IB Diploma Business Management HL · Operations Management
Mini-Lesson
Operations Management
This mini-lesson covers Unit 5: production methods, quality and lean production, location, capacity and productivity, and break-even in operations decisions. At HL you also study production planning, research and development, and crisis management and contingency planning.
Screens flagged HL only cover production planning, R&D and crisis management.
Work through each screen, answer the questions as you go and collect ⭐ stars. Press Start when you are ready.
Role of operations
Turning inputs into outputs
Operations transforms inputs (materials, labour, capital) into finished goods and services, adding value efficiently. Objectives balance cost, quality, speed, flexibility and dependability.
Concept — sustainability: firms increasingly design circular processes (reduce, reuse, recycle; cradle-to-cradle) to cut waste and environmental impact.
Production methods
Job, batch, flow and mass customisation
How output is organised:
Job — one unique item made to order (a tailored suit).
Batch — groups of identical items in stages (loaves in a bakery).
Flow (mass) — continuous production of identical items (bottling line).
Mass customisation — flexible systems give some choice at near mass-production cost.
Sort it
Job, batch or flow?
Tap a product, then the production method it uses.
🔨 Job
📦 Batch
🏭 Flow
Quick check
Job production
?A boatyard builds a single hand-crafted luxury yacht to a customers exact specification. This is:
Break-even in operations
Contribution and break-even output
Operations managers use break-even to judge whether an output level is viable. Contribution per unit = price − variable cost, and break-even = fixed costs ÷ contribution per unit.
Calculate
Break-even output
1A workshop has fixed costs of 12,000 dollars. Each unit sells for 20 dollars with a variable cost of 12 dollars. Calculate the break-even output.
Location factors: proximity to market, raw materials and labour; costs (land, wages); infrastructure; government incentives; and clustering near similar firms. Firms may offshore, reshore, outsource or insource to cut cost or improve control.
Quick check
Location factor
?A heavy-steel manufacturer locates right next to the iron-ore mine it depends on. Its main location factor is proximity to:
Capacity and productivity
Using resources efficiently
Capacity utilisation = (actual output ÷ maximum possible output) × 100. High utilisation spreads fixed costs over more units (economies of scale); very high utilisation risks strain and no room for orders. Labour productivity = output ÷ number of workers.
Calculate
Capacity utilisation
2A plant can make 4,800 units a week but actually makes 3,600. Calculate its capacity utilisation.
3The same plant makes 4,800 units with 16 workers. Calculate labour productivity (output per worker).
units
Hint: labour productivity = total output ÷ number of workers = 4,800 ÷ 16.
Lean production and quality
TQM, Kaizen and JIT (HL depth)
Lean production minimises waste (muda). Tools: Kaizen (continuous improvement), just-in-time (JIT) stock, quality circles, benchmarking and total quality management (TQM), where every worker owns quality. Quality control inspects at the end; quality assurance builds quality in at every stage.
Quick check
Benchmarking (HL)
?A firm compares its delivery times and defect rates against the industrys best performer to find gaps to close. This is:
Production planning
Supply chain and stock control (HL only)
Production planning keeps output flowing:
Supply chain management — coordinating suppliers to end customers.
JIT vs JIC — just-in-time holds almost no stock; just-in-case holds buffer stock for safety.
Stock control chart — reorder level, lead time, buffer stock and maximum stock.
Labour- vs capital-intensive production; make-or-buy decisions.
Quick check
Buffer stock (HL)
?A firm keeps a minimum level of stock in reserve so production can continue if a delivery is late. This reserve is called:
Calculate
Defect rate (HL)
4In a batch of 900 units, 45 are found to be defective. Calculate the defect rate.
%
Hint: defect rate = (defective units ÷ total units) × 100 = (45 ÷ 900) × 100.
R&D and crisis management
Innovation and contingency (HL only)
Research and development (R&D) creates new or improved products and processes; patents and intellectual property protect the returns. Innovation may be incremental or disruptive — a key use of the creativity concept.
Crisis management responds to a sudden serious threat; contingency planning prepares in advance (business continuity plans), stressing fast, transparent communication and clear control.
Quick check
Contingency planning (HL)
?Preparing detailed plans before a possible disaster (fire, cyber-attack, supply failure) so the firm can react quickly is:
Match it
Match the operations term to its meaning
Tap a term on the left, then its meaning on the right.
Term
Meaning
Quick check
Quality assurance vs control
?Which best describes quality assurance?
Recap
The big ideas to know
Operations: transform inputs to outputs, adding value; sustainability and circular design.