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Operations Management

IB Business Management: 
5.1
Operations methods
The different operations methods in the IB Business Management course fall into three main categories: job (one-off production), batch (multiple items, one step at a time for all items), and flow (multiple items, all steps in process at once for separate items).
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Key learning outcomes:

  • Explain the role of operations management
  • Describe and compare the features and applications of job, batch, line, mass/flow production and mass customisation. 
  • Analyse the implications for functional departments that arise from changing the production methods. 
  • Analyse the most appropriate method of production for a given situation.
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The role of operations management

​Operations management is a critical function in any organisation, whether it's a manufacturing firm, a service provider, or a non-profit entity. It is the process of planning, organizing, directing, and controlling the resources, processes, and systems involved in the production and delivery of goods and services. The primary goal of operations management is to ensure that an organisation operates efficiently, effectively, and meets the needs of its customers while maintaining a sustainable competitive advantage. The role of operations management can be broken down into several key areas:
  • Process design and improvement: Operations management is responsible for designing and optimising processes to ensure that they are efficient, effective, and aligned with the organisation's strategic goals. This includes identifying bottlenecks, reducing waste, and implementing continuous improvement initiatives.
  • Capacity and resource planning: Operations managers are tasked with ensuring that the organisation has the right resources, including people, equipment, and materials, in the right quantities and at the right time. This involves forecasting demand, scheduling production, and balancing capacity with demand.
  • Quality management: Ensuring that the products and services delivered by the organization meet or exceed customer expectations is a key responsibility of operations management. This involves establishing quality standards, implementing quality control measures, and continuously monitoring and improving quality levels.
  • Supply chain management: Operations managers must coordinate and manage relationships with suppliers, distributors, and other partners in the supply chain. This includes procurement, inventory management, transportation, and logistics, ensuring that materials and finished products flow smoothly and efficiently throughout the supply chain.
  • Cost control and efficiency: One of the primary goals of operations management is to minimise costs and maximise efficiency. Operations managers must identify opportunities to reduce expenses, optimise resource utilisation, and eliminate inefficiencies in the production process.

Operations management explained


  • Risk management: Operations managers must identify and mitigate potential risks, such as equipment breakdowns, labor shortages, or supply chain disruptions, that could negatively impact the organisation's ability to meet customer demand or achieve strategic objectives.
  • Sustainability and corporate social responsibility: Operations management plays a key role in ensuring that the organisation operates in an environmentally and socially responsible manner. This includes reducing waste and energy consumption, minimising the environmental impact of production processes, and ensuring fair labor practices.
  • Integration with other business functions: Operations management must work closely with other departments, such as marketing, finance, and human resources, to ensure that the organisation's strategic goals are aligned and that the overall performance is optimised.

In summary, the role of operations management is to ensure that an organisation operates efficiently and effectively, delivers high-quality products and services, and remains competitive in the marketplace. This involves managing resources, processes, and systems, as well as working closely with other business functions to achieve organisational goals.

Operations methods

There are several different ways in which goods and services can be produced. These production methods fall into three main categories: job (one-off production), batch (multiple items, one step at a time for all items), and flow (multiple items, all steps in process at once for separate items).

There are four different classifications of operations methods :
  • Job production
  • Batch production
  • Mass or flow production 
  • Mass customisation
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Operations – economies of scale

No one does mass production quite like the Chinese. Economies of scale that will take your breath away! This video is fantastic. Don't wait for anything to happen, don't wait for anything to be said. Just sit back, enjoy and be prepared to be astonished as every passing second reveals more and more of the staggering size of this operation. This one factory is responsible for 99 per cent of worldwide iron production (that's iron as in 'ironing one's clothes'). 
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Key terms

Job production: Job production is the manufacture of individual 'one-off' or unique items made to customer specifications. The product is seen through the whole process, from start to finish, by an individual or group of workers. The production of the next individual item does not begin until the previous job is complete.

Batch production: is where the manufacturing process is split into a number of different operations; each of which is carried out on the whole batch before it is moved on and another batch received. The batch is moved on from one stage of production to the next until all the manufacturing processes are completed. Batch production involves the manufacture of a group of identical items and is normally used when the demand for the product is relatively constant.

Flow/flow production: A production method where all the different operations required for production are carried out in a sequence one after the other. It is usually used where mass production is required to meet high levels of demand and when the product being manufactured is reasonably standardised.

Mass customisation: The use of flexible computer-aided production systems to produce items that meet individual customer requirements at mass production cost levels. ​Such manufacturing systems combine the low unit costs of mass production processes with the flexibility of individual customisation.

Job production

​Job production is normally used for the production of single one-off products. The products may be small or large and are often unique. In order to be called job production, each individual product has to be completed before the next product is started. At any one time, there is only one product being made. New, small firms often use labour-intensive job production, before they get the chance to expand and purchase advanced equipment. Job production enables specialised products to be produced and tends to be motivating for workers because they produce the whole product and take pride in it.

However, this production method tends to result in high unit costs, often takes a long time to complete, and is usually labour intensive. The labour force also needs to be highly skilled and this is not always easy to achieve. Watch the video of a master watch maker  producing a bespoke watch to get some idea of why these watches are so expensive.

Aston Martin is an example of a very expensive car that is individually produced for the needs of each customer. Each engine is hand built and carries a plate with the engineers name on it.

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Producing bespoke watches


Producing an aeroplane


Batch production

Batch production makes products in separate groups and the products in each batch go through the whole process together. The production process involves a number of distinct stages and the defining feature of batch production is that every unit in the batch must go through an individual production stage before the batch as a whole moves on to the next stage.

Batch production allows firms to use division of labour in the production process and it enables economies of scale if the batch is large enough. It is usually employed in industries where demand is for batches of identical products (say, raspberry doughnuts) . It also allows each individual batch to be specifically matched to the demand, and the design and composition of batches can easily be altered (to say, chocolate doughnuts).

The drawbacks are that batch production tends to have high levels of work-in-progress stocks at each stage of the production process  The work may well be boring and demotivating for workers. If batches are small, then unit costs are likely to remain high. There is often a need to clean and adjust machinery after each batch has passed through. 
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Batch production: hotdogs


Batch production: bubblegum


Mass/flow production

This method is used when individual products move from stage to stage of the production process as soon as they are ready, without having to wait for any other products. Flow production systems are capable of producing large quantities of output in a relatively short time and so it suits industries where demand for a product is high and consistent. It also suits the production of large numbers of a standardised item that only requires minimal alterations. This is often why it is often referred to as mass production. Flow production usually takes place on a production line – hence the use of the term production line.

Flow production has a number of advantages over other types of production. Labour costs tend to be relatively low, because much of the process is mechanised and there is little physical handling of products. The constant output should make the planning of inputs relatively simple and this can lead to the minimisation of input stocks through the use of just-in-time (JIT) stock control (a 5.6 Production Planning topic). Quality tends to be consistent and high and it is easy to check the quality of products at various points throughout the process. The main disadvantage is the high initial set-up cost. By definition, capital intensive, high technology production lines are going to cost a great deal of money. In addition, the work involved tends to be boring, demotivating and repetitive.

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A funny example of mass/flow production!


Beer bottling example of mass/flow production


Mass customisation

The search for production methods that combine the advantages of job production – flexibility and worker satisfaction – with the gains from flow/mass production – low unit costs – has lead to the development of mass customisation where custom output can be produced. 

This method is only possible because of tremendous advances in technology such as computer-aided design (CAD) and computer-aided manufacturing (CAM). These have allowed much quicker development of new product  designs that feature many common components and robotic machinery that can be switched to making different parts. (The Tesla factory video illustrates this perfectly.)

The mass customisation process combines the latest technology with multi-skilled labour forces to use production lines to make a range of varied products. This allows businesses to move away from a mass marketing approach with high output of identical products. Instead, differentiated marketing can be used which allows for higher added value – an essential objective of all operations managers.

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​Mass customisation at the Tesla factory


The future of manufacturing: Industry 4.0


Operations methods: summary notes

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The factory of the future

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Student focus question:
​Is American manufacturing dead?

Listen to the Planet Money podcast and answer the above question.

Combining production methods

The factors that affect the choice of production method are also likely to encourage firms to use a variety of production methods to satisfy the needs of customers in different market segments.

The burger, or fast food market, tends to work along the principles of batch production with a number of identical burgers being produced at a time. However, where demand is lower for certain products, e.g. vegetarian burgers, these may be made to order, i.e. job production.

Subway, for instance, produces batches of rolls or 'subs', but consumers are able to customise the fillings to a certain extent within the options available.

Mass production can be customised through the use of greater automation and robots in the production line. Until recently, assembly lines were built on the principle of the standardisation of products. Under this production method, any change in the nature of the finished product would require the line to be stopped, new tools or materials added and/or existing equipment to be recalibrated. However, robotic technology may be programmed to produce varying sizes and finishes. Paints, for example, can be changed rapidly by the rotation of nozzles.

The technology market in particular combines methods of production. Dell traditionally sells online and customers can order a number of standardised products, which are produced using assembly line operations. However, during the order process, additional options can be selected. This additional flexibility may threaten the existence of smaller firms which do not enjoy the lower costs associated with mass production, but whose greater choice and flexibility to meet customer needs previously justified the higher price they inevitably charged.
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Choosing the right production method

​The following factors will influence whether a business adopts one of the four methods of the different production methods examined here. 
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Impact of changing production methods

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IB Business Management 5.1 Operation methods
SUMMARY NOTES

IB Business Management: 5.1 Operations Methods teaching and learning PowerPoint notes for HL and SL IB Business Management

PROGRESS CHECK  – Test your understanding by completing the activities below

You have a range of practice activities, interactive flash cards, exam practice questions, interactive quizzes and classroom games to ensure you and your students have complete mastery of the IB Business Management requirements for the 5.1 Operations Methods topic.

USE THE FLASHCARDS IN ALL STUDY MODES


IB Business Management
5.1 Operations methods

Student learning activity A
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IB Business Management
5.1 Operations methods
Student learning activity B
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IB Business Management
5.1 Operations methods
​
Student learning activity C
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IB Business Management
5.1 Operations methods
Exam practice questions
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IB Business Management interactive quizzes and classroom games
Test how well you know the IB Business Management Operations: 5.1 Operations Methods​ topic with the interactive self-assessment quizzes below. Each interactive quiz selects 30 questions at random from a larger question bank so keep on practicing! Aim for a score of at least 80 percent.
Loading 5.1A Operations Methods
Loading 5.1B Operations Methods

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Instructions: How to play Kahoot!
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    • Operations methods
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    • Ansoff matrix
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