4. Operations management (AS Level)
A section of Business Studies, 9609
Listing 10 of 59 questions
Luxury Carpets (LC) LC is a large public limited company operating in country B. LC produces and sells a range of luxury carpets and other floor coverings. The carpets are sold to households through the many shops that LC has in country B. LC also sells directly to business markets including hotels, offices and restaurants. Aziz, the Marketing Director, uses market segmentation. Table 2: Percentage of LC’s revenue by market segment for the year ended 31 December 2017 Market segment Percentage of revenue Households 20% Hotels 40% Offices 20% Restaurants 20% The Finance Director, Sam, has produced the following information: • Total revenue from LC’s income statement (for year ended 31 December 2017) was $50 000 000. • Over the last four years, revenue has increased by 25% in total. • There has been no change over the last four years in the percentage of revenue earned from each market segment. The production process to manufacture carpets in LC’s factory is capital intensive and uses a flow production method. The Production Director, Sally, has recently installed a new machine, which cost $300 000, to improve productivity. LC employs 500 production workers. Many of the workers are unhappy about their working conditions and their pay. Workers feel that the directors care more about productivity than they do about them. They complain that communication between management and workers is poor. Define the term ‘productivity’ (line 20). Briefly explain the term ‘public limited company’ (line 1). Refer to Table 2. Calculate the value of the growth in revenue earned by LC from the hotel market segment over the last four years. Explain one way LC could use the information in its income statement. Analyse two benefits to LC of increasing worker participation. Discuss the importance of market segmentation to LC.
9609_m18_qp_22
THEORY
2018
Paper 2, Variant 2
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Flight Food (FF) FF is a large secondary sector business that supplies airlines with in-flight meals. Meals are manufactured using batch production. A different variety of meal is made each hour with a five minute changeover time between batches. FF makes use of Just in Time (JIT) to manage inventory wherever possible. Trucks arrive each hour and deliver the materials needed for production. The market for airline meals is very competitive. FF uses market segmentation when deciding which meals are most likely to appeal to different airlines. FF must adapt to changes in tastes and the demands of each airline. FF is a labour intensive business. The workers are employed with short-term (six month) employment contracts. They are only offered new contracts if they meet their production targets. Table 2.1 shows some production data for FF’s two work teams. Table 2.1: Worker data for FF Team A Team B Number of workers Productivity (per worker per day) 300 meals 240 meals The Board of Directors of FF is considering changing the manufacturing process to flow production. This would require purchasing Computer Aided Manufacturing (CAM) equipment and using a capital intensive production process. Production targets would no longer be used for employees because the machinery would be set at a specific production rate. Sabrina, the Operations Director, has put forward the following advantages for moving to flow production: • more products made each hour • lower employment costs • improved quality. Ben, the Human Resource Director, is worried about the change from a labour intensive process to a capital intensive process. Define the term ‘secondary sector’ (line 1). Explain the term ‘market segmentation’ (line 6). Refer to Table 2.1. Calculate the total number of meals per day produced by both teams. Explain two ways in which FF may be affected by the lower productivity of employees working in Team B. Analyse two possible disadvantages for FF of using Just in Time (JIT) to manage inventory. Evaluate the possible effects on FF of a change from a labour intensive process to a capital intensive process.
9609_s20_qp_23
THEORY
2020
Paper 2, Variant 3
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Delicious Cocoa (DC) DC is a co-operative owned by cocoa farmers in country X. It has 500 workers. In 2022, DC produced 2000 tonnes of raw cocoa beans. Productivity is expected to increase by 5% in 2023. Although DC is profitable, it has no retained earnings. DC focuses on the triple bottom line as its main objective. The members of the co-operative are motivated within the current operation. Zara, the Managing Director, has recently completed a workforce plan. She has identified that young people do not want to work on DC’s farms. Their concerns are: • lack of investment in training • most of the work is manual • lack of control over earnings. Ranjit, the Operations Director, has identified an opportunity to create added value by investing in a capital intensive factory. The factory will process raw cocoa beans produced by DC’s farms into cocoa butter. Cocoa butter is a premium product and attracts higher profit margins than raw cocoa beans. The processing factory will require a significant capital investment (see Table 2.1). Table 2.1 Data for the cocoa processing factory $ Initial investment: Land Machinery Training 100 000 150 000 15 000 Average variable costs per tonne 5 000 Average selling price per tonne 10 000 Identify one element of the triple bottom line. Explain the term added value. Refer to lines 1–2. Calculate DC’s expected labour productivity in 2023. Explain one reason why labour productivity is important to DC. Analyse two ways DC can motivate young people to work on its farms. Evaluate whether DC should grow its operations by opening its new cocoa processing factory.
9609_s23_qp_21
THEORY
2023
Paper 2, Variant 1
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Candy Planet (CP) CP is a public limited company which sells candy to its national market and international markets. CP has benefitted from internal growth over the past eight years and has a good working capital position. The total market sizes are shown in Table 2.1. Table 2.1: Market data for candy National market $550m $550m International market $60bn $61.5bn CP is a capital intensive business but it does employ 40 workers to operate and maintain the machines. These employees have part-time contracts. The candy is made using flow production. Each variety of candy is made on a separate production line. Some of the machinery is over 25 years old. CP has 20 separate production lines in its factory and there are diseconomies of scale. The Operations Director of CP has proposed that the company changes from having many production lines to a single production line using process innovation. The business has carried out research into new machinery that would allow for mass customisation and an increase in the number of products produced each month. This would mean CP could have just one production line which would make every type of candy which CP sells. CP could also increase its product portfolio. The new machinery would cost $75m and its installation would require CP to stop production for six months. Most of the current workforce would face redundancy. The Finance Director has concerns about how CP could finance this new machinery. CP does not have any retained earnings which it could use and the business has already been told that a bank loan is not possible. Define the term ‘internal growth’ (line 2). Explain the term ‘capital intensive’ (line 9). Refer to Table 2.1. Calculate the percentage market growth in the international market for candy. Explain two ways in which CP’s marketing may differ between its national market and international markets. Analyse one internal source of finance and one external source of finance which CP could use for the new machinery. Evaluate the likely benefits for CP of the proposed process innovation.
9609_w19_qp_22
THEORY
2019
Paper 2, Variant 2
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Questions Discovered
59