Production Planning (DP IB Business Management: HL): Exam Questions

BrightClean manufactures and supplies cleaning products to industrial clients. The company recently adopted a just-in-time (JIT) stock management system to improve efficiency and reduce costs.

However, this has created challenges. BrightClean relies heavily on punctual deliveries from suppliers to meet client orders, and any delays disrupt production. Despite these risks, JIT has reduced stockholding costs significantly and improved cash flow. The company is considering switching back to a just-in-case (JIC) system to mitigate risks.

BrightClean manufactures and supplies cleaning products to industrial clients. The company recently adopted a just-in-time (JIT) stock management system to improve efficiency and reduce costs.

However, this has created challenges. BrightClean relies heavily on punctual deliveries from suppliers to meet client orders, and any delays disrupt production. Despite these risks, JIT has reduced stockholding costs significantly and improved cash flow. The company is considering switching back to a just-in-case (JIC) system to mitigate risks.

GreenField Agriculture grows organic vegetables and distributes them to supermarkets. The company has been struggling with under-utilised capacity at its processing facility, which has led to increased unit costs.

GreenField is considering increasing production to optimise its capacity utilisation but is concerned about the risks of overproduction, including potential waste and storage issues. The company also aims to ensure that it can respond to sudden increases in demand without straining resources.

GreenField Agriculture grows organic vegetables and distributes them to supermarkets. The company has been struggling with under-utilised capacity at its processing facility, which has led to increased unit costs.

GreenField is considering increasing production to optimise its capacity utilisation but is concerned about the risks of overproduction, including potential waste and storage issues. The company also aims to ensure that it can respond to sudden increases in demand without straining resources.

SwiftSnacks operates a network of vending machines that sell healthy snacks and beverages in office buildings and schools. The company has grown rapidly, but inconsistent supply chain management has led to stockouts in some vending machines and overstocking in others, causing waste and reduced customer satisfaction.

To address this, SwiftSnacks is evaluating its supply chain processes, including the use of automated stock control systems to optimise replenishment schedules. Additionally, the company is considering outsourcing the stocking of its vending machines to a third-party logistics provider. SwiftSnacks must balance the benefits of outsourcing with the need to maintain control over product quality and brand reputation.

SwiftSnacks operates a network of vending machines that sell healthy snacks and beverages in office buildings and schools. The company has grown rapidly, but inconsistent supply chain management has led to stockouts in some vending machines and overstocking in others, causing waste and reduced customer satisfaction.

To address this, SwiftSnacks is evaluating its supply chain processes, including the use of automated stock control systems to optimise replenishment schedules. Additionally, the company is considering outsourcing the stocking of its vending machines to a third-party logistics provider. SwiftSnacks must balance the benefits of outsourcing with the need to maintain control over product quality and brand reputation.

SteelBuild Ltd manufactures prefabricated steel components for construction projects. The company carefully manages its stock to ensure uninterrupted production while minimising holding costs.

Bright Bakery Ltd produces artisanal bread and pastries for local retailers. The bakery has a maximum production capacity of 80,000 units per month. In November 2024, the bakery produced 60,000 units to meet demand. However, 3,000 units were returned due to spoilage during transport. Management wants to calculate the capacity utilisation rate to evaluate operational efficiency.

GreenGrow Ltd produces organic fertilisers for the agricultural sector. The company employs 22 workers in its factory, who collectively worked 3,130 hours in November 2024. During this period, the factory produced 32,410 units of fertiliser. Management wants to calculate the labour productivity to monitor workforce efficiency.

EcoLights Ltd manufactures energy-efficient LED bulbs. In December 2024, the company produced 240,680 standard bulbs and 4,870 bespoke bulbs using machinery valued at $1,253,000. The company also spent $350,420 on labour costs during the month. Management wants to calculate the capital productivity to evaluate how effectively the company utilises its equipment.

SweetTreats Ltd produces gourmet chocolates for retailers. Management is concerned that the defect rate has increased from 3.2% last year and wants to calculate the current defect rate to identify areas for process improvement. The company also received 375 customer complaints during the same period.

FreshWrap Ltd. produces reusable food wraps and is considering whether to continue outsourcing production or bring manufacturing in-house. The company currently purchases wraps from a supplier for $38,000. If FreshWrap manufactures the wraps internally, fixed costs would be $12,500 per month, and variable costs would be $2.50 per unit. The company plans to produce or buy 10,220 units per month. Additionally, the company spends $4,500 per month on marketing.

Bright Toys & Appliances (BTA)

 BTA produces a range of toys and small household items. BTA manufactures most of its products in its own factory, but demand for its best-selling toy model has increased significantly. The directors are considering whether to increase production capacity or to outsource part of the production to an overseas business.

 BTA’s finance manager notes that BTA’s fixed costs are relatively high compared to its variable costs. Currently, the lead time to source materials from its UK supplier is 3–4 days, whereas the lead time from the overseas business would be 2 weeks.

 Table 1: Selected financial information for BTA (year ending 31 December 2024)

SwiftSnacks runs a network of vending machines that sells healthy snacks and drinks in office buildings and schools. The company started five years ago and has grown quickly. It now operates over 500 vending machines in city areas. SwiftSnacks’ goal is “To make healthy choices easy and affordable.” Customers like the company’s focus on nutritious options, but the business faces several challenges as it grows

One of the main problems is inconsistent stock management. Some vending machines run out of popular products (stockouts), while others have too much stock, leading to waste. These issues upset customers and reduce profits. SwiftSnacks is thinking about installing automated stock control systems. These systems would track sales in real time and send alerts when a machine needs restocking. This could reduce waste and improve customer satisfaction, but the system would cost $300,000 upfront

SwiftSnacks is also considering outsourcing the job of restocking machines to a logistics company. This could save time and allow SwiftSnacks to focus on choosing and marketing products. However, outsourcing might mean less control over quality and reliability, which could harm the company’s reputation

Recent changes in how people work and study are also affecting the business. Many office workers now work remotely or part-time in the office, which has reduced demand for vending machines in office buildings. At the same time, demand in schools has increased due to new rules encouraging healthier snacks for students. To adjust to these trends, SwiftSnacks is testing a subscription service for remote workers. This allows customers to receive snack boxes delivered to their homes

SwiftSnacks is reviewing how to fund its ideas. The automated stock system would cost a lot upfront but could save money over time by reducing waste and restocking trips. Outsourcing would cost less initially but involves ongoing fees. Management is using investment appraisal methods such as the payback period to decide which option makes the most sense for the business

Table 1: Financial data (2023)

Table 2: Demand trends (2023)

Table 3: Production metrics (2023)

BrightClean manufactures and supplies cleaning products to industrial clients, including large factories, hospitals and schools. The company recently adopted a just-in-time (JIT) stock management system to improve efficiency and reduce costs. With JIT, raw materials are delivered only when needed, and production schedules are closely aligned with client orders. This approach has significantly reduced stockholding costs and improved cash flow

However, JIT has introduced significant challenges, particularly for BrightClean’s employees. The system relies heavily on punctual supplier deliveries to avoid disruptions. When delays occur, production schedules are thrown off, creating intense pressure on employees to meet tight deadlines. Workers in the packaging department, for instance, have reported being asked to work overtime at short notice to compensate for missed supplier deliveries

The increased pressure has led to conflicts between management and employees, as well as within teams. For example, production staff have criticised managers for not providing sufficient warning about potential delays, while warehouse employees feel unfairly blamed when materials are unavailable. A recent attempt to mediate a dispute about overtime requirements failed because employees felt that their concerns about workload were not taken seriously

Despite these challenges, BrightClean’s management remains committed to JIT due to its financial benefits. The company is now considering whether a just-in-case (JIC) stock management system, which involves holding buffer stock, could reduce disruptions. However, switching to JIC would increase storage costs and tie up more working capital in inventory

In response to employee concerns, the HR department has introduced feedback sessions, but participation has been low, with employees doubting that their input will lead to meaningful changes. Management is also exploring enhanced training programmes and improved communication with suppliers to reduce delays and rebuild trust with the workforce

Table 1: BrightClean – Key metrics (2023 vs 2024)

Table 2: BrightClean – HR metrics