Practice IB Business Management Topic 5.3 Lean Production and Quality Management with authentic exam-style questions for both SL and HL students. This question bank focuses on the exact syllabus content for 5.3 Lean Production and Quality Management and mirrors Paper 1, 2, 3 style where relevant.
Get instant solutions, detailed explanations, and build confidence with questions aligned to IB examiner expectations.
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 sales | 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.
Calculate the stock turnover ratio for EcoForge Ltd. Show all your working.
Comment on what the stock turnover ratio result suggests about EcoForge Ltd.’s inventory management (stock control) efficiency.
Suggest one internal and one external source of finance EcoForge Ltd. could use to fund the new plant.
Analyse how improved production planning could support EcoForge Ltd.’s financial and strategic goals.
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:
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.
Explain how NexaHealth’s proposed JIC-based contingency plan could affect the business in terms of cost and risk.
Analyse how NexaHealth’s proposed strategies (automation and adopting lean production and TQM practices) could help improve operational performance.
Using the stimulus and your knowledge of business management, evaluate which strategy NexaHealth should prioritise to improve operational resilience and long-term competitiveness. You may recommend one primary strategy or justify a phased approach, but you must make a clear first priority.
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.
FlexFrame is also considering a contingency plan to reduce the risk of disruption (eg supplier failures for key components, machinery breakdowns, or transport delays) that could affect delivery reliability. The plan would include measures such as dual-sourcing critical components, holding additional safety stock of high-risk parts, and arranging backup logistics providers. Management estimates the plan would increase unit costs by 8% and delay the rollout of some new product/process changes due to extra supplier qualification and training requirements.
Identify one feature of lean production used by FlexFrame.
Explain one benefit and one risk of investing in R&D for FlexFrame.
Explain the impact of outsourcing production on FlexFrame’s operations.
Evaluate whether FlexFrame should implement the proposed contingency plan.
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.
Table 1: Financial and Production Data for EcoCrate Ltd.
| Item | Amount |
|---|---|
| Fixed costs (in-house production) | $300,000 |
| Variable cost per unit (in-house) | $120 |
| Cost to buy (CTB) per unit from supplier | $160 |
| Selling price per unit | $250 |
| Expected sales volume | 5,000 units |
Additional notes:
Calculate EcoCrate Ltd.’s break-even quantity based on current in-house production costs.
Calculate the margin of safety in units based on expected sales.
Calculate the cost difference between Cost to Buy (CTB) and Cost to Make (CTM) at the expected sales volume.
Explain one effect of outsourcing production compared to insourcing.
Suggest one reason why labour turnover may have increased at EcoCrate Ltd.
Global Solar Solutions (GSS)
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.
With reference to business management motivation theory, describe one need that GSS satisfies for rural households requiring solar lighting.
Explain one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.
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.