CAIE A-Level Business 4 Operations Management Question Bank

Practise Operations Management through transformation, inventory, capacity, lean production, projects, quality, location and sustainability, applying decisions to case constraints.

Covered syllabus points

4.1 The nature of operations 4.2 Inventory management 4.3 Capacity utilisation and outsourcing

[Maximum number: 20]

(a)

Analyse two ways in which operations contributes to added value in a business.

[ 8 ]

Analyse two ways in which operations contributes to added value in a business.

Indicative content

Responses may include:

AO1 Knowledge and understanding

- Operations is the harvesting of value from the assets owned by a business - the concept can refer to the production and transformation process in a business or in a broader sense to all the operations in a business

- Added value is the difference between the price of a finished good and the cost of the inputs in making it - added value - can be achieved in different ways - building a car in an innovative way or building the brand of a business

The ways operations contributes to added value in a business include:

- To satisfy customers

- Produce quality goods

- Ensure production process is efficient

- Ensure supply chain is efficient

- Ensure all functional business areas contribute

AO2 Application

- The goal of operations is to add value - essentially be strengthening the relationship between the organisation and its customers - the aim of all the functional areas in a business

- Main aim is to ensure the business produces quality products that can satisfy the needs of customers on a regular basis-the production process is involved as is marketing and human resources

- Production process in a manufacturing business - converting raw materials into a cell phone

- Marketing operations - promote the quality of a product and the customer prepared to pay the price

- Human resources - the right employees are hired, trained, and equipped to add value with front line superb service in a service business

6(a)

AO3 Analysis
- Manufacturing business adds value through its production process - raw
materials into finished products - sources quality materials from suppliers
- new cars come off the production line assembled by robots
- Production takes copper, plastic, lithium - converts into smart phones -software specialists increase functionality with up- grades
- Marketing operations - promote the business reputation for quality and
establish a USP to differentiate and add value
- Marketing operations - improve the supply chain to deliver excellent
delivery systems to attract customers
- Inventory operations - focus on appropriate order and storage system to
make the transformation system more efficient
- Lean management/right first time efficiency systems - used to reduce
waste and add value
Accept all valid responses

(b)

'Supply chain management has the most significant impact on the effectiveness of a hospital.' Evaluate this view.

[ 12 ]

'Supply Chain Management has the most significant impact on the effectiveness of a hospital’. Evaluate this view.

Indicative content

Responses may include:

AO1 Knowledge and understanding

- Supply chain management is the flow of goods and services between businesses and locations including the movement and storage of raw materials

- Supply chain management concerned with handling the entire production flow of a good or service from raw material components to final product delivery to the customer

- Effectiveness is the ability of a business to achieve its objectives - to deliver a desired result

- Hospital is in the business of treating sick patients - it combines skilled staff with high technology equipment to make sick people more healthy

6(b)

AO2 Application

The effectiveness of a hospital is impacted by many factors

- Human resource management is important - hospitals are essentially labour intensive organisations

- Human resources consist of a variety of staff specialisms - including nurses, doctors, cleaners, and porters

- Technology - operating theatres need high tech equipment to provide surgeons with appropriate facilities

- Management/administration - needs to be competent so that the path from initial examination to discharge is efficient

- External ambulance services - need to be connected to the mainstream hospital activities

- Supply chain management - focus on components/raw material delivery to patient delivered home

- Supply chain management - the logistics system impacts on the work of hospitals

6(b)

AO3 Analysis
- Supply chain management - essentially concerned with logistics and
purchasing inventory - aim is to minimise shortages and to keep costs
down - essential to all businesses
- Supply chain management - the connected network of all individuals,
organisations, resources, activities associated with the operations of a
business - there are many places along the supply chains where value
can be added or lost
- Supply chain management involved in the procurement of raw materials, the processing into finished goods and services, and the distribution to
the customer - a potentially all-embracing management function -
impact on organisational efficiency and effectiveness
- Supply chain management is relevant not only for tangible products but
also for services - focus is more on developing relationships, exchanging
information, communication flows - the focus is on people rather than
physical products
- Supply chain management is relevant to service businesses - particularly
in the case of logistics - at the start and end of the flow of operational
activity
AO4 Evaluation

6(b)

A judgement/conclusion given as to the importance of supply chain management as an operational factor to a hospital

Such judgements/conclusions may be made at any point in the essay, not just in a concluding section

- Judgement can be made that supply chain management is important to a service organisation such as a hospital and is not restricted to manufacturing

- It can be concluded that there are aspects of supply chain management that are very relevant to hospitals- the shortage of personal protective equipment and medical equipment at times of health emergencies dramatically illustrates the dependence of hospitals on an efficient supply chain

- It can be concluded that some basic hospital activities are very dependent on efficient supply chain planning and management - such as instruments - drugs - ambulance transfers

- The question could be asked - is supply chain management in its infancy in the service sector or is it increasingly being recognised as a critical factor in the effective management of service organisations such as hospitals

- Judgement may be made that while supply chain management is important to the effective functioning of a hospital there may be more important operational factors such as recruitment/training, budgeting, financial planning - and that it may depend on the situation of a hospital at a particular point of time - is it financially healthy, is there a critical shortage of nurses, does operational technology need updating?

Accept all valid responses.

[Maximum number: 12]

Direct News (DN)

Shila and Lucy own and manage DN, an online publishing business. DN produces a daily online local newspaper called QNews. Readers pay a subscription to access QNews. DN's mission statement is: 'to be a daily community newspaper for local people, about local people'.

DN recently tested a monthly online magazine aimed at the 18-30 age group called QLine. DN's plan is to stop publishing QNews and produce only QLine. Secondary market research suggests QLine will be popular with national businesses wanting to promote their products.

Shila is aware that revenue from online newspapers is decreasing. However, she has found national market research data about online monthly magazines (see Table 2.1).

Table 2.1 National revenue for online monthly magazines

Shila thinks that before the business decides to produce QLine, more market research data will be needed. Shila and Lucy will have to decide on new objectives for DN.

To ensure a quality product that meets customer expectations, Lucy thinks it is important to have careful management of the supply chain, from content creation to customer delivery.

Evaluate the importance to DN of effective supply chain management.

Evaluate the importance to DN of effective supply chain management.

&

2(d)

Indicative content

Knowledge of supply chain (max $2 \square^{\mathrm{k}} \mathrm{s}$ ), may include:

AO1 Knowledge and understanding:

- Supply Chain Management understanding

- The process of creating content

- Managing content

- Delivering content to the consumer

- Customer expectations

- Employee skills

- Suitable content

- Quality issues

- Cost control

No further marks can be gained without knowledge and understanding.

AO2 Application

Limited application ${ }^{\text {spe } \text { applies knowledge of effective supply chain management to DN once. }}$

Developed application $\Sigma^{\mathrm{Fe}}+\Sigma^{\mathrm{Fe}}$ applies knowledge of effective supply chain management DN twice.

- content accessible on any device at any time / the magazine content should be available on all devices,

- Through all internet service providers and easily available to subscribers.

- Content suitable for target market (18-30)

- Not easily available to non-subscribers

- Need to keep costs low

- Allow DN to compete in the new market

- Difference between local and national market

2(d)

AO3 Analysis

Limited analysis → - candidate shows one link in the chain of analysis.

Developed analysis → candidate shows two or more links in the chain of analysis.

- Do current employees have the right skills - to provide appropriate content?

- Can the business survive inefficient management of the supply chain - as costs need to be carefully controlled throughout the chain?

- Large variation of formats required - will involve many suppliers of different platforms / devices.

- Multiple service providers add additional complexity - which can be challenging to manage.

- Need to provide a quality product - which requires careful monitoring throughout the supply chain.

- Content should be easy to find - how to ensure that this applies to all platforms / devices.

- Employees important part of the supply chain - they have concerns / careful workforce planning required.

AO4 Evaluation

Limited evaluation ${ }^{\text {IVAL }}$ - unsupported judgement and/or a weak attempt at evaluative comment

Developed evaluation ${ }^{\mathrm{E}}$ - supported judgement and/or reasonable evaluative comment.

Developed evaluation in context ${ }^{\overline{\mathrm{EE}}}$ - supported judgement in context and/or reasonable evaluative comment in context.

- A justified recommendation

- Assessment of the decision

- Identification of factors critical in the supply chain

- How to ensure quality - what to compare to / what is quality content

- Is there enough information to implement

- Will revenue outweigh costs

- Require complex negotiations with multiple platforms - do they have the expertise?

- Discussion of further information required.

- Other factors more important e.g., marketing

Accept all valid responses.

2(d)

Exemplars for awarding evaluation

L1 ${ }^{\text {ENAL }}$ (limited
supporting evidence)

L2 ± (developed supporting
evidence)

L3 ${ }^{\text {LE }}$ (developed supporting evidence with
context)

Effective supply chain
management is
important to DN

Effective supply chain management
is important to DN as it needs to
deliver content that meets customer
expectations.

Effective supply chain management is important to DN
as it needs to deliver content that meets customer
expectations. The main premise of their product is to
deliver factual, entertaining and informative news.

Supply chain
management is not as
important as marketing.

Supply chain management is not as
important as marketing because
without awareness and advertising
there will be a lack of demand.

Supply chain management is not as important as
marketing because without awareness and advertising
there will be a lack of demand. Since Qline will be a
new online monthly magazine DN will need social
media accounts to promote this product.

[Maximum number: 6]

(a)

Refer to Table 1.1. Calculate NS's capacity utilisation in 2024.

[ 3 ]

Refer to Table 1.1. Calculate NS's capacity utilisation in 2024.

Indicative content

Rate of capacity utilisation $=\frac{\text { Current output level }}{\text { Maximum output level }} \times 100 \quad$ (1 mark - formula only)

NS capacity utilisation $=\frac{145000}{150000} \times 100 \quad$ (1 mark - use of correct figures in formula)

Answer = 9 6. 6 7 ( % ) or 96.7 or 97 (3 marks - correct answer no working or \% needed)

OFR applies

Exemplar and annotations

1(b)(i)

No creditable content.

Figure for Answer to Question (a) — CAIE A-Level Business AS

1 mark

Correct formula

To award one mark, there must be:

- One and two

0 marks

To award zero marks, there must be

(b)

Explain one possible disadvantage to NS of high capacity utilisation.

[ 3 ]

Explain one possible disadvantage to NS of high capacity utilisation.

Figure for Answer to Question (b) — CAIE A-Level Business AS

Indicative content

AO1 Knowledge and understanding

Identification of a disadvantage of high capacity utilisation □ (max. 1 mark), including:

- Pressure on employees to work at full/near capacity constantly (accept anxiety / stress / need to work overtime)

- Pressure to keep employees motivated

- No margin for production errors / scheduling mistakes

- Cannot accept increased/additional orders

- No time for maintenance of machinery / machines break down a lot

- Over-production (accept inventory going off before it can be sold)

- Low inventory of inputs/raw materials / run out of materials

- No space left for finished product

- Not sustainable in the long-term

AO2 Application

- Explanation of a disadvantage of high capacity utilisation $\Delta^{\mathrm{RFP}}$ (max 1 mark), including:

- Pressure on employees to work at full/near capacity constantly - increased employee absenteeism / demotivation / increased labour turnover - reduced productivity long-term

1(b)(ii)

- No margin for production errors / scheduling mistakes - may lead to customer dissatisfaction due to lower quality

- Cannot take on increased/additional orders - may lead to customer dissatisfaction / customers may go to competitors who are able to accept increased/additional orders

- Machines break down a lot - no output

Context applied to NS ${ }^{\mathrm{s} \text { pe }}$ (max 1 mark), including:

- Answer to Q1(b)(i) (OFR)

- Market leader for natural hair care

- Five years since John's investment

- Sold in major retailer

- Private limited company operated as a social enterprise

- Focuses on customer (market) orientation

- Aim to donate to local charities and improving gender equality in the workplace

Accept all valid responses.

1(b)(ii)

Mark 2

No margin for error is □ . The context to major retail customers is reasonable $\Delta^{\mathrm{s} F}$ , but only one point of application.

Cannot increase orders is a factor. The rest of the answer is not applying it to the context, so ${ }^{\mathrm{NA} \oplus \mathrm{O}}$ (Not Answering Question).

Although there is some relevant context, there is no knowledge of a factor, so no marks can be awarded.

[Maximum number: 8]

Fizzy Drinks (FD)

FD is a private sector business that manufactures an international brand of carbonated drinks. Its slogan was 'A premium drink for premium customers'. The market for FD's drinks is very competitive, with 7 national and 12 international brands all competing in the same market. Recently FD lost the title of market leader to TR, one of its largest competitors. TR is a multinational public limited company.

Table 2.1 FD financial data 2023

Employee morale has dropped as a result of the negative feedback. Key employees have left to work for FD's competitors. The lack of experienced employees has led to a drop in the productivity of the production process.

Analyse two possible impacts on FD of a fall in productivity.

Figure for Answer to Question 4. Operations management question 4 — CAIE A-Level Business AS

2(c)

Indicative content

Responses may include:

AO1 Knowledge and understanding

Knowledge of productivity (max of 1 mark if no impact of a fall in productivity)

Knowledge of impacts of a fall in productivity (max 2 marks - annotate first impact on left and second impact on right) including:

- Knowledge of productivity - the effectiveness of productive effort

- Producing fewer products

- Productivity is the ratio of outputs to inputs during production, e.g. labour productivity

- Resources are not being utilised to their maximum potential/producing less with the same resources

- Measurements of productivity - average output/costs, time or resources incurred in a time period

- Producing output at the highest ratio of output to input (more out of less)

- Knowledge of possible impacts of a drop in efficiency

- Profitability

- Average costs of production

- Wastage of resources

AO2 Application

Context applied to an impact of a fall in productivity □ (max 2 marks), including:

- Loss of 'market leader' title

- Great brand name high brand awareness and customer loyalty lost

- Cost of raw materials have increased

- Quality of ingredients reduced instead of increasing selling price per unit

- Reduced marketing budget

- Lack of distinctiveness

- Falling demand

- Data from table 2.1

- Drop in employee morale and loss of key employees

2(c)

AO3 Analysis

Limited analysis - candidate shows one link in the chain of analysis.

Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis.

- Reduced productivity will increase the average cost of making each unit of output

- Lowers output per time period of fizzy drinks, which may lead to an increase in the unit cost which can further reduce the profit margin per unit which may lead to an increase in the selling price

- FD may run out of inventory if supply is not equal to demand, which may lead to an increased lead time for the customer order which may further increase consumer dissatisfaction and help the competitor strengthen their market dominance

- May lead to KPI's not being achieved which may impact on the financial reward for the employees which may persuade remaining employees to find alternative employment

- Unexperienced employees may be pressured to increase productivity, however without the prior manufacturing experience may make further mistakes which may negatively impact on the taste and therefore the already dropping brand name and demand which can affect cashflow and reputation

- Employee morale may fall further due to the fall in productivity

Accept all valid responses.

All question bank results loaded

Covered syllabus points

4. Operations management question 1

Question (a)

Question (b)

4. Operations management question 2

4. Operations management question 3

Question (a)

Question (b)

4. Operations management question 4