This mini-lesson covers Unit 5: production methods, quality and lean production, location, capacity and productivity, and break-even in operations decisions.
Work through each screen, answer the questions as you go and collect ⭐ stars. Press Start when you are ready.
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.
How output is organised:
Tap a product, then the production method it uses.
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.
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.
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.
As output rises, average (unit) cost often falls thanks to economies of scale: bulk buying, specialisation of labour and machinery, and spreading fixed costs over more units. Grow too large, though, and diseconomies of scale creep in — communication and coordination problems and weaker motivation — pushing unit costs back up.
Lean production reduces waste. Kaizen means continuous small improvements; just-in-time (JIT) delivers stock only as needed, cutting storage costs but relying on dependable suppliers. Quality control inspects finished output; quality assurance builds quality in at every stage to prevent defects. Poor quality means recalls, waste and lost trust.
Tap a term on the left, then its meaning on the right.
Operations: transform inputs to outputs, adding value; sustainability and circular design.
Methods: job, batch, flow, mass customisation.
Break-even: contribution = price − variable cost; break-even = fixed costs ÷ contribution.
Location: market, materials, labour, cost, infrastructure; offshoring/reshoring.
Efficiency: capacity utilisation and labour productivity; lean, Kaizen, JIT; quality assurance vs control.
You have covered Unit 5. Press Finish to see your score.
You have worked through Operations Management for IB Diploma Business Management SL. 🎉
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