IB · BM SL

Business Management SL

Operations management — Unit 5

Name: ____________________Date: October 2, 2026

1.
A factory has a maximum possible output of 1,000 units per month, but currently produces 800 units per month. (a) Calculate the factory's capacity utilization rate. (b) Suggest one way the factory could increase its capacity utilization rate without building new facilities.
[3 marks]
Marking points
- Uses the formula: capacity utilization rate = (actual output / maximum possible output) × 100.
- Substitutes to obtain (800/1,000) × 100 = 80%.
- Suggests a valid method, such as increasing marketing to boost sales/demand, running additional shifts with existing equipment, or more flexible/efficient scheduling of existing staff and machinery.
Examiner tip: Low capacity utilization means fixed costs are spread over fewer units, raising average cost per unit — this is why improving utilization is a common route to better profitability without new investment.
2.
Marking analysis: A learner attempts the following task: “A factory has a maximum possible output of 1,000 units per month, but currently produces 800 units per month. (a) Calculate the factory's capacity utilization rate. (b) Suggest one way the factory could increase its capacity utilization rate without building new facilities.” Their response addresses only this point: “Uses the formula: capacity utilization rate = (actual output / maximum possible output) × 100.” Evaluate the response against the complete 3-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[3 marks]
Marking points
- Recognises credit for the stated point: Uses the formula: capacity utilization rate = (actual output / maximum possible output) × 100.
- Identifies the missing requirement: Substitutes to obtain (800/1,000) × 100 = 80%.
- Identifies the missing requirement: Suggests a valid method, such as increasing marketing to boost sales/demand, running additional shifts with existing equipment, or more flexible/efficient scheduling of existing staff and machinery.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
3.
Distinguish between job production, batch production, and flow (mass) production, giving one example product typically made using each method.
[3 marks] · no calculator
Marking points
- Defines job production as making a single, unique product to a specific customer's order, typically highly customized. Gives a valid example, such as a wedding dress or a bespoke yacht.
- Defines batch production as making a group ('batch') of identical items together, with different batches able to be customized before moving to the next stage. Gives a valid example, such as a bakery producing a batch of a particular bread recipe.
- Defines flow production as a continuous, standardized process producing large volumes of an identical product on an assembly line. Gives a valid example, such as car manufacturing or bottling soft drinks.
Examiner tip: These three methods form a spectrum of increasing standardization and volume, and decreasing customization: job production (most customized, lowest volume) through batch to flow production (least customized, highest volume).
4.
Marking analysis: A learner attempts the following task: “Distinguish between job production, batch production, and flow (mass) production, giving one example product typically made using each method.” Their response addresses only this point: “Defines job production as making a single, unique product to a specific customer's order, typically highly customized. Gives a valid example, such as a wedding dress or a bespoke yacht.” Evaluate the response against the complete 3-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[3 marks] · no calculator
Marking points
- Recognises credit for the stated point: Defines job production as making a single, unique product to a specific customer's order, typically highly customized. Gives a valid example, such as a wedding dress or a bespoke yacht.
- Identifies the missing requirement: Defines batch production as making a group ('batch') of identical items together, with different batches able to be customized before moving to the next stage. Gives a valid example, such as a bakery producing a batch of a particular bread recipe.
- Identifies the missing requirement: Defines flow production as a continuous, standardized process producing large volumes of an identical product on an assembly line. Gives a valid example, such as car manufacturing or bottling soft drinks.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
5.
Explain the difference between quality control and quality assurance as approaches to managing product quality.
[2 marks] · no calculator
Marking points
- Explains quality control as a reactive approach, typically involving inspecting finished products (often at the end of the production line) to identify and remove defective items before they reach the customer.
- Explains quality assurance as a proactive approach, building quality checks into every stage of the production process itself, aiming to prevent defects from occurring in the first place rather than catching them afterward.
Examiner tip: Quality assurance is generally considered superior because preventing defects during production is cheaper than discovering and discarding or reworking defective finished products at the end of the line.
6.
Marking analysis: A learner attempts the following task: “Explain the difference between quality control and quality assurance as approaches to managing product quality.” Their response addresses only this point: “Explains quality control as a reactive approach, typically involving inspecting finished products (often at the end of the production line) to identify and remove defective items before they reach the customer.” Evaluate the response against the complete 2-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[2 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains quality control as a reactive approach, typically involving inspecting finished products (often at the end of the production line) to identify and remove defective items before they reach the customer.
- Identifies the missing requirement: Explains quality assurance as a proactive approach, building quality checks into every stage of the production process itself, aiming to prevent defects from occurring in the first place rather than catching them afterward.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
7.
Explain how adopting Kaizen (continuous improvement) could benefit a manufacturing company over time, and state one requirement for Kaizen to succeed within an organization.
[3 marks] · no calculator
Marking points
- Explains that Kaizen involves making small, incremental improvements to processes on an ongoing basis, often suggested by the employees actually performing the work.
- Explains that over time, these many small improvements accumulate into significant gains in efficiency, quality, or cost reduction, without requiring large, risky, one-off capital investment.
- States a valid requirement for success, such as a company culture that genuinely values and acts on employee suggestions, or ongoing management commitment and employee training to sustain the process.
Examiner tip: Kaizen's power comes from involving the employees closest to the work in identifying improvements — a top-down approach that ignores worker input undermines the whole philosophy behind it.
8.
Marking analysis: A learner attempts the following task: “Explain how adopting Kaizen (continuous improvement) could benefit a manufacturing company over time, and state one requirement for Kaizen to succeed within an organization.” Their response addresses only this point: “Explains that Kaizen involves making small, incremental improvements to processes on an ongoing basis, often suggested by the employees actually performing the work.” Evaluate the response against the complete 3-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[3 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains that Kaizen involves making small, incremental improvements to processes on an ongoing basis, often suggested by the employees actually performing the work.
- Identifies the missing requirement: Explains that over time, these many small improvements accumulate into significant gains in efficiency, quality, or cost reduction, without requiring large, risky, one-off capital investment.
- Identifies the missing requirement: States a valid requirement for success, such as a company culture that genuinely values and acts on employee suggestions, or ongoing management commitment and employee training to sustain the process.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
9.
Explain how a just-in-time (JIT) inventory system reduces a company's stock-holding costs, and state one risk associated with relying on JIT.
[3 marks] · no calculator
Marking points
- Explains that JIT involves ordering and receiving raw materials or components only as they are needed for production, rather than holding large buffer stocks in advance.
- Explains that this minimizes the costs of storing, insuring, and managing large quantities of inventory, and reduces the risk of money being tied up in unsold stock or stock becoming obsolete.
- States a valid risk, such as production being halted entirely if a supplier fails to deliver materials on time, or the company having little buffer stock to cope with a sudden, unexpected surge in demand.
Examiner tip: JIT trades lower inventory-holding costs for greater supply chain vulnerability — this trade-off became especially visible during global supply chain disruptions, which forced many firms to reconsider pure JIT strategies.
10.
Marking analysis: A learner attempts the following task: “Explain how a just-in-time (JIT) inventory system reduces a company's stock-holding costs, and state one risk associated with relying on JIT.” Their response addresses only this point: “Explains that JIT involves ordering and receiving raw materials or components only as they are needed for production, rather than holding large buffer stocks in advance.” Evaluate the response against the complete 3-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[3 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains that JIT involves ordering and receiving raw materials or components only as they are needed for production, rather than holding large buffer stocks in advance.
- Identifies the missing requirement: Explains that this minimizes the costs of storing, insuring, and managing large quantities of inventory, and reduces the risk of money being tied up in unsold stock or stock becoming obsolete.
- Identifies the missing requirement: States a valid risk, such as production being halted entirely if a supplier fails to deliver materials on time, or the company having little buffer stock to cope with a sudden, unexpected surge in demand.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
11.
A company is deciding where to locate a new factory. Explain two factors the company should consider when making this location decision.
[2 marks] · no calculator
Marking points
- Explains a valid factor, such as the cost and availability of labor in the area, the proximity to raw materials or suppliers (reducing transport costs), or proximity to the target market.
- Explains a second valid factor, such as the quality of local infrastructure (transport links, utilities), government incentives or regulations in the area, or the availability of suitable land/premises at an acceptable cost.
Examiner tip: Location factors generally fall into cost-related categories (labor, land, transport) and market/infrastructure-related categories — a strong answer picks factors from different categories rather than two very similar cost factors.
12.
Marking analysis: A learner attempts the following task: “A company is deciding where to locate a new factory. Explain two factors the company should consider when making this location decision.” Their response addresses only this point: “Explains a valid factor, such as the cost and availability of labor in the area, the proximity to raw materials or suppliers (reducing transport costs), or proximity to the target market.” Evaluate the response against the complete 2-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[2 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains a valid factor, such as the cost and availability of labor in the area, the proximity to raw materials or suppliers (reducing transport costs), or proximity to the target market.
- Identifies the missing requirement: Explains a second valid factor, such as the quality of local infrastructure (transport links, utilities), government incentives or regulations in the area, or the availability of suitable land/premises at an acceptable cost.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
13.
Explain how outsourcing production to a third-party supplier could reduce costs for a company, and state one risk this strategy carries regarding quality control.
[2 marks] · no calculator
Marking points
- Explains that outsourcing allows a company to avoid the fixed costs of owning and operating its own production facilities, and to take advantage of a specialist supplier's own economies of scale or lower labor costs.
- States a valid risk, such as reduced direct control over the quality of the outsourced production, making it harder to ensure products consistently meet the company's own standards.
Examiner tip: Outsourcing is fundamentally a trade-off between lower costs/flexibility and reduced direct control — quality, reliability, and reputational risk are the main concerns a company gives up some control over.
14.
Marking analysis: A learner attempts the following task: “Explain how outsourcing production to a third-party supplier could reduce costs for a company, and state one risk this strategy carries regarding quality control.” Their response addresses only this point: “Explains that outsourcing allows a company to avoid the fixed costs of owning and operating its own production facilities, and to take advantage of a specialist supplier's own economies of scale or lower labor costs.” Evaluate the response against the complete 2-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[2 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains that outsourcing allows a company to avoid the fixed costs of owning and operating its own production facilities, and to take advantage of a specialist supplier's own economies of scale or lower labor costs.
- Identifies the missing requirement: States a valid risk, such as reduced direct control over the quality of the outsourced production, making it harder to ensure products consistently meet the company's own standards.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
15.
Explain how effective supply chain management (coordinating with suppliers and distributors) can improve a company's competitiveness.
[2 marks] · no calculator
Marking points
- Explains that effective supply chain management can reduce costs by minimizing delays, waste, and excess inventory throughout the process from raw material to finished product reaching the customer.
- Explains that it can also improve reliability and speed of delivery to customers, strengthening the company's reputation and competitive position relative to rivals with less coordinated supply chains.
Examiner tip: Supply chain management connects operations to overall competitiveness through two channels: cost efficiency and delivery reliability — a strong answer explains at least one of these mechanisms concretely.
16.
Marking analysis: A learner attempts the following task: “Explain how effective supply chain management (coordinating with suppliers and distributors) can improve a company's competitiveness.” Their response addresses only this point: “Explains that effective supply chain management can reduce costs by minimizing delays, waste, and excess inventory throughout the process from raw material to finished product reaching the customer.” Evaluate the response against the complete 2-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[2 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains that effective supply chain management can reduce costs by minimizing delays, waste, and excess inventory throughout the process from raw material to finished product reaching the customer.
- Identifies the missing requirement: Explains that it can also improve reliability and speed of delivery to customers, strengthening the company's reputation and competitive position relative to rivals with less coordinated supply chains.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
17.
Explain why a company producing a highly customized, low-volume product (such as handmade furniture) would generally choose a labor-intensive production method over a capital-intensive one.
[2 marks] · no calculator
Marking points
- Explains that automated/capital-intensive equipment is typically only cost-effective when producing large, standardized volumes of an identical product, since the high fixed cost of the machinery needs to be spread over many units.
- Explains that skilled human labor offers the flexibility needed to customize each individual product to a specific customer's requirements, something rigid automated machinery is typically unable to do cost-effectively at low volumes.
Examiner tip: The choice between labor-intensive and capital-intensive production generally comes down to the trade-off between flexibility (favoring labor) and standardized high-volume efficiency (favoring capital/automation).
18.
Marking analysis: A learner attempts the following task: “Explain why a company producing a highly customized, low-volume product (such as handmade furniture) would generally choose a labor-intensive production method over a capital-intensive one.” Their response addresses only this point: “Explains that automated/capital-intensive equipment is typically only cost-effective when producing large, standardized volumes of an identical product, since the high fixed cost of the machinery needs to be spread over many units.” Evaluate the response against the complete 2-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[2 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains that automated/capital-intensive equipment is typically only cost-effective when producing large, standardized volumes of an identical product, since the high fixed cost of the machinery needs to be spread over many units.
- Identifies the missing requirement: Explains that skilled human labor offers the flexibility needed to customize each individual product to a specific customer's requirements, something rigid automated machinery is typically unable to do cost-effectively at low volumes.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
19.
A workshop produced 4,500 units in a month using 30 workers. (a) Calculate labour productivity per worker. (b) The next month it produces 4,800 units with 30 workers. Calculate the percentage change in productivity.
[3 marks]
Marking points
- Calculates productivity as 4,500 / 30 = 150 units per worker.
- Calculates new productivity as 4,800 / 30 = 160 units per worker.
- Calculates the change as (160 − 150)/150 × 100 ≈ 6.7%.
Examiner tip: Percentage change is always measured relative to the original (earlier) value.
20.
Marking analysis: A learner attempts the following task: “A workshop produced 4,500 units in a month using 30 workers. (a) Calculate labour productivity per worker. (b) The next month it produces 4,800 units with 30 workers. Calculate the percentage change in productivity.” Their response addresses only this point: “Calculates productivity as 4,500 / 30 = 150 units per worker.” Evaluate the response against the complete 3-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[3 marks]
Marking points
- Recognises credit for the stated point: Calculates productivity as 4,500 / 30 = 150 units per worker.
- Identifies the missing requirement: Calculates new productivity as 4,800 / 30 = 160 units per worker.
- Identifies the missing requirement: Calculates the change as (160 − 150)/150 × 100 ≈ 6.7%.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
21.
Explain how a business can benefit from internal economies of scale as it increases its output.
[3 marks] · no calculator
Marking points
- Defines economies of scale as a fall in average (unit) cost as output rises.
- Explains a valid source, such as bulk-buying discounts from suppliers or spreading fixed costs over more units.
- Explains that lower unit costs allow either higher profit margins or lower prices to gain market share.
Examiner tip: Name a specific source of the saving (bulk buying, spreading fixed costs, specialization) rather than only stating 'costs fall'.
22.
Marking analysis: A learner attempts the following task: “Explain how a business can benefit from internal economies of scale as it increases its output.” Their response addresses only this point: “Defines economies of scale as a fall in average (unit) cost as output rises.” Evaluate the response against the complete 3-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[3 marks] · no calculator
Marking points
- Recognises credit for the stated point: Defines economies of scale as a fall in average (unit) cost as output rises.
- Identifies the missing requirement: Explains a valid source, such as bulk-buying discounts from suppliers or spreading fixed costs over more units.
- Identifies the missing requirement: Explains that lower unit costs allow either higher profit margins or lower prices to gain market share.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
23.
Explain how cell production (organizing workers into small teams responsible for a whole product or process) can improve efficiency and motivation.
[2 marks] · no calculator
Marking points
- Explains that team ownership of a whole task reduces handovers and waiting time, speeding up production and making problems easier to spot.
- Explains that greater responsibility, variety and teamwork can raise motivation and quality.
Examiner tip: Cell production improves on a rigid assembly line by giving workers variety and responsibility, which supports both efficiency and morale.
24.
Marking analysis: A learner attempts the following task: “Explain how cell production (organizing workers into small teams responsible for a whole product or process) can improve efficiency and motivation.” Their response addresses only this point: “Explains that team ownership of a whole task reduces handovers and waiting time, speeding up production and making problems easier to spot.” Evaluate the response against the complete 2-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[2 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains that team ownership of a whole task reduces handovers and waiting time, speeding up production and making problems easier to spot.
- Identifies the missing requirement: Explains that greater responsibility, variety and teamwork can raise motivation and quality.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
25.
A firm uses 50 units of a component each day. Delivery takes 4 days and it keeps a buffer stock of 100 units. (a) Calculate the reorder level. (b) Explain the purpose of holding buffer stock.
[3 marks]
Marking points
- Uses reorder level = (daily usage × lead time) + buffer stock.
- Calculates (50 × 4) + 100 = 300 units.
- Explains that buffer stock protects production against late deliveries or unexpected surges in demand.
Examiner tip: Reorder level covers the stock used while waiting for delivery plus the safety cushion.
26.
Marking analysis: A learner attempts the following task: “A firm uses 50 units of a component each day. Delivery takes 4 days and it keeps a buffer stock of 100 units. (a) Calculate the reorder level. (b) Explain the purpose of holding buffer stock.” Their response addresses only this point: “Uses reorder level = (daily usage × lead time) + buffer stock.” Evaluate the response against the complete 3-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[3 marks]
Marking points
- Recognises credit for the stated point: Uses reorder level = (daily usage × lead time) + buffer stock.
- Identifies the missing requirement: Calculates (50 × 4) + 100 = 300 units.
- Identifies the missing requirement: Explains that buffer stock protects production against late deliveries or unexpected surges in demand.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
27.
Distinguish between quality circles and total quality management (TQM) as approaches to improving quality.
[3 marks] · no calculator
Marking points
- States that quality circles are small voluntary groups of employees who meet regularly to identify and solve quality problems in their own area.
- States that TQM is a company-wide philosophy in which every employee in every department is responsible for quality at every stage, aiming for zero defects.
- Notes that quality circles can be one tool within a broader TQM culture.
Examiner tip: TQM is a whole-organization culture, whereas quality circles are one specific team-based technique.
28.
Marking analysis: A learner attempts the following task: “Distinguish between quality circles and total quality management (TQM) as approaches to improving quality.” Their response addresses only this point: “States that quality circles are small voluntary groups of employees who meet regularly to identify and solve quality problems in their own area.” Evaluate the response against the complete 3-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[3 marks] · no calculator
Marking points
- Recognises credit for the stated point: States that quality circles are small voluntary groups of employees who meet regularly to identify and solve quality problems in their own area.
- Identifies the missing requirement: States that TQM is a company-wide philosophy in which every employee in every department is responsible for quality at every stage, aiming for zero defects.
- Identifies the missing requirement: Notes that quality circles can be one tool within a broader TQM culture.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
29.
Explain two ways a manufacturing business can reduce the environmental impact of its operations.
[2 marks] · no calculator
Marking points
- Explains a valid method such as recycling waste or using recycled materials, reducing raw-material use and landfill.
- Explains a second valid method such as investing in energy-efficient machinery or renewable energy, lowering emissions and often long-run costs.
Examiner tip: Show the business case too: many environmental measures also cut costs or improve brand image.
30.
Marking analysis: A learner attempts the following task: “Explain two ways a manufacturing business can reduce the environmental impact of its operations.” Their response addresses only this point: “Explains a valid method such as recycling waste or using recycled materials, reducing raw-material use and landfill.” Evaluate the response against the complete 2-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[2 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains a valid method such as recycling waste or using recycled materials, reducing raw-material use and landfill.
- Identifies the missing requirement: Explains a second valid method such as investing in energy-efficient machinery or renewable energy, lowering emissions and often long-run costs.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.