The purpose of business operations
Operations is the part of a business that actually makes the product or delivers the service. Its purpose, as the specification puts it, is to produce goods and to provide services — turning inputs into something customers will pay for.
The operations decisions in this topic all come back to the same tension: producing more cheaply usually means producing less flexibly, and the right balance depends on what is being sold.
- Operations
- the part of a business that makes the product or delivers the service, turning inputs into something customers will pay for
Production processes
The impact of the different types is what the specification asks about, in terms of keeping productivity up and costs down and allowing for competitive prices.
Productivity means output per worker, or per hour. Flow production has the highest productivity, because each worker repeats one task and machinery does much of the work. Job production has the lowest, because each item is made individually.
Higher productivity means a lower cost per unit, which allows the business either to charge a lower, more competitive price, or to keep the price and earn a larger margin. That is the chain of reasoning these questions want: process → productivity → unit cost → price.
Worked example
A bakery currently makes wedding cakes to order. It wants to supply supermarkets with a standard cake. Recommend a production process.
- Identify the current process: individual cakes made to order is job production.
- Identify what changes: supermarkets need many identical cakes, reliably and cheaply.
- Job production would be far too slow and too expensive per cake for a supermarket price.
- Batch production suits: it can make large runs of identical cakes at a much lower unit cost, while still allowing the line to be changed for different varieties.
- Note why not flow, since a good answer rules out the alternative.
Answer: Batch production. It gives a much lower cost per cake than making each to order, which is essential to meet a supermarket price, while still allowing changes between varieties. Flow production would be cheaper still, but the set-up cost is very high and it offers no variety at all — hard to justify unless the supermarket contract is large and long-term.
Common mistake
Productivity is not the same as production. Production is how much is made; productivity is how much is made per worker or per hour. A business can raise production simply by hiring more people without productivity changing at all.
- Productivity
- output per worker, or per hour
- Job production
- producing one item at a time, made to the customer's requirements
- Batch production
- producing a group of identical items together, then switching the process to produce a different batch
- Flow production
- producing items continuously on a production line; it has the highest productivity because each worker repeats one task
Impacts of technology on production
The specification asks for technology's impact in terms of balancing cost, productivity, quality and flexibility — all four, because technology does not affect them all in the same direction.
There is also an effect on people, which links to 2.5.4: automation can remove jobs, and doing a job alongside a machine can be repetitive and demotivating. But it can also remove the most dangerous and unpleasant tasks, and create more skilled roles maintaining and programming the equipment.
For a small business the barrier is usually the up-front cost rather than any doubt about the benefit — which is why the size of the business matters in these answers.
Before you practise
- The purpose of operations is to produce goods and provide services.
- Job production: one item at a time, high quality and high unit cost.
- Batch production: groups of identical items, a middle option on both cost and flexibility.
- Flow production: continuous identical output, lowest unit cost but no variety and high set-up cost.
- Cost per unit and flexibility both fall from job to flow.
- Productivity is output per worker or per hour — not the same as total production.
- Higher productivity lowers unit costs, which allows more competitive prices.
- Technology must be balanced across cost, productivity, quality and flexibility — it improves each but at a price.