Operations management: methods of production, productivity, capacity utilisation, lean production, stock control, and quality assurance and control.

What this dot point is asking

WJEC Unit 2 covers operations - how a firm turns inputs into outputs efficiently while keeping quality. You need the methods of production, the measures of productivity and capacity utilisation, lean production (including JIT), stock control, and quality assurance and control. Strong answers compute the measures, interpret them and weigh the trade-offs (efficiency versus flexibility, cost versus quality).

The answer

Methods of production

Job production is flexible and high-quality but slow and costly per unit; flow production is fast and cheap per unit (economies of scale) but inflexible; batch sits between the two. The right method depends on the product and the market.

Productivity

Productivity measures efficiency: output per unit of input. The most common measure is labour productivity = output / number of workers. Higher productivity lowers unit costs and raises competitiveness. It can be improved by training, better technology and machinery, improved motivation, and better organisation of work.

Capacity utilisation

Lean production and stock control

Lean production aims to cut all forms of waste - time, materials, stock and effort - while maintaining quality. A key lean technique is just-in-time (JIT) stock management: holding little or no buffer stock and ordering materials to arrive exactly when needed. JIT cuts storage costs and waste and frees cash, but it depends on reliable suppliers, because any disruption halts production.

Stock control balances the benefits of holding stock (meeting demand, avoiding stockouts) against the costs (storage, insurance, tied-up cash, obsolescence). A stock-control system sets a maximum level, a re-order level and a minimum (buffer) level to trigger re-ordering at the right time.

Quality

WJEC distinguishes two approaches to quality:

• Quality control - inspecting the finished product to catch defects at the end; simpler but reactive, and waste has already occurred.
• Quality assurance - building quality in at every stage so defects are prevented, with everyone responsible; total quality management (TQM) is the firm-wide version.

Good quality reduces waste and returns, builds reputation and supports a premium price, but achieving it costs money and effort.

Examples in context

Example 1. Flow production and high utilisation. A large drinks bottler uses continuous flow production running near full capacity utilisation to spread its heavy fixed costs (the plant) over millions of units, achieving a very low unit cost. The trade-off is inflexibility: it cannot easily switch product or absorb a sudden surge without new capacity. The example shows flow production and high utilisation delivering low costs in a standardised market.

Example 2. Lean production at a manufacturer. A Welsh component manufacturer adopts lean production with JIT stock and quality assurance, cutting storage costs and waste and improving reliability for its customers. It works because the firm has built strong, dependable supplier relationships; without them, JIT's lack of buffer stock would risk halting the line. The example illustrates lean methods reducing cost while depending on supply reliability and built-in quality.

Try this

Q1. Define the term capacity utilisation. [2 marks]

• Cue. The proportion of maximum possible output that a business is actually producing, calculated as (actual output / maximum possible output) x 100.

Q2. A factory produces 9,000 units with 30 workers. Calculate its labour productivity. [2 marks]

• Cue. Labour productivity = output / workers = 9,000 / 30 = 300 units per worker.