THE 4MS OF OPERATIONS DISTRIBUTION METHOD

DISTRIBUTION
METHODS - the process to be followed in effectively manufacturing or - is the process of bringing the products or services to customers.
delivering a product or service. - is not a straight process from the entrepreneur to customers, thus SUPPLY
MANPOWER - the right human resources who will handle certain business CHAIN or DISTRIBUTION CHANNEL was coined.
operations • In selling physical goods, the entrepreneur must plan the LOCATION, the
MACHINES - the technology used in efficiently operating the business. PROCESSES, and the DISTRIBUTION of the products.
MATERIALS - to be used in creating a product or performing a service, which
includes supply chain management. PAYMENT PROCESS
- There are no problems if the customers pay in cash. But there are instances
1. METHODS when they do not want to pay in cash and are usually attracted by flexible and
- represent the day-to-day operations of a business/describes how an customer-friendly payment terms.
entrepreneur will run the business. - Some entrepreneurs put POINT-OF-SALE (POS) machines to accommodate
those who will pay through their credit or debit cards.
• The entrepreneur has to be very detailed and must ensure that the customer
experience will be pleasant and seamless. 2. MANPOWER
• The process must also abide with industry standards and policies where the business - The entrepreneur needs to plot a table of organization based on his business
belongs (e. g. ISO CERTIFICATION) INTERNATIONAL ORGANIZATION FOR objectives.
STANDARDIZATION - To verify if a position is really necessary, the entrepreneur must devise a
DETAILED JOB DESCRIPTION AND JOB QUALIFICATIONS of the future
SOP - set by the entrepreneur both in manufacturing goods and rendering the employee. This will be the basis in deciding whether to hire an employee or
services, monitored to validate compliance. The entrepreneur must also not.
critically consider the effects of these processes to the environment and to the one of the highest costs of operating a business but is also the most
public. instrumental to its success.
MANUFACTURING OF GOODS - The entrepreneur who will engage in JOB DESCRIPTION (JOB IDENTIFICATION)
producing his or her own products will have to consider the basic guidelines - enumerates the duties and responsibilities of the potential employee,
and principles in manufacturing. including the scope, limitations, and terms and conditions of employment.
MANUFACTURING - the process of translating raw materials into finished - Originates from Job Analysis
goods - Consist of job title, job location, role, responsibilities, duties, salary, incentives and
allowances.
THREE ELEMENTS - Its objective is to describe the job profile.
1. INPUTS- the materials or ingredients to be used in creating the product. -What the company is offering to the candidate.
2.PROCESS- the transformation phase where inputs are processed by
manpower and machines. A. JOB TITLE - the heading of a job description, which the summary of what
3. OUTPUT-the final product of the process stage, which is intended to be sold the employee will do.
to target customers B. COMPENSATION AND BENEFIT RANGE - details the potential salary and
benefits that the employee will get.
MANUFACTURING SITE - the manufacturing process will take place C. OUTIES - describe the job that employee will assume with allowance for
HOME-BASED- most startups do not have financial capacity to establish a flexibility.
manufacturing site. The cheapest and flexible (food products and customized D. RESPONSIBILITIES AND ACCOUNTABILITIES - must be communicated
clothes). well to the employee so that he or she knows what to expect with the job.
COMMERCIAL SPACE FOR RENT- advisable if the business really requires a E. WORK SCHEDULES - work hours must be clearly indicated in the job
commercial space. It gives that entrepreneur a more specialized and suited description. The specific days and working hours must be written so that the
manufacturing site. Expensive than home-based. employee will be able to align the work schedule with his or her personal
COMMERCIAL SPACE PURCHASE - requires the biggest amount of capital schedule.
expenditure, but also provides substantial freedom to design and run the
space. Compared with renting, purchasing commercial space is more of an EMPLOYEE QUALIFICATION (JOB SPECIFICATION)
investment than expense. - the set of specific qualities, knowledge and experience, a person must
possess to perform o particular job.
• Once the manufacturing site is chosen, LOCATION must be considered, where the - Based on the job description
delivery of raw materials and finished goods will be conducted. The transportation - Involves personal attributes, skills, knowledge, educational qualification and
routes should be efficient, experience
• The internal layout or the floor plan must be critically done. Each space should be -Its objective is to specifies the eligibility criteria
maximized save manufacturing costs (specially the overhead costs). -What company is demanding from the candidates.
• An efficient floor plan illustrates how raw materials and finished goods con efficiently -Used to match the right attributes with the job so described.
be transferred.

TWO OPTIONS FOR FLOOR PLAN 1. EDUCATIONAL BACKGROUND - gives the entrepreneur an idea on the
(1) the PRODUCT-BASED LAYOUT - facilities are prearranged according to degree of the candidate's knowledge of basic things.
the flow of the manufacturing operation. 2. WORK EXPERIENCE - will tell him or her what to expect from the applicant
(2) the PROCESS-BASED LAYOUT - facilities are grouped according to their and can potentially contribute.
function. 3. SPECIFIC SKILL OR KNOWLEDGE - important especially on technical
jobs that require high proficiency.
SERVICE DELIVERY PROCESS 4. WORK ATTITUDE - the worker's integrity and how he or she deals with his
- The entrepreneur who will engage in a service business must be more or her co- workers, bosses, and customers. A good work attitude involves
meticulous when it comes to the service delivery process. being punctual, having good leadership and communication skills, a team
- SERVICES are intangible and customer can appreciate the service is by remembering player, making ethical decisions, obeying superiors, and being passionate and
how pleasant his or her experience was. It saves the entrepreneur a huge chunk in dedicated to the company.
operation costs.
PREPARATORY SELECTION OF JOB APPLICANTS
SERVICE BLUEPRINT - detailed flowchart of the of the service business. HEADHUNTERS - help companies find a set of people suited for their
BOTTLENECK - part of the process where there is an apparent inefficiency requirements. They usually charge a finder's fee once the entrepreneur has
and customer waits longer, avoid customer complaints. decided to accept an applicant.
• Manpower Agencies recruit temporary employees under a short contract, usually on a WAREHOUSING - storing the finished goods manufactured in a facility until
SIX-MONTH PERIOD they are distributed to end users. Warehousing cost is usually substantial.
• The entrepreneur can also opt to ADVERTISE JOB VACANCIES VIA PRINT such as Therefore, it must be reduced by either buying an economical warehouse or
general circulation newspaper or other publications if the intention is to promptly get a renting an inexpensive space
candidate from the public. TRANSPORTATION - major cost in logistics management. The process of
DIGITAL MEDIA - with the power of the internet, an entrepreneur can easily transferring the products to retailers or consumers. The entrepreneur or
post job vacancies through his or her website. manufacturer must purchase energy-efficient vehicles to prevent inefficient
trips.
SELECTION OF JOB APPLICANTS DISTRIBUTION HUB - is where the entrepreneur combines the goods before
The entrepreneur must now do the difficult task of screening them and picking the most
qualified and most suited for the job. PRELIMINARY SCREENING - the entrepreneur
delivery to the retailers or end consumers.
will just need to refer to the required qualifications and eliminate those who did not INVENTORY - Each of the inventories should be monitored. The law of supply
qualify. The HR DEPARTMENT can conduct series of interviews. and demand must always be considered. There shouldn't be a surplus of
inventory. The entrepreneurs must be knowledgeable about the life span of the
JOB OFFER - Once the entrepreneur has been convinced of the credentials products and ensure there is enough space to store and stock inventory.
and the interview answers of the candidate, the job contract is now prepared.
JOB CONTRACT - summarizes the terms and conditions of the candidate's THE BUSINESS MODEL
employment with the business. It includes the following: rank or position of the According to DON DEEBELAK in his article "Developing a Great Business
candidate, salary and benefits including vacation and sick leaves, a list of Model on the Entrepreneur Website, the entrepreneur must adopt the
responsibilities or deliverables and its scope and limitations, work schedule. dynamics of traffic lights in developing the business model.

EMPLOYEE DEVELOPMENT GREEN LIGHTS

TRAINING PEOPLE - one of the biggest investments of an entrepreneur or a 1. TARGET HIGH-VALUE CUSTOMERS
businessman. The entrepreneur must devise strategies on how to keep - are often misinterpreted as affluent/high-end customers, but is not always the
employees satisfied working in the company. case.
- someone who is easy to find, someone who is willing to pay a price that will
Training starts with EMPLOYEE ORIENTATION - a one-to-two-day session reasonably profit the entrepreneur, someone who is easy to persuade.
that summarizes the history of the business, its vision, mission, policies and 2. OFFER PRODUCTS OR SERVICES WITH GREAT VALUE - The unique
procedure, culture, and norms of the business value proposition should be a reason to choose your product or your service.
KEY PERFORMANCE INDICATOR KPI AND KRA - are the bases of the 3. OFFER PRODUCTS SERVICES WITH REASONABLE PROFITS - The two
entrepreneur for rating the performance of the employee. ways of reasonable profits, increasing markup and decreasing operational
OJT - the most practical tool in training the employee under a supervision of a costs. To achieve reasonable profits though is to decrease operational costs.
team leader or manager. This will spare the entrepreneur the cost of further
classroom training because the OJT training will serve as learning experience. RED LIGHTS
BUDDY SYSTEM - training program wherein on expert team member is 1. SATISFYING THE CUSTOMER BECOMES TOO COSTLY AND
assigned to assist the new employee in his or her function. IRRATIONAL - The entrepreneur must calculate the cost and profit associated
MENTOR-MENTEE PROGRAM - training program for supervisors, wherein with serving the customer before pursuing the business. The term lifetime
they will be mentored by senior executive or senior officer of the business. value of a customer was coined to understand the patential value that a
SUCCESSION PLAN - ensure the business operations still continue even in customer can bring to the business in the long run.
their absence or the absence of key employees, or when they decide to resign
or retire. But there are obvious red flags, which are collectively called CUSTOMER
SATISFACTION COSTS, that can impede the success of an entrepreneur.
3. MACHINES a. WARRANTY- some products are not as sturdy, so the business will incur
unnecessary warranty costs that can surpass the cost and profit margin of the product.
- can be described as the "best friend" of manpower in producing goods and b. AFTER SALES COST- Some products or services require extensive technical
offering services. Without machines, business operations will be cumbersome, support, installation, and customer service. These after sales costs might even surpass
costly, and with low quality. the actual sales price of the product or service.
EQUIPMENT AND OTHER FACILITIES 2. BEING A MARKET LEADER IS DIFFICULT TO SUSTAIN - one of the
The sizes and shapes of the facilities and equipment affect the entire characteristics of an ideal business model is capitalizing on the business'
operations process, so the site must adapt to how big or small the pieces of stature as a market leader through improving the features and benefits, adding
equipment are. new product lines services, or having new customers.
- For manufacturing equipment that are complicated to operate, the entrepreneur must
ensure that the employee went through rigorous training or certification to operate
them. The goal is to maximize the pieces of equipment to their full capacity to minimize
3. RETURN ON INVESTMENT TAKES TOO LONG AND TOO SMALL - ROI
manufacturing or service delivery costs. is very important to the entrepreneur because it validates that the business is
doing well and that money is flowing in as expected during the planning stage
• Approximately 25% in the first three years of business operations is a sign that the
TELECOMMUNICATIONS AND INFORMATION TECHNOLOGY - entrepreneur is not operating on ideal business model.
Entrepreneurs will venture to it regardless of any business, they are • Only less that 50% of the capital required will be allocated to revenue-generating
mandatory. These pieces of equipment include mobile phones or activities such as selling and manufacturing.
smartphones, tablet computers, landline phones, laptops or desktops
computer, POS machines, etc. TYPES OF BUSINESS ORGANIZATION
1. SOLE PROPRIETORSHIP OR INDIVIDUAL PROPRIETORSHIP - simplest
4. MATERIALS form of business. A person who owns the business and is personally
Whether the entrepreneur will offer products or cater services, he or she has to responsible for its debts.
pinpoint a number of dependable suppliers of quality raw materials and 2. PARTNERSHIP - a legal form of business between two or more individuals
supplies. who share management and profit.
- The selection of suppliers depends largely on how the suppliers will not
cause interruptions in the production of goods or serving the customers. THE TWO MOST COMMON TYPE OF PARTNERSHIP
GENERAL - the partners manage the company and assume responsibility for
LOGISTICS - Entrepreneurs/manufacturers can also venture into distributing the partnership's debts and other obligations
their products on their own without the aid of distributor or agent. They are LIMITED - has both general and limited partners, the general partners own
responsible for manufacturing, warehousing, transportation, inventory and operate the business and assume liability, while the limited partners serve
management, marketing, and selling the product or service. as investors only. They have no control over the company and are not subject
to the same liabilities
3. CORPORATION - has a separate legal status. It is able to raise large sums PAYBACK PERIOD
of capital through issuing bands and stock. CORPORATION INCOME is taxed = Total Investment/Annual net income after taxes
twice, once as corporate profits, then as personal income or dividends.
RETURN ON INVESTMENT
ORGANIZATION AND MANAGEMENT = Net Profit After Taxes/Total Assets/Investment
ORGANIZATIONAL STRUCTURE - system made up of tasks to be
accomplished, work movements from one work level to other work levels in the HORIZONTAL ANALYSIS
system, reporting relationships, and communication passageways. - the left to right comparison of performance for comparative periods. A
RECRUITMENT - process of finding and attempting to attract job candidates minimum of three periods may be compared to evaluate increases and
who are capable of effectively filling job vacancies. decreases. The increases or decreases are expressed as percentage of
SELECTION - the process of choosing the best among applicants, through change.
series of written examinations, interviews, medical examination and training
VERTICAL ANALYSIS
EXAMPLE OF JOB ANALYSIS - evaluates financial statement accounts with each account expressed as
Job Title: Bookkeeper percentage of the base account. The performance measurement determines
Job Specifications: proper balances for given accounts. For both service and merchandizing
- Must be a graduate of any business related course enterprises, the biggest percentages are for salaries and wages.
- Must be NCIII passer
- Must have a 2 years of work experience
- Computer literate Trustworthy

Job Description:
- Prepares and analyses financial statements
- Computes payroll
- Submits all necessary permits and government requirements.
- Sends payment of contribution to the corresponding agencies.

COMPENSATION - all monetary payments and all goods or commodities used

in lieu of money to reward employees.
WAGES - employee compensation based on the number of hours worked or
amount of output produced.
SALARY - employee compensation calculated on a weekly, monthly, or
annual basis.
ADMINISTRATIVE EXPENSES - expenses that an organization incurs not
directly tied to specific function such as manufacturing, production or sales.
These expenses are related to the organization as a whole. (Salaries of senior
executives and costs of general services such as accounting).

FINANCIAL PLAN
INCOME STATEMENT (PROFIT/LOSS STATEMENT) - shows the business'
revenues and expenses incurred over a period of time and the resulting profit
or less.
1. Consist of the following: Revenue, Cost of goods sold, gross profit,
operating/administrative expenses
REVENUE - the amount of the goods or services a business sells to
customers
COST OF GOODS SOLD - the cost of inventory a business sells during
particular period for business that have inventory.
GROSS PROFIT - the difference between revenue and cost of goods sold in
the gross profit.
NET INCOME - after the taxes are subtracted, the result is the net income or
loss for the period.
BALANCE SHEET - financial statement that lists what a business owns, what
it owns and how much it is worth at a particular point in time. It illustrates your
business's net worth.

ASSETS = LIABILITIES + EQUITY

ASSETS - Items of value owned by business
LIABILITIES - are amounts that a business owes to others
OWNER'S EQUITY - the amount remaining after the value of all liabilities is subtracted
from the value of all assets.

TYPES OF ASSETS
CURRENT ASSETS - referred to as liquid assets, can be converted to cash
easily.
ACCOUNTS RECEIVABLE - amounts owed to a business by its credit
customers.
FIXED ASSETS - illiquid assets connot be converted into cash easily, are
those that will be used for many years

TYPES OF LIABILITIES
LONG TERM LIABILITIES - are debts that are payable over a year or longer.
CURRENT LIABILITIES - debts that are due to be paid in full in liability.
ACCOUNTS PAYABLE - amounts owed to vendors for a merchandise
purchased or credit.