Operations

Overview

Operations is the functional area of a business responsible for producing goods and providing services. Examiners frequently test this topic because it connects deeply with other areas: efficient operations lower costs (Finance), high-quality products build reputation (Marketing), and new technology changes workforce needs (Human Resources). This study guide covers the core concepts you need to know, from choosing the right production method to managing quality and navigating the supply chain.

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Production Methods

Businesses must choose the most appropriate way to produce their goods. Examiners expect you to understand the trade-offs between cost, flexibility, and scale.

Job Production

What it is: Producing one unique item at a time to a customer's specific requirements.

Key Features: Highly skilled labour, high unit cost, bespoke output.

Example: A custom-tailored suit or a unique wedding cake.

Batch Production

What it is: Producing a set number of identical items before switching to a different product.

Key Features: Semi-skilled labour, flexible, requires holding stock.

Example: A bakery making 100 white loaves, then switching to 100 wholemeal loaves.

Flow Production

What it is: Continuous, automated production of identical items on an assembly line.

Key Features: Low unit cost, high setup cost, inflexible.

Example: Car manufacturing or bottling plants.

Quality Management

Quality is essential for reputation and customer retention. You must understand the difference between controlling quality and assuring it.

Quality Control (QC)

What it is: Checking finished products at the END of the production process.

Impact: Finds defects after they occur. Can lead to high waste as faulty products must be discarded or reworked.

Quality Assurance (QA)

What it is: Building quality checks into EVERY stage of the production process.

Impact: Prevents defects before they occur. Reduces waste and builds a culture of quality throughout the business.

Customer Service and Sales

How a business sells its products and supports its customers is a key operational decision.

Methods of Selling

• Face-to-face: Personalised but expensive.
• Telesales: Wider reach but often unpopular with consumers.
• E-commerce: Global reach, 24/7 sales, lower overheads, but highly competitive.

After-Sales Service

Why it matters: Retaining existing customers is cheaper than finding new ones. Excellent after-sales service (warranties, support, easy returns) builds brand loyalty and positive word-of-mouth.

Business Location

Choosing where to locate a business involves balancing several factors:

• Proximity to Market: Crucial for retail and services.
• Proximity to Raw Materials: Important for bulk-reducing industries (e.g., paper manufacturing).
• Labour Supply: Access to workers with the right skills.
• Infrastructure: Transport links and digital connectivity.
• Costs: Rent and rates vary significantly by location.

Supply Chain and Procurement

Supply Chain: The entire network of businesses involved in providing a product to the final consumer.

Procurement: The process of sourcing and purchasing inputs. Good procurement considers quality, reliability, and ethics, not just the lowest price.