ENTREPRENEURSHIP

Module 3
ORGANIZATION PLAN, PRODUCTION
PLAN,
AND OPERATIONAL PLAN

3rd Quarter - Module 3

Grade 12
(2nd Semester S.Y.2020-2021)
Mrs. Melanie A. Pareja
Subject Teacher

Dr. Maricar T. Magcalen

 SHS Coordinator

I. Title of Material/Introduction:
ORGANIZATION PLAN, PRODUCTION PLAN
AND OPERATIONAL PLAN
This module will discuss other areas of the business plan, particularly involving the
organization, production and operation.

ll. Objectives
At the end of this lesson, the learner should be able to implement the business plan.
Specifically, the learner must be able to:
1. Identify the important areas in the organization plan,
2. Determine the critical areas in the production plan, and
3. State the significant factors in the operation plan.

II. VOCABULARY LIST

SUPPLIERS - refer to individual persons or companies that provide the required, materials, parts, or
services to the business.

Creditors - refer to banks, financial institutions, and financial intermediaries engaged in the lending of
money to the borrower usually for a fee or charge in the form of interest.

Liability - is an obligation between one party and another not yet completed or paid for.

Demand - is an economic principle referring to a consumer's desire to purchase goods and services and
willingness to pay a price for a specific good or service.
In transit - means that the product is no longer in the custody of the seller, but the buyer has not yet
received it.

III. PRE-TEST
Multiple Choice. Write the letter of your answer.

1. Which part of the plan outlines the form of the business organization, liability of the
owner or owners, organizational structure, roles and responsibilities, salary
requirements?
A. Organization Plan c. Operational Plan
B. Production Plan d. Marketing Plan
2. All other mandatory benefits are included in the Salary Requirements section except
________________.
A. Social Security System c. Pag-Ibig
B. Phil health d. Loans

3. The _______________ presents the total number of goods to be produced and the
expected time to produce them.
A. Production Process B. Production Schedule
c. Production Cost d. Sources Material

4. In the case of business dissolution and there still remains unsettled financial
obligation of the business, the creditor cannot go after the personal property of the
business owner. This is what you called _________________.
a. Limited Liability c. Unlimited Liability
b. Internal Liability d. External Liability

5. Why it is a must the business should conduct a critical evaluation of the suppliers of
raw materials?
a. It is a part of the business plan.
b. To choose the cheapest supplier.
c. To minimize or avoid defects or damages in the supplies.
d. For personal choice.

IV. Learning Activities

1. Read the things all about Organization Plan and its different forms.
2. Read about Production Plan and study how it is done.
3. Read about Operation Plan and learn how business is being operated.
 Take time to Read Young Entrepreneur!

ORGANIZATION PLAN

The organization plan provides a detailed description of the business in terms

of the following:

1. Form of the business organization

2. Liability of the owner or owners
3. Organizational structure
4. Roles and responsibilities
5. Salary requirements

In case a feasibility study has been prepared prior to the preparation of the
business plan, most of the information contained in the organization plan can be found
in the management aspect of the feasibility study.

Forms of the Business Organization

A business organization can come in the form of a sole proprietorship, a partnership, or a corporation.
There must be a purpose for the selection of the most appropriate business form. In other words the mere
statement, “The ABC Manufacturing shall be in the form of a sole proprietorship, “ is an incomplete
description of the business organization.

The factors affecting the selection of the most appropriate business form include the following:

1. Capital requirement
2. Liability of the owner or owners
3. Management and supervisory skills
4. Tax implications
5. Government intervention
6. Nature of the Business
7. External financing requirement

Liability of the Owner or Owners

This section describes the extent of the owner’s financial obligations with creditors. The creditors can be
in the form of individual persons, suppliers of raw materials and supplies, or financial institutions. The
extent of financial liability can either be limited or unlimited.

The term limited liability means that in the case of business dissolution and there still remains unsettled
financial obligation of the business, the creditor cannot go after the personal property of the business
owner. The liability of the owner is only up to the extent of his/her financial contributions to the
business. On the other hand, the term unlimited liability means that the creditors can run after the
personal property of the owner in the event that the business fails to fully settle its financial obligation
during business dissolution.

The extent of the liability of the owners in a sole proprietorship and a partnership is usually unlimited. In
a corporate form of business organization, the shareholders have limited liability. They are only liable to
the extent of their investments in the corporation. The investment of the shareholders is represented
through ownership of shares or stocks.

Organizational Structure

The organizational structure of the business is usually shown or reflected in the organizational chart. It
shows and defines the hierarchy of the different positions in the organization and the interrelationships of
the different offices or departments. The organizational chart depicts the flow of communication within
the organization, and the line and staff authority that must be observed and executed.

A corporation has the most complicated organizational structure, since most corporations are composed
of a huge workforce and also if the corporation operates across the different parts of the Philippines. On
the other hand, a small business, like the business that you intend to pen, has a very simple organizational
structure- the owner acts as the president or general manager and, at the same time, the head of the
production and marketing operations.

The entrepreneur prepares the structure that best fits the organization and hires the most qualified people
to do the tasks.

Roles and Responsibilities

The roles and responsibilities of the various positions in the business organization must be clearly
defined in order to minimize and avoid misunderstanding and overlapping of functions. The educational
requirements and experiences required of the workers must also be specified. Complete information
about the expectations of a particular job or positions facilitates evaluation and hiring of qualified
personnel and the assessment of performance of existing workforce. Furthermore a clear set of selection
criteria for every position in the organization eases the hiring process and assures the organization that
only qualified personnel are hired. It will be better if the entrepreneur prepares early a list of positions
together with the respective job specifications.
Salary Requirements

The organizational plan must show the total estimated monthly and annual salary requirements of the
business. All other mandatory benefits like the employer’s contributions to the Social Security System
(SSS), Pag-Ibig, and Philhealth must likewise be specified. If some legal plans and moves of the
Congress of the Philippines will bring about increases in the salaries of personnel, the projected amount
must be included in the disclosure as well.

PRODUCTION PLAN

The Production plan presents or describes activities related to the production of goods. The production
plan is the result of the industry analysis, particularly the study of supply and demand and consumer
behavior.

The production plan usually includes the following:

1. Production Schedule
2. Production Process
3. Processing Plant and equipment
4. Sources of Material
5. Production Cost
This section basically applies to manufacturing entities. For service entities, this section must be
modified and labeled as Service Provision Plan.

Production Schedule

The production schedule presents the total number of goods to be produced and the expected time to
produce them. The total number of units to produce, however, is usually affected by the following factors
:

1. Demand for the product

2. Availability of resources
3. Capacity of the plant

The primary factor that influences the number of goods to be produced is market demand. The
entrepreneur must produce goods based on the total demand of the consumers. The second consideration
is timing. Producing the goods exactly at the time when the consumers need them is an excellent
production practice.
Production Process

This section of the plan must show the estimated cost of production. The three elements of cost, namely
labor, direct materials, and factory overhead must be properly described and accounted for. In the event
that the final product involves the use of several direct or indirect materials, all the materials used in the
production of goods must be properly listed and provided with the cost. The total cost of the proposed
product may serve as the basis in setting its selling price, which not be lower than its production cost.

OPERATION PLAN

The operation plan is a major section of the business plan that outlines the various activities, from the
acquisition of raw materials to the delivery of the products to the target consumers.
The operation plan commonly covers the following areas:

1. Evaluation of suppliers
2. Materials requisition and receiving procedures
3. Storage and inventory control system
4. Shipment system and control
5. Functions of support services
Evaluation of Suppliers

The new basic entrepreneurial concept of quality management is that control starts from the
suppliers of raw materials. It used to be a common practice that a business starts to implement its control
system upon receipt of the materials. The suppliers of raw materials must practice total quality
management to minimize or avoid defects or damages in the supplies. This concept extends from the
suppliers of the business to the suppliers of the suppliers. The business must conduct a critical evaluation
of the suppliers of raw materials and establish harmonious working relationships with them to reduce the
threats they posed.

Materials Requisition and Receiving Products

The procedures in requisitioning raw materials and other manufacturing supplies and receiving them
must be explained in the operation plan. The person assigned to conduct inspection upon receipt of the
materials must be included.

This section covers the following areas:

1. Basis of receiving the raw materials

 2. Comparison of the order and receipt
3. Quality of materials received

The basis of the receiving report is the purchase order of the business. It must be signed by
authorized personnel. After the inspection, the person receiving the materials usually prepares the
receiving report.

Storage and Inventory Control System

The operation plan describes how the business stores the finished goods and protects its inventory
against possible theft and losses. Goods that have been completed in the processing plant are transferred
to the warehouse or storeroom.

This section deals with the following:

1. Owning or renting a warehouse

2. Management of the warehouse
3. Procedures in the transfer of goods.
4. Control of inventory in the warehouse

Under the just-in-time manufacturing system, also known as JIT production system, storage
and warehousing are eliminated because only actual orders are produced at the exact required time. The
JIT system also eliminates wastage of expired products and requires less capital since only essential
stocks are ordered.

Shipment System and Control

The basis of sales invoice and other shipment documents are the purchase order received from the
customers. The sales contract and shipping documents must be properly approved before the product is
shipped to the customers.

This section covers the following:

1. Approval of shipping and sales documents

2. Terms of shipment
3. Manner of shipping the product
4. Other terms and conditions like sales contract.
The proper operation plan on the shipment of goods must be clearly defined. It would be
too costly on the part of the business to lose millions of pesos on shipment. For
example, who owns the products in transit that cost ten million pesos? In transit means
that the product is no longer in the custody of the seller, but the buyer has not yet
received it.

In a situation like where the shipment terms have not been clearly defined, problems will
definitely arise. Normally, the seller will opt to collect the amount from the buyer since
the goods have already been shipped, but the buyer may refuse to pay because he/she
has not yet received the goods.
Functions of Support Services

The operation plan defines and describes the functions of other support services relative
to the acquisition, processing, and shipment of goods to the customers. It also includes
the important role of other support services such as the maintenance personnel and the
security officers and staff.

Most businesses consist of three or four functional areas as follows:

1. Finance
2. Marketing
3. Operation
4. Human resources

Practice Task
1 - CONNECT ME!

Look for words inside the box which are connected to Organization Plan, Production
Plan, and Operation Plan.
Salary Requirements Liability of the owner or owners
Schedule Shipment System and Control
Materials Roles and Responsibilities
Evaluation of Supplier Organizational Structure
Functions of Support Services Cost
Plant and equipment
Process
Form of the Business Organization Storage and Inventory Control System
Materials requisition and Receiving Procedures

Questions:

1. What does the organization plan cover?

2. What are the five (5) important areas under production plan?

3. What are the significant factors in the operation plan?

PRACTICE TASK 2 – JUSTIFY ME

Write True if the statement is correct. Otherwise write False and state your reason briefly/change the
word/s that make it false.

Practice Task 3 – REFLECT ON ME!

Martha is running a t-shirt printing shop. If you are Martha and you are going to choose between
two suppliers, who are you going to choose between Supplier A and Supplier B and why?

 Supplier A who gives you a cartridge printer at Php 1999 price.

 Supplier B who gives you a bottomless printer at Php 4990 price.
POST TEST
ANSWER ME! Answer the following.

1-5 Identify the important areas that must be properly described in the organization
plan.

6-15. name the critical areas that must be included in the production plan and the
operational plan.

16-22. state some factors that must be considered in selecting the form of
organization that is best suited to the business.

23-25. Enumerate at least 3 factors involved in selecting the machinery and

equipment for the production of goods.
Assignments

LET US ORGANIZE, PRODUCE and OPERATE!

Work with your group in the previous lessons. Do as instructed.

1. Prepare the organization plan of your proposed small business using the format below as a
guide.
 ORGANIZATION PLAN
This section describes the form of the business organization, the liability of the owner, the
organizational , Structure, the role of the owner, and the proposed salary.

Form of the Business Organization

Trendy Food Company is in the form of partnership. The owners come up with this form
because it will be a big help to enhance our business if we combine our knowledge and skills. Through
it, we can make a better decision for our business. Furthermore, it is also an advantage to have a
greater availability of financing. With a large amount of capital, we can produce more delicious
corndog and we can even create a new product in order to improve the business’ profit. However, the
profit will be shared to all of the owners but it will not affect our teamwork.

Liability of the Owner

The owners shall perform the unlimited liability wherein the owners have a full legal
responsibility for all the debts of the business. The Trendy Food Company owners are personally
liable for any loss the business makes. Because there is no cap on the amount of debt that can be
incurred, all partners and owners are legally liable for the entire amount. Therefore, in the case of
business dissolution and there still remains unsettled financial obligation of the business, the owners
and partners shall take responsibility of it.

Organizational Structure
Role of the Owner
At the moment, Trendy Food Company is just a small business that is why the owners shall
become the workers also. We are responsible to go to great lengths to ensure the success of our
enterprises. This could include everything from emptying garbage cans to making sales, calls, and
modifying the company’s go-to-market approach. As a small business owners, we are responsible to
do different tasks. We divided it wherein everyone has a specific area to manage. It covers the sales
marketing, finance and operation.

Proposed Salary
 PRODUCTION PLAN

Production Schedule
Our company will make sure that we serve our customer quickly. We will not let them
become angry or disappointed with our service. For instance, the customer ordered a corndog at
1:00 pm, we are going to prepare her request as fast as we can. In just a span of three to five minutes,
we will serve the food deliciously for her. Here at Trendy Food Company, we value our customers
because they are the key to the success of our business. Their feedback about our products and
services matter. Our goal in terms of production is to make them say “wow that was fast”. Through it,
our customer will always go back in our store because they know that the food will be served
automatically and will not be delay.

Production Process
 Equipment Required
•Frying Pan
•Stove and Gas
•Spatula
•Mixer or whisk
•Bowl
•Chopping Board
•Corndog Plates
Sources of materials
Since, Trendy Food Company is still just a small startup, our materials sources will be from our
home and some in the market. We prefer to minimize our expenses than purchasing a lot of
equipment that we do not really need. We, the owners agreed to bring our equipment from home in
order to save money. However, if we already have enough profit that we can use to buy our
company’s own materials, we will consider it.

Estimated Production Cost

The maximum estimated production cost of our product is 2,500 pesos including the stall that
we are going to make. It is good for minimum of 100 persons.
 Operation Plan
Evaluation of Suppliers
As a start up small business of Corndog, I would look at the suppliers ability to meet and
exceed the expectations of the company and the customers. The performance track record of the
supplier should be excellent. The supplier should recognize its responsibilities to deliver high quality
goods and services. The suppliers should have compliance record with governing laws and regulations
for instance and its delivery schedules should be reliable convenient, and flexible enough to meet the
demand of the company that may change from time to time. As a small business I will evaluate
suppliers on the basis of their capacity to provide support to the business whatever necessary.
Further more, the suppliers should be engaged in business practices and it should be financially stable
and effective plans to ensure its business continuity. The supplier that will meet the criteria set by the
company will be selected.

Purchase Procedures
Storage and Inventory Control
Scoring rubric for each activity will be used.
 SCORING RUBRICS

Category Beginning Developing Proficient Highly Excellent

Proficient 8
2 4 6 10

Completeness The work is Many questions Two or One All

very are more question is questions
incomplete. missing/partially questions partially are
complete. are answered answered
missing or or completely.
partially completely
complete. missing.
Correctness The work is Some There are There is 1 There are 0
full of questions/tasks 2 or 3 error in the errors in
errors. were not errors in output. the output.
answered the
correctly. output.
Collaboration We did the We We worked Everyone
work by worked together so worked
ourselves. together that together
We talked most of everyone using
a little the time. contributed his/her
among Sharing to the final knowledge
group ideas output. and
members regularly. abilities to
make the
output
come
together.
Cleanliness Our final There are some Our work Our final There is no
output is erasures. is clean. output is erasures.
full of very clean
erasures.