5.3 Lean production and quality management (HL only) Questionbank

Practice 5.3 Lean production and quality management (HL only) with authentic IB Business Management exam questions for both SL and HL students. This question bank mirrors Paper 1, 2, 3 structure, covering key topics like systems and structures, human behavior and interaction, and sustainability and ethics. Get instant solutions, detailed explanations, and build exam confidence with questions in the style of IB examiners.

Paper

Level

Question 1

HLPaper 2

EcoForge Ltd. is a UK-based company that manufactures energy-efficient building materials. To improve competitiveness, EcoForge has adopted a lean production strategy, including just-in-time (JIT) inventory systems and total quality management (TQM) initiatives. As part of its production planning review, the company is investing in new software to better align production schedules with customer orders.

EcoForge Ltd. plans to expand into the European market by opening a new manufacturing plant. The finance team has compiled key efficiency and financial data for 2024 to evaluate whether the company should fund this expansion internally or seek external sources of finance.

Table 1: Selected Financial Data – EcoForge Ltd. (2024)

Item	Amount (£)
Revenue	7,500,000
Cost of goods sold	4,400,000
Operating expenses	2,600,000
Net profit	500,000
Average stock	550,000

Explain one way total quality management (TQM) can support lean production at EcoForge Ltd.

[2]

Calculate the stock turnover ratio for EcoForge Ltd.
Show all your working.

[2]

Comment on what the stock turnover ratio result suggests about EcoForge Ltd.’s operational efficiency.

[2]

Suggest one internal and one external source of finance EcoForge Ltd. could use to fund the new plant.

[2]

Analyse how improved production planning could support EcoForge Ltd.’s financial and strategic goals.

[2]

Question 2

HLPaper 2

NexaHealth Equipment Ltd.

NexaHealth manufactures advanced diagnostic scanners for hospitals. Each scanner requires 72 imported components sourced using a just-in-time (JIT) model. NexaHealth spends £7.2 million annually on R&D, equal to 12% of its £60 million annual revenue, to maintain its innovation lead.

Last quarter, a global semiconductor shortage caused a six-week production delay, resulting in:

£3.4 million in lost hospital contracts
£620,000 in labour downtime costs
A drop in customer satisfaction from 92% to 77%

To manage this risk, the COO has proposed switching to a just-in-case (JIC) model for critical components, which would increase annual inventory holding costs by £1.5 million but reduce delay risk to below 1%. The operations team instead suggests investing £4.2 million in automation and adopting lean production and TQM practices to reduce dependency on external suppliers.

Identify the stock control method currently used by NexaHealth.

[2]

Explain how NexaHealth’s proposed JIC-based contingency plan could affect the business in terms of cost and risk.

[4]

Analyse how NexaHealth’s proposed conflict resolution and recruitment strategies could help reduce labour turnover.

[4]

Using the stimulus and your knowledge of business management, evaluate which strategy NexaHealth should prioritise to improve operational resilience and long-term competitiveness.

[10]

Question 3

HLPaper 2

FlexFrame

FlexFrame is a European company that designs and assembles modular office furniture for B2B clients. Most of its production is done in-house at its central factory in Austria. FlexFrame promotes its use of lean production to reduce excess materials and shorten delivery times.

To support continuous improvement, FlexFrame recently introduced quality circles in its manufacturing division and is considering whether to implement total quality management (TQM) across the whole organization.

Identify one feature of lean production used by FlexFrame.

[2]

Explain one benefit and one risk of investing in R&D for FlexFrame.

[4]

Explain the impact of outsourcing production on FlexFrame’s operations.

[4]

Using the stimulus and your knowledge of business management, evaluate whether FlexFrame should implement the proposed contingency plan.

[10]

Question 4

HLPaper 2

EcoCrate Ltd.

EcoCrate Ltd. manufactures eco-friendly modular furniture. Management is considering two options: buying prefabricated parts from a supplier (CTB) or making parts internally (CTM). They are also assessing lean production methods and ways to reorganize production internationally.

Key Financial and Operational Data:

Financial and Production Data for EcoCrate Ltd.
Fixed costs (in-house production)
Variable cost per unit (in-house)
Cost to buy (CTB) per unit from supplier
Selling price per unit
Expected sales volume

Additional notes:

Moving production offshore would reduce variable costs by 20%.
Labour turnover after recent changes has risen to 20%.

Answer all the questions.

Calculate EcoCrate Ltd.’s break-even quantity based on current in-house production costs.

[2]

Calculate the margin of safety in units based on expected sales.

[2]

Calculate the cost difference between Cost to Buy (CTB) and Cost to Make (CTM) at the expected sales volume.

[2]

Explain one effect of outsourcing production compared to insourcing.

[2]

Suggest one reason why labour turnover may have increased at EcoCrate Ltd.

[2]

Question 5

HLPaper 3

Global Solar Solutions (GSS)

Resource 1 – Background of the social enterprise Three years ago, electrical engineer and entrepreneur Nadira Khan founded Global Solar Solutions (GSS) as a social enterprise in Morocco. Her goal was to provide affordable, modular solar lighting kits to off-grid rural communities. These kits, manufactured at GSS’s urban facility, include rechargeable LED lights and mobile charging ports. GSS reinvests 100% of profits into R&D and local hiring. GSS operates in partnership with local NGOs and community councils. Its workforce includes 40 technicians and 20 community trainers who educate households about solar usage and maintenance. GSS applies lean production, Kaizen, and maintains a strong internal emphasis on quality control and after-sales support.

Resource 2 – Recent internal report on workforce issues "High staff turnover and trainer burnout have increased over the past 12 months. Trainers, who work in remote villages for weeks at a time, report fatigue and a lack of recognition. Some have requested additional health support and clearer promotion opportunities." The HR department suggested non-financial incentives such as increased job rotation and monthly feedback sessions but reported mixed engagement.

Resource 3 – Email from the Director of Rural Development (DRD) To: nadira.khan@GSS.org Subject: Expansion proposal Dear Ms. Khan, We are impressed by GSS’s impact. The Ministry would like to propose a contract to expand the solar program to 80,000 homes across North and West Africa over five years. Your team would need to train local technicians and build capacity in three new countries. Please note, the contract requires local sourcing of at least 60% of parts. We will require an initial trial rollout in 5,000 homes and evidence of social impact. Regards, Director, DRD

Resource 4 – Extract from a marketing audit summary GSS currently relies on word-of-mouth and NGO referrals. Its brand is associated with trust and affordability. However, a 2024 brand perception survey in new markets revealed low awareness and concerns about product durability compared to larger multinationals such as SolarX. GSS’s marketing team is small (3 staff) and has no formal digital strategy. There is also no localized messaging for francophone West African markets.

Resource 5 – Operations update from the Head of Production Our current facility is operating at 92% capacity. To meet a major scale-up, we would need to either expand production or outsource subassembly. We have identified two regional partners with experience in sustainable component manufacturing. However, we are concerned about quality assurance if we lose full process control.

Resource 6 – Excerpt from a local newspaper article “Access to solar power has transformed daily life in remote villages. Children now study at night, families charge phones to access mobile banking, and kerosene usage has dropped. However, NGOs report that replacement parts for some GSS kits have been slow to arrive, creating frustrations in isolated regions.”

With reference to business management motivation theory, describe one need that GSS satisfies for rural households requiring solar lighting.

[2]

Explain one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.

[6]

Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for GSS over the next five years.

[17]

Question 6

HLPaper 2

ZenMoto Ltd.

ZenMoto Ltd. is a Japanese company that manufactures electric scooters designed for city commuting. To improve operational efficiency, ZenMoto has implemented lean production techniques such as just-in-time (JIT) inventory management, kaizen (continuous improvement), and quality circles across its factories. It is also reviewing its production planning processes to better match seasonal demand fluctuations.

The company plans to expand into new Southeast Asian markets and needs funding for a new manufacturing plant. The finance department has provided key efficiency data and is evaluating whether internal cash flows are sufficient or if external sources of finance are needed.

Table 1: Selected Financial Data – ZenMoto Ltd. (2024)

Item	Amount (¥)
Revenue	8,500,000,000
Cost of goods sold	5,200,000,000
Operating expenses	2,700,000,000
Net profit	600,000,000
Capital employed	5,000,000,000

Explain one way lean production techniques could improve ZenMoto Ltd.'s operational efficiency.

[2]

Calculate the return on capital employed (ROCE) for ZenMoto Ltd. Show all your working.

[2]

Comment on how ZenMoto Ltd.’s ROCE result might influence its decision to use internal or external finance for expansion.

[2]

Suggest one internal and one external source of finance ZenMoto Ltd. could consider for the new manufacturing plant.

[2]

Suggest how improvements in production planning could contribute to better financial performance at ZenMoto Ltd.

[2]

Question 7

HLPaper 3

Alpha Robotics – Optimizing HR and Operations for Growth

Resource 1 – News Article Alpha Robotics Struggles with HR and Operational Efficiency Alpha Robotics, a technology firm specializing in AI-powered industrial robots, is experiencing rapid expansion as demand for automation increases globally. The company was founded in 2015 and has since grown to 2,500 employees across four locations: the United States, Germany, Japan, and India. Key Challenges: (1) HR management issues – Employees complain about unclear leadership, poor communication, and lack of motivation due to a highly hierarchical structure. (2) Production inefficiencies – The company’s batch production method is increasing lead times and reducing product quality. (3) Location challenges – With rising costs in the US and Germany, Alpha Robotics must decide whether to expand in India (lower labor costs) or develop a new R&D facility in Singapore. CEO Daniel Carter is considering the following strategic changes: (1) Restructuring the organization to improve communication and motivation. (2) Shifting to lean production and just-in-time (JIT) inventory management. (3) Relocating part of production to India or Singapore while maintaining efficiency.

Resource 2 – Internal HR Survey Results

Issue	Percentage of Employees Concerned
Lack of leadership clarity	42%
Poor communication from managers	38%
Low motivation and workplace morale	45%
Limited career advancement	41%

Key Insights: (1) Employees feel disconnected from leadership, affecting productivity. (2) A lack of career growth opportunities is reducing motivation and increasing turnover. (3) Middle management struggles with effective communication due to a rigid hierarchical structure.

Resource 3 – Cost-Benefit Analysis for Production Relocation Alpha Robotics – Cost Analysis for Facility Expansion

Location	Labor Costs per Hour ($)	Setup Costs ($M)	Expected Efficiency Gains
India	12	30	10% increase
Singapore	22	50	18% increase

Key Considerations: (1) India offers lower costs, but efficiency gains are lower compared to Singapore. (2) Singapore provides greater efficiency but has significantly higher setup costs.

Using an appropriate business management theory, describe an HR challenge that Alpha Robotics is facing.

[2]

Explain two operational challenges Alpha Robotics faces in improving production efficiency.

[6]

Using all the resources provided and your knowledge of business management, recommend a possible plan of action to improve both HR and operations management at Alpha Robotics.

[17]

Question 8

SLPaper 2

3.4 Final accounts

3.5 Profitability and liquidity ratio analysis

3.8 Investment appraisal

5.3 Lean production and quality management (HL only)

5.4 Location

Question 54 EcoBlade Ltd.

EcoBlade Ltd. produces biodegradable razors aimed at environmentally conscious consumers. The company is deciding whether to invest in a second production site closer to its largest market. Management is considering two investment projects and recently reviewed its operational performance.

Table 1 shows income and expenses for the year ended 20XX. Table 2 presents data for two expansion projects under consideration.

Table 1: Income and Expenses for EcoBlade Ltd. – Year Ended 20XX (All figures in $m)

Revenue	14.0
Cost of goods sold	9.0
Operating expenses	3.0
Net profit before tax	______

| Current assets | 4.0 | | Current liabilities | 2.0 |

Table 2: Investment Appraisal Data - Project A and Project B (All figures in $m)

Project	A	B
Initial investment	5.0	5.0
Net cash inflows: Y1	2.0	1.0
Net cash inflows: Y2	2.0	2.0
Net cash inflows: Y3	1.5	2.5
ARR (over 3 years)	___	___
NPV (@10% discount)	$0.7	$0.5

Additional context:

EcoBlade currently uses quality control to catch faulty razors at the packaging stage, but rejects remain high.
The proposed new site would reduce delivery times by 50% and is near suppliers of plant-based plastic.

(a) Calculate:

(i) Net profit before tax

(ii) Current ratio

[2]

(b) Calculate the ARR for both Project A and Project B.

[2]

(d) Distinguish between quality control and quality assurance using EcoBlade Ltd. as an example.

[2]

(e) Outline one operational reason why EcoBlade Ltd. is considering its second factory near suppliers.

[2]

Total marks: [10]

Calculate:

(i) Net profit before tax

(ii) Current ratio

[2]

Calculate the ARR for both Project A and Project B.

[2]

Explain one advantage of using NPV instead of payback period alone for investment decision-making.

[2]

Distinguish between quality control and quality assurance using EcoBlade Ltd. as an example.

[2]

Outline one operational reason why EcoBlade Ltd. is considering its second factory near suppliers.

[2]

Question 9

SLPaper 2

3.4 Final accounts

3.5 Profitability and liquidity ratio analysis

3.8 Investment appraisal

5.3 Lean production and quality management (HL only)

5.4 Location

Question 54 EcoBlade Ltd.

Table 1 shows income and expenses for the year ended 20XX. Table 2 presents data for two expansion projects under consideration.

Table 1: Income and Expenses for EcoBlade Ltd. – Year Ended 20XX (All figures in $m)

Revenue	14.0
Cost of goods sold	9.0
Operating expenses	3.0
Net profit before tax	______

| Current assets | 4.0 | | Current liabilities | 2.0 |

Table 2: Investment Appraisal Data - Project A and Project B (All figures in $m)

Project	A	B

Initial investment
Net cash inflows: Y1 2.0			1.0
Net cash inflows: Y2 2.0 2.0 2.0
Net cash inflows: Y3 1.5 2.5
ARR (over 3 years)
NPV (@10% discount) $0.7$ 0.5

Additional context:

EcoBlade currently uses quality control to catch faulty razors at the packaging stage, but rejects remain high.
The proposed new site would reduce delivery times by 50% and is near suppliers of plant-based plastic.

(a) Calculate: (i) Net profit before tax (ii) Current ratio

(b) Calculate the ARR for both Project A and Project B.

(d) Distinguish between quality control and quality assurance using EcoBlade Ltd. as an example.

(e) Outline one operational reason why EcoBlade Ltd. is considering its second factory near suppliers.

Total marks: [10]

Calculate:

(i) Net profit before tax

(ii) Current ratio

[2]

Calculate the ARR for both Project A and Project B.

[2]

Explain one advantage of using NPV instead of payback period alone for investment decision-making.

[2]

Distinguish between quality control and quality assurance using EcoBlade Ltd. as an example.

[2]

Outline one operational reason why EcoBlade Ltd. is considering its second factory near suppliers.

[2]

Question 10

SL & HLPaper 2

Question 54 EcoBlade Ltd.

Table 1 shows income and expenses for the year ended 20XX. Table 2 presents data for two expansion projects under consideration.

Table 1: Income and Expenses for EcoBlade Ltd. – Year Ended 20XX (All figures in $m)

Revenue	14.0
Cost of goods sold	9.0
Operating expenses	3.0
Net profit before tax	____

| Current assets | 4.0 | | Current liabilities | 2.0 |

Table 2: Investment Appraisal Data – Project A and Project B (All figures in $m)

Project	A	B
Initial investment	5.0	5.0
Net cash inflows: Y1	2.0	1.0
Net cash inflows: Y2	2.0	2.0
Net cash inflows: Y3	1.5	2.5
ARR (over 3 years)	___	___
NPV (@10% discount)	$0.7	$0.5

Additional context:

EcoBlade currently uses quality control to catch faulty razors at the packaging stage, but rejects remain high.
The proposed new site would reduce delivery times by 50% and is near suppliers of plant-based plastic.

Calculate:

(i) Net profit before tax

(ii) Current ratio

[2]

Calculate the ARR for both Project A and Project B.

[2]

Explain one advantage of using NPV instead of payback period alone for investment decision-making.

[2]

Distinguish between quality control and quality assurance using EcoBlade Ltd. as an example.

[2]

Outline one operational reason why EcoBlade Ltd. is considering locating its second factory near suppliers.

[2]

Global Solar Solutions (GSS)