Skip to main content

Operations Management

Subject: Business Studies
Topic: 4
Cambridge Code: 0264 / 0450 / 7115

Production Methods​

Job Production​

One-off custom products

Examples: Weddings, custom furniture, architecture

Advantages:

  • Every product unique
  • Can charge premium
  • Customer satisfaction
  • Worker engagement

Disadvantages:

  • High cost per unit
  • Time-consuming
  • Difficult scheduling
  • Skilled workers needed

Batch Production​

Groups of identical products

Examples: Furniture batches, printing runs, shoes

Advantages:

  • Less cost than job
  • Flexible product change
  • Reasonable efficiency
  • Uses standard equipment

Disadvantages:

  • Setup time and cost
  • Inventory between batches
  • Not optimal efficiency
  • Medium skill level

Flow/Mass Production​

Continuous production

Examples: Cars, food processing, pharmaceuticals

Advantages:

  • Lowest cost per unit
  • Efficiency high
  • Predictable output
  • Specialization of labor

Disadvantages:

  • Large capital investment
  • Inflexible (hard to change)
  • Worker boredom
  • Quality issues from speed

Quality Control​

Quality control - Ensuring products meet standards

Methods​

Inspection:

  • Check finished products
  • Remove defects
  • Reactive (after-production)
  • Expensive (waste already made)

Quality Assurance:

  • Prevention focus
  • Control throughout process
  • Training and systems
  • Proactive (prevent defects)

Total Quality Management (TQM):

  • Everyone responsible
  • Continuous improvement
  • Customer focus
  • Kaizen (small improvements)

Benefits of Quality​

  • Customer satisfaction - Repeat purchase
  • Brand reputation - Competitive advantage
  • Lower costs - Fewer returns/reworks
  • Higher prices - Quality justifies premium

Inventory Management​

Inventory (Stock) - Raw materials, work-in-progress, finished goods

Problems​

Too much inventory:

  • Tied-up capital
  • Storage costs
  • Risk of obsolescence
  • Insurance costs

Too little inventory:

  • Stock-outs (can't fulfill orders)
  • Lost sales
  • Customer dissatisfaction
  • Production delays

Inventory Control Methods​

Re-order Level:

  • Point when to order
  • Based on: Lead time + Safety stock

Economic Order Quantity (EOQ):

  • Balance between ordering and holding costs
  • Minimize total cost

ABC Analysis:

  • A items: High value, close monitoring
  • B items: Medium value, normal control
  • C items: Low value, loose control

Just-In-Time (JIT)​

JIT - Inventory arrives exactly when needed

Features​

  • Minimal stockholding
  • Frequent deliveries
  • Close supplier relationships
  • Flexible production

Advantages​

  • Lower inventory costs
  • Reduced obsolescence
  • Fresh stock
  • Capital freed up
  • Less storage needed

Disadvantages​

  • Dependent on suppliers
  • No buffer for delays
  • Higher transport costs
  • Requires reliable systems

Lean Production​

Lean - Eliminate waste and maximize value

Principles​

  1. Identify value - Customer perspective
  2. Map value stream - All steps to deliver
  3. Create flow - Smooth continuous process
  4. Establish pull - Customer demand drives production
  5. Pursue perfection - Continuous improvement

Wastes to Eliminate​

  • Overproduction
  • Waiting
  • Transportation
  • Over-processing
  • Inventory
  • Motion/ergonomics
  • Defects

Capacity and Utilization​

Capacity - Maximum output possible

Capacity utilization = Actual outputMaximum possible output×100%\frac{\text{Actual output}}{\text{Maximum possible output}} \times 100\%

Utilization Targets​

  • Optimal: 70-85% (buffer for demand peaks)
  • Low: < 70% (underused, high cost per unit)
  • High: > 85% (risk of delays, quality issues)

Improving Utilization​

  • Market research to forecast demand
  • Product diversification
  • Outsourcing
  • Shift working
  • Subcontracting

Resource Planning​

Converting inputs into outputs efficiently

Resources​

Labour:

  • Recruitment
  • Training
  • Motivation
  • Scheduling

Materials:

  • Sourcing
  • Quality checking
  • Inventory control

Equipment:

  • Maintenance
  • Replacement
  • Utilization

Planning Techniques​

  • Forecasting demand
  • Scheduling production
  • Resource allocation
  • Contingency planning

Supply Chain Management​

Supply chain - All activities from materials to customer

Components​

  1. Procurement - Buying materials
  2. Production - Manufacturing
  3. Logistics - Transportation, warehousing
  4. Distribution - Getting to customers
  5. Customer service - Support

Optimization​

  • Reduce lead times
  • Lower costs
  • Improve quality
  • Enhance communication
  • Supplier partnerships

Key Points​

  1. Production methods: Job, Batch, Flow
  2. Quality control: Prevention vs inspection
  3. Inventory: Balance stockouts vs excess
  4. JIT: Minimal inventory, frequent delivery
  5. Lean: Eliminate waste
  6. Capacity utilization: 70-85% optimal
  7. Supply chain: All steps from materials to customer

Practice Questions​

  1. Recommend production method for product
  2. Design quality control system
  3. Calculate optimal inventory level
  4. Analyze JIT suitability
  5. Calculate capacity utilization
  6. Improve supply chain efficiency

Revision Tips​

  • Know production methods pros/cons
  • Understand quality approaches
  • Learn inventory concepts
  • JIT advantages/disadvantages
  • Capacity utilization importance
  • Supply chain integration