without prior
permission in writing from the
Instructor.

November 6, 2023
November 11, 2023
Date of completion
 PRODUCTION Plan
MODULE 4 OUTLINE
MODULE DURATION

November 6 to November 11, 2023 Synchronous Meeting and Asynchronous Learning

For asynchronous learning inquiries, you may reach me through the messenger group chat from Monday to Thursday at 5pm to
8pm. or thru my GMAIL – arlenemusones143@gmail.com

LEARNING OBJECTES

After completing this module, you are expected to:

1. Show the manufacturing or production process of your product or service;
2. Show the plant layout of your physical store;
3. Innumerate the machines, equipment and tools you will use in producing the product or service; and
4. List down items comprising your Total project costs.

INPUT INFORMATION

Production Plan

LEARNING ACTIVITIES

1. Group discussion during a synchronous meeting

2. Asynchronous Learning

ASSESSMENT/EVALUATION
I. Synchronous Test with a time limit.
A long test link will be provided through our group chat. This is a synchronous test with a time limit.
II. Asynchronous Learning
a. Individual Activity – Individual Learning Portfolio
b. Group Activity – Case Study

ASSIGNMENT
Individual Learning Portfolio. In your own words, (minimum of 30 words each question):
1. What are some of the factors you should consider when selecting a site for your business?
2. When marking the trade area for your business, why should you indicate the locations of your competitors?
3. Why should you make a list of all equipment and supplies you need to start your business?
4. Why is it important to obtain price quotes from several different vendors before selecting a vendor?
Deadline: November 18, 2023 11:59PM
Group Activity:
Actual Writing of the PRODUCTION PLAN for the Group Business Plan. .
Deadline: November 18, 2023 11:59PM

San Mateo Municipal College Module 5/ECF3/Page 2

College of Business and Accountancy Prepared by: Arlene F. Musones, MBA

 LEARNING RESOURCES
Book/E-book:
Entrepreneurship by Cynthia L. Greene @2013 Cengage Learning Asia Pte. Ltd.
Entrepreneurship by Bruce R. Barringer and R. Duane Ireland, Fourth Edition
Production Plan of a BUSINESS PLAN
MODULE 5 PROPER

Parts of an PRODUCTION PLAN

Detailed Format:

Manufacturing Process
a. Product Specification
b. Production Process

Physical Plant
a. Plant location
b. Plant Rated Capacity
c. Plant Layout
d. Production Schedule

Machinery and Equipment

a. Machine and Equipment Specifications
b. Rated Capacity per day
c. Cost estimates

Building and Facilities

a. Building Plan
b. Electrical Plants
c. Drainage

Raw Materials and Supplies

a. Raw Materials Requirements and its specification
b. Name of the Suppliers
c. Cost and Terms of Payment
d. Availability and long term supply
e. Alternative Suppliers

Power Supply and Utilities

a. Supply of Electricity and water available in the processing of the Product.
b. Disposal of Waste and compliance with the government

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College of Business and Accountancy Prepared by: Arlene F. Musones, MBA

 c. Drainage System in compliance with the sanitary requirements imposed by municipal and national
requirements.

Production Cost
a. Direct and Indirect Labor.
b. Administrative cost in the processing the products.
c. Total Cost of Investment

NATURE AND CONCEPT OF PRODUCTION PLAN

This will serve as a technical plan as to how the business will produce, store, and deliver the product/service to end users.
This will identify the manufacturing process to be adopted.
The plant capacity and design.
The production schedule.
The plant layout, including plant location and specifications.
The available suppliers of machinery and equipment.
Machinery specifications, capacity, prices and auxiliary equipment.
The sources of Raw Materials, labor, and utilities.
Name of the suppliers
Transportation needed
Waste Disposal System

Three (3) Major Interrelated Activities comprising the whole Technical Aspect:
1.) Selection process
2.) Determination process
3.) Projection process

Selection Process

• The product (s) &/or service (s)

• The manufacturing/production process
• The capacity & design
• The supplies
• The location
• The lay out
• The structures specifications
• The raw materials & their sources

. Determination Process

• The quantity & quality of the product (s) & service (s) to be produced
• The labor needed, both skilled & unskilled
• The utilities required
• The waste disposal method
• The transportation necessary

Provide or Projection Process

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College of Business and Accountancy Prepared by: Arlene F. Musones, MBA

Estimates of the total project cost, & enumerate the major items of capital cost
Projection is done under the following instances:
1. When demand study is conducted
2. When supply study is made
3. When technical study is performed

The technical study is presented by describing & making necessary calculations for the following:
A. The product(s)/service(s)

This portion describes the products or services to be produced/provided & sold. Which specifies the products’ physical,
mechanical, & chemical properties.Their various uses, both as finished goods & industrial inputs.

The following questions must be answered when considering the proposed product or service:

1. What is the physical appearance of the product?

2. What are the mechanical parts of the product?
3. What are the chemical contents or properties of the product?
4. Is the product a consumer or industrial product?
5. What is the quantitative measurement of the product?
6. Is the product perishable or not?
7. What is the appearance of a similar competing product?
8. What benefits does the product offer?
9. What type of service is rendered?

B. Production Process

1. The selected manufacturing/production process must be described simply & clearly, preferably with the aid of flow
charts and diagrams.
2. The alternative processes & the way they compare with the chosen process must be mentioned.
3. The analysis should further touch on the manufacturing/production processes used in existing businesses with the
same or similar activity, both domestic & foreign.
4. Licensing agreements & patents should also be reviewed.

The Selection of the manufacturing process to be followed is highly influenced by:

1. the type of the product

2. the characteristics of raw materials
3. the expected quality

C. Size of the Business or Plant Capacity

1. Minimum & maximum rated capacity
2. Fixed costs
3. Actual capacity utilization
4. The number of shifts per day
5. Number of operating days per year

What is meant by PLANT CAPACITY?

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College of Business and Accountancy Prepared by: Arlene F. Musones, MBA

Refers to the maximum level of production that the machine may actually produce during a particular period. Sometimes,
the actual capacity of a machine is equated with its rated capacity.

The size and capacity of the plant:

Are influenced by the size of demand and the expected market share of the proposed product.

The following questions should be considered here such as:

1. Who is the supplier of the machinery and equipment?

2. What other equipment are needed?
3. What is the design of the plant?
4. Is there a stand-by unit in case of emergency?
5. What is the expected life span of the processing plant?
6. What are the auxiliary equipment?

Following information:
1. Schematic or perspective diagram of the processing plant.
2. Proper description of the machinery that has the required capacity
3. Suppliers of the machinery
4. Auxiliary equipment
5. Estimated cost

D. Production Schedules

1. The expected growth in market share

2. The availability of financing for possible expansion
3. The availability of additional raw materials
4. The level of utilization of plant capacity

What is meant by PRODUCTION SCHEDULE?

It is the manufacturing planning tool that aims to maximize the production capacity of the plant or to maximize production
efficiency by minimizing operation costs.

Forward or backward scheduling plan

• FORWARD SCHEDULING PLAN – a production plan is prepared when the various tasks and required resources
are scheduled to determine the due date or shipping date of the goods.

• BACKWARD SCHEDULING PLAN – the date of shipment or delivery is the primary factor to determine the date to
start production.

BENEFITS that the business may derive from proper production scheduling.

• Increased production efficiency

• Exact delivery dates
• Reduction of inventory
• Reduced production costs
• Optimized work load in various stages

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College of Business and Accountancy Prepared by: Arlene F. Musones, MBA

• Maximized production time.

Production Scheduling Tools

• Batch production scheduling

• Cycle-time analysis
• Visualization using Gantt Chart
• Algorithmic methods

The different schedules that may be prepare include:

1. Schedule of raw materials to be purchased

2. Schedule for direct labor (number of laborers and labor cost per hour)
3. Schedule for other manufacturing costs
4. Schedule for finished goods and delivery time
5. Schedule for inventory level

E. MACHINERY & EQUIPMENT

• Identified & individually listed according to type & use

• Specifications, capacities & costs must be described in detail
• The origin of the machinery & equipment, whether local or imported
• The manner of & cost of transporting them must be indicated

The following questions should be considered here such as:

1. What type of equipment and technology will the business need to produce its product/service?
2. What costs are involved to purchase and set up the equipment? What are the costs involved in the ongoing running
of the equipment?
3. EQUIPMENT SUPPLIERS:
4. Who are the potential suppliers of the equipment?
5. Where are they located?
6. What sort of service and warranties do they provide?
7. How long will it take to acquire the equipment and begin operations?

The following factors to be considered in selecting the necessary machinery and equipment:

1. Plant capacity and size of the machine

2. Model of the machinery and equipment
3. Production within the required time
4. Availability of spare parts and repair service
5. Cost and terms of payment
6. Plant location and layout

Additional Information of machinery & equipment:

1. Machine capacity
2. Model and specifications

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College of Business and Accountancy Prepared by: Arlene F. Musones, MBA

3. Name of supplier
4. Cost
5. Terms of payment
6. Estimated productive life
7. Annual depreciation

F. LOCATION

• A thorough & comparative analysis for each potential location should be made to determine the most ideal site.
• It has to consider the following factors:
• The accessibility to, & availability of, raw material sources
• The availability of cheap or moderately-priced utilities such as power, water, or fuel
• The combined cost of transporting raw materials & fuel to the site
• The proximity to distributing outlets
• The availability of skilled & unskilled labor
• Maps & charts of the proposed site must be included

In selecting the location of the processing plant; the following factors should be given high consideration:
1. Distance of sources of raw materials
2. Proximity to the market
3. Availability of utilities
4. Availability of labor or skilled work force
5. Transportation facilities
6. Infrastructure facilities including roads, airports and shipping docks
7. Waste disposal system and/or problems
8. Local taxation and legislation
9. Peace and order situation
10. Peace and order situation
11. Physical conditions and terrain of the land
12. Prevalent weather condition in the area
13. Attitude, customs, and practices of the community

G. LAYOUT

1. The layout should be clearly depicted through diagrams & descriptions.

2. A good layout is characterized by:
• Minimum material handling
• Effective space utilization
• Smooth work flow
• Safe & conducive working area for the workers
• Safety and sanitation facilities, &
• Flexibility of arrangements

What is meant by PLANT LAYOUT?

• Refers to the physical arrangement or configuration of machines, furniture, equipment and tools used in producing
goods.

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College of Business and Accountancy Prepared by: Arlene F. Musones, MBA

• The concept should also include the ground layout, or the arrangement of the buildings, parking lots, receiving and
shipping warehouses, road network, drainage system and other infrastructure facilities of the whole manufacturing
operations.

Basic Principles and Objectives in designing Plant Layout:

1. Be economically and technically feasible

2. Properly and efficiently utilize available floor space
3. Provide smooth, easy and uninterrupted transport and flow of raw materials, goods in process, finished goods and
industrial waste
4. Properly and fully utilize production capacity
5. Provide a conducive working condition
6. Have a feature that will enhance easy supervision and control as well as maintenance of machinery and equipment.

The Plant Layout can either be:

1. Product or line layout

2. Process or functional layout
3. Fixed position or location layout
4. Combined or group layout

Product or Line Layout

• Is preferred when the material moves sequentially from one machine to another.
• The machines, therefore, are arranged according to the sequence of operation in producing the goods

Process or functional layout

• Is used when the product is not standardized and produced in small quantities.
• Machines with similar functions and operations are arranged together in one place.

Fixed position or location layout

• May be adopted when the product remains fixed or stationary and it is the human workforce and the machine that
go the product that remains fixed.

Combined layout

• Is used when product requires both the process and product layout. The physical arrangement of machines and
equipment is combined when the manufacturing operations produced several products in repeated numbers but there is
absence of continuous production.

H. BUILDING & FACILITIES

• What are possible locations for the facility (office/manufacturing plant)?

• What size facility is needed?
• What are the costs involved in the building? Do you need to fit it out? How much will it cost to get all necessary
utilities connected?

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College of Business and Accountancy Prepared by: Arlene F. Musones, MBA

• Does the proposed location have adequate access to infrastructure and services such as highways, railway and
utilities?
• Will you need to build your own facility, or purchase an existing one?
• Where will the facility be located in relation to your customers?
• Who will be responsible for transport of goods between the facility and the market? What are the costs involved?

The section on buildings and other structures that need to be constructed should answer the following questions:

1. What is the size of the building to be constructed?

2. What type of building will be constructed?
3. Will it be a two-story building?
4. How much is the estimated cost?

Buildings & related structures to be constructed include:

1. an administrative building
2. a manufacturing plant,
3. warehouse or storage facilities
4. road network and pathways
5. a drainage and disposal system, and
6. a parking space

The different schedules should be included in this section, in tabular format, showing the following information:

1. Estimated cost of building structures and land improvement

2. Estimated useful life
3. Estimated annual depreciation

I. RAW MATERIALS & SUPPLIES

• The required raw materials should be listed down and the basis for their selection must presented.
• Descriptions and specifications on their physical, mechanical, and chemical properties must also be given.
• Current and prospective cost of raw materials, the availability and continuity of supply, and the current prospective
sources should also be included.
• The volume required at various phases of operations must be clearly presented.

Different types of raw materials or ingredients needed in manufacturing the product should answer the following
questions:

1. What are the raw materials needed to product the goods?

2. Who are the existing and prospective suppliers of these raw materials?
3. Are there enough available raw materials for the product?
4. What is the proximity of the source of raw materials to the processing plant?
5. Are there raw materials to be imported?
6. Are there alternative raw materials?
7. What is the estimated cost of the raw materials?
8. What is the trend in the world market in term of raw materials for the proposed product?

J. Power Supplies and UTILITIES

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College of Business and Accountancy Prepared by: Arlene F. Musones, MBA

• This portion describes the amount, cost, and sources of electricity, fuel, water, and/or steam required.
• This must be determined in relation to the production schedule and capacity utilization defined. Alternative sources
of these utilities and the feasibility of their use must also be described.

Utilities and other overhead costs addresses the following questions:

1. Who are the utility providers (light & water)?

2. How much is the expected consumption for utilities?
3. Are there ways to reduce utility consumption?
4. What are the other type of overhead costs that have material effect on the manufacture of the product?

K. WASTE DISPOSAL

• A description of the quantity, manner of disposal, and the cost involved in doing away with expected waste from
production is necessary.
• The analysis must be expanded to consider the possibilities of further using these wastes.

The following questions:

1. What type of waste disposal system should be adopted?

2. What is the prevalent practice of the community in disposing waste or trash?
3. What is the expected volume of waste to be produced by the plant in a month?
4. Is the industrial waste to be produced by the business recyclable?
5. How much is the estimated cost of disposing the garbage?

The design should reflect the recommended waste disposal system which could either be:

1. Transfer station system

2. A landfill station provision system
3. Combustion facilities system

L. PRODUCTION COST

• The monetary aspect of all the production plans is put into perspective.
• How much does it cost to produce one unit of output?
• To arrive at this, the following must be determined:
1. Raw material costs
2. Labor cost
3. Overhead cost (fixed cost), operating costs (variable costs)
4. Other pertinent costs

M. LABOR REQUIREMENT

• The various jobs and functions necessary for the operational stage must be described.
• For costing, labor is generally classified into three types:
• Direct
• Indirect

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College of Business and Accountancy Prepared by: Arlene F. Musones, MBA

• Administrative
• The number of workers to be employed for each job classification
• The pay scales
• Employees development programs
• The organization set-up
• The aggregate labor costs

The direct labor requirements to produce the goods or render proposed services:

1. What specific direct labor requirements are needed to produce the goods or deliver the services?
2. Are there enough direct laborers to produce the goods?
3. How long will it take, in terms of number of hours, to produce the goods?
4. How many workers are involved to produce the goods?
5. How much is the wage of every worker per day or per hour?
6. How much is the prevailing daily wage in the community?
7. How much is the minimum wage in the region where the business is located?

TOTAL COST OF INVESTMENT

The capital expenditures includes the costs of the following:

1. Land
2. Factory and administrative building
3. Warehouse and/or storage facilities
4. Machinery
5. Equipment
6. Tools
7. Road network and pathways
8. Drainage system
9. Parking space
10. Waste disposal facilities

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College of Business and Accountancy Prepared by: Arlene F. Musones, MBA