Operations Management
Operations tests how inputs are transformed into outputs efficiently and reliably. SL questions often ask you to compare production methods, improve quality or assess capacity and inventory decisions.
Core rules and concepts
- Production methods: job production makes one-off customized items; batch production makes groups of identical items; mass or flow production makes large volumes on a line; mass customisation combines scale with variety.
- Productivity = output ÷ input. It is not the same as total production.
- Capacity utilisation = actual output ÷ maximum output × 100.
- Lean production reduces waste through just-in-time (JIT), kanban, kaizen, cell production and zero-defect approaches. JIT lowers stock-holding costs but increases dependence on reliable suppliers.
- Quality: quality control inspects finished output; quality assurance builds quality into processes; TQM involves everyone and focuses on continuous improvement.
- Inventory and supply chain: buffer stock protects against uncertainty; lead time affects reorder decisions. Location decisions balance costs, labour, transport and market access.
Worked example
A furniture maker employs 10 workers and produces 200 units per week, so productivity is 200 ÷ 10 = 20 units per worker per week. A new machine raises output to 240 units with the same labour, giving 24 units per worker, a 20% increase. If maximum capacity is 300 units, utilisation rises from 66.7% to 80%. If each extra unit earns $100 contribution, the extra 40 units add $4,000 per week, so a $50,000 machine has a simple payback of 12.5 weeks before other costs. The decision still depends on demand and maintenance costs.
Traps that cost marks
Do not confuse productivity with production. JIT is not risk-free; supplier failure can stop production. TQM is proactive and organisation-wide, not a final inspection. Capacity utilisation near 100% can strain quality and leave no room for breakdowns. Economies of scale reduce unit cost; diseconomies raise it through coordination problems.