Operations

What Operations covers

Operations is examined in Component 02, Operations, finance and external influences. It covers the purpose of operations and the transformation process, added value and how it is calculated, ways of adding value: convenience, branding, design and facilities, sustainability as a way of adding value, automation, robotics and 3D printing in production, AI, cloud services and digital technology in production, efficiency, effectiveness and productivity, measuring and improving productivity, production quality: purpose and standards, quality control and quality assurance, capacity utilisation and how it is calculated, managing capacity: increasing output, cutting capacity and outsourcing, types of inventory and the purpose of inventory control, inventory control charts, re-order levels and lead time, just-in-time and inventory management systems, the stages of supply chain management, logistics: procurement, transport and reliability of supply and key performance indicators in operations.

The 18 subtopics

Each one has its own page.

• The purpose of operations and the transformation processRecall questions on what the operations function does, production, inputs, outputs and the transformation process, the difference between goods and services, operations objectives, and how operations links to marketing and competitiveness.Open →
• Added value and how it is calculatedRecall questions on added value and its formula, calculating it per unit and in total, and the ways a business raises it.Open →
• Ways of adding value: convenience, branding, design and facilitiesRecall questions on adding value through convenience, branding, a unique selling point, design, quality and facilities, which methods suit different products, how easily rivals copy them, and the risk of raising quality.Open →
• Sustainability as a way of adding valueRecall questions on circular design, sustainable sourcing, energy efficiency in production and its effect on unit costs, reducing packaging, and the risk of making a sustainability claim that is not accurate.Open →
• Automation, robotics and 3D printing in productionRecall questions on automation and robotics, their effects on unit costs, quality, cost structure and the workforce, their drawbacks for small manufacturers, and the uses and limits of 3D printing.Open →
• AI, cloud services and digital technology in productionRecall questions on computer systems in operations, cloud services and their benefits and risks, artificial intelligence and predictive maintenance, augmented reality, nanotechnology, and the hidden costs of new technology.Open →
• Efficiency, effectiveness and productivityRecall questions on productivity, efficiency and effectiveness and the difference between them, ways of improving labour productivity, the effect of motivation, the trade-off with quality, and measuring productivity in services.Open →
• Measuring and improving productivityRecall questions on calculating labour productivity, output per labour hour and labour cost per unit, interpreting changes and industry comparisons, ways of raising productivity, and the risk of measuring by output alone.Open →
• Production quality: purpose and standardsRecall questions on quality and fitness for purpose, minimum standards, the costs of poor quality, product recalls, rising complaints, how a reputation for quality supports price, and how customers judge quality.Open →
• Quality control and quality assuranceRecall questions on quality control and quality assurance, the differences between them, their advantages and drawbacks, self-checking, finding faults early, sampling risk, and which approach suits different production lines.Open →
• Capacity utilisation and how it is calculatedRecall questions on capacity utilisation and its formula, calculating it and working back to output, and what a figure at or near full capacity means for a business.Open →
• Managing capacity: increasing output, cutting capacity and outsourcingRecall questions on maximum capacity, ways of increasing capacity, rationalisation and the costs of cutting capacity, planned and unplanned maintenance downtime, and the uses and risks of outsourcing production.Open →
• Types of inventory and the purpose of inventory controlRecall questions on raw materials, work in progress and finished goods, the purpose of inventory control, the costs of stock-outs and of holding too much inventory, and how inventory control affects cash flow.Open →
• Inventory control charts, re-order levels and lead timeRecall questions on inventory control charts, buffer inventory, maximum inventory level and lead time, calculating the re-order level and re-order quantity, interpreting a chart and its main limitation.Open →
• Just In Time and inventory management systemsRecall questions on just-in-time production and its effects on cash flow, costs and quality, the supplier relationships and quality it requires, its risks, just-in-case inventory, and how better data improves inventory management.Open →
• The stages of supply chain managementRecall questions on supply chain management and the planning, sourcing, production, delivery and returns stages, choosing suppliers, reverse logistics, and how a failure at one stage affects the whole chain.Open →
• Logistics: procurement, transport and reliability of supplyRecall questions on logistics and procurement, calculating purchasing savings, short and long supply chains, improving reliability of supply, road, rail, sea and air transport and their costs, and timing in logistics.Open →
• Key performance indicators in operationsRecall questions on key performance indicators in operations, calculating defect, wastage and on-time delivery rates and average delivery time, and why indicators need comparisons and should not be read singly.Open →

What you need to know

Answer each one before you reveal it.

Take Operations further

The same content, four other ways.

Commonly confused

Pairs that lose marks when they are blurred together.

• Efficiency vs Effectiveness

  Efficiency: getting a given output from the smallest possible quantity of inputs, so that waste and cost per unit are as low as possible. Effectiveness: how well the work achieves what it set out to achieve, such as meeting the specification, the deadline or the customer's requirement.

• Quality control vs Quality assurance

  Quality control: checking finished output against the standard after it has been made, so that faulty units are found and removed before they reach the customer. Quality assurance: building the standard into the process itself, with every stage responsible for its own work so that faults are prevented rather than found later.

• Capacity vs Capacity utilisation

  Capacity: the greatest output a business can produce in a period using the equipment, premises and workforce it currently has. Capacity utilisation: the percentage of the maximum possible output that a business is actually producing.

Questions from this topic

Each one with the model answer underneath.

1. 1

   What does the operations function of a business actually do?

   Model answer

   It turns inputs such as materials, labour and equipment into the goods and services the business sells to its customers.

2. 2

   Define the term production.

   Model answer

   Production is the process of combining inputs to create a good or a service that has value to a customer.

3. 3

   Name three inputs that a production process uses.

   Model answer

   Raw materials, labour and machinery are three inputs to a production process.

4. 4

   What is meant by the transformation process?

   Model answer

   It is the stage in which inputs are changed in form, place or convenience, so that the output is worth more than the inputs used to make it.

5. 5

   State two differences between producing a good and providing a service.

   Model answer

   A good is tangible and can be stored, while a service is intangible and is usually produced and consumed at the same moment.

6. 6

   Why can a hairdresser not build up a stock of finished output in the way a bakery can?

   Model answer

   The service is intangible and is created at the moment the customer receives it, so it cannot be made in advance and held in storage.

What is inside Levo

Six ways to work the same material.

Operations revision questions

What does Operations cover in OCR A-Level Business (H436)?

18 subtopics: the purpose of operations and the transformation process, added value and how it is calculated, ways of adding value: convenience, branding, design and facilities, sustainability as a way of adding value, automation, robotics and 3d printing in production, ai, cloud services and digital technology in production, efficiency, effectiveness and productivity, measuring and improving productivity, production quality: purpose and standards, quality control and quality assurance, capacity utilisation and how it is calculated, managing capacity: increasing output, cutting capacity and outsourcing, types of inventory and the purpose of inventory control, inventory control charts, re-order levels and lead time, just in time and inventory management systems, the stages of supply chain management, logistics: procurement, transport and reliability of supply and key performance indicators in operations. Each one has its own page with questions and model answers.

How is Operations organised?

By the OCR H436 specification, subtopic by subtopic, so it matches the order you are taught it in.