Business Management SL - 5.1 & 5.2 Operations Management

Circular Supply Models

Businesses use renewable, recyclable, or biodegradable resources instead of finite raw materials; using recycled material

• Example: Patagonia uses recycled polyester and organic cotton in clothing to reduce waste and reliance on virgin materials

Resource Recovery Models

Businesses recover useful resources or energy from waste products instead of discarding them; recovering materials

• Example: Veolia recycles electronic waste and extracts valuable metals like copper and gold

Sharing Models

Products or assets are shared among multiple users, reducing the need for individual ownership

• Example: Airbnb (homes) and Zipcar or Turo (cars) allow shared use instead of everyone buying their own

Product Service System Models

Customers pay for the service a product provides, not the product itself. Businesses keep ownership and responsibility for the product

• Example: Philips Lighting offers “Light as a Service” where companies pay for lighting but Philips owns, maintains, and upgrades the light systems

Job Production

Production of a special “one-off” product made to a specific order, artisan

• Example: Rocket ships & wedding cakes

✅ Pros:

• High customization: allow quality to be adapted

• High quality: attentive to detail

• Flexibility: producers can handle prototypes

❌ Cons:

• High unit cost

• Premium pricing may deter customers

• Time consuming: planning, prototyping

• Requires skilled labor

Batch Production

Production of a group of identical products, go through same assembly line stages

• Example: Bakery shop & medicine & clothing

✅ Pros:

• Economies of scale: lower unit costs, achieve higher profit

• Increases choice, increase in market share

• Trial products in smaller quantities, reduce development costs

❌ Cons:

• Negative production time

• Large stocks, can’t sell out fast for large-scale production

• Size depends on machine capacity

• Lose time changing configuration of machinery

• Low worker motivation as it’s repetitive

Flow, Mass Production

High quantity of standardized products made from a continuous flow of raw materials along an assembly line, tends to be automated, products are homogenous

• Example: Coca-Cola bottles

✅ Pros:

• Once set up, system may need little maintenance

• Cater for large orders, achieve considerable economies of scale

• Great efficiency and productivity

• Labor costs may be low (unskilled jobs) and a fully automated process

• Above the Line (ATL) marketing (broad, mass-media advertising campaigns, widespread brand awareness)

❌ Cons:

• Set-up costs are high, high capital expenditure

• Potential need for external financing, increases risk

• Breakdowns are costly, assembly line may have to stop

• Depends on steady demand from large market segment

• System is inflexible (sudden drop in demand may cause large unwanted stocks)

• Repetitive activities may be demotivating for workers

• Risk of brand dilution if too generic or low quality, USP is not strong

• Risk of overproduction and inventory stockpiling

Mass Individualized Customization

Efficient mass production offering personalized customer products

• Example: Nike customizable colors and designs & Tesla car colors and seat fabrics

✅ Pros:

• Offers USP (unique selling point), competitive advantage

• Customer satisfaction and loyalty

• Diversify product portfolio

• Large economies of scale

• Automation to increase efficiency

❌ Cons:

• High costs and high capital expenditure

• Complex supply chains