Skip to content
Study Hall
Lesson 1 of 5Business Functions
Unit 3 · Lesson 1 of 5

Operations: Making the Product or Delivering the Service

Operations turns inputs into outputs through a series of steps, and a good process is measured by time and cost per unit, quality, safety, ethics and sustainability.

5 min read1 quick check10 practice questionsAsk AI about this →

Key things to remember

  1. 1Inputs (materials, equipment, labour, money, information) go through a process (ordered steps) to become outputs (products, services and by-products).
  2. 2Time per unit = the sum of the times for every step.
  3. 3Capacity = time available ÷ time per unit (round down to whole units).
  4. 4The bottleneck is the slowest step; improving it speeds up the whole process.
  5. 5Cost per unit = materials per unit + labour per unit, where labour per unit = (minutes ÷ 60) × hourly wage.
  6. 6A good process is efficient, healthy and safe, ethical, and sustainable, with quality checked before the customer sees the product.

Maya has a heat press in her basement and a plan: sell custom hoodies to her school's graduating class under the name Class Act Hoodies. Her first weekend, she makes six hoodies in four hours, burns her wrist on the press, peels one design on crooked, and throws out a pile of wasted vinyl. Customers do not see any of that. They only see whether their hoodie shows up on time, looks good and lasts. Everything that happens between "order received" and "hoodie delivered" is called operations, and doing it well is what lets a business keep its promises without losing money.

Operations (also called production) is the business function that makes the product or delivers the service. A product is something physical you can hold, like a hoodie. A service is work done for someone, like a bike repair or a tutoring session. Both need operations: a tutor still has to book the session, prepare, teach and follow up.

Inputs, process and outputs

Every production system, from a car factory to a lemonade stand, has the same three parts. Inputs are everything that goes in: materials (blank hoodies, vinyl), equipment (the heat press, a cutting machine), labour (the people's time and skill), money, and information (the customer's design and size). The process is the ordered set of steps that changes the inputs. Outputs are what comes out: the finished product, and also by-products like scrap vinyl and packaging waste.

SuppliersInputsProcessQuality checkOutputinput → process → output, with quality checked before deliveryA good: custom T-shirtsblank-shirtwholesaler,ink and vinylsupplierblank shirts,ink, designs,a heat press,your timedesign, printor press,cure, fold andtagcheck eachprint, sizeand spelling;fix defectsfinishedshirts,packed, thenpicked up orshippedA service: tutoringworkbookpublisher,onlinepractice sitestutor'sknowledge andtime,workbooks, aquiet spaceassess needs,plan lessons,teach,practiseshort quizzes;feedback fromstudent andparentsstrongerskills,delivered inperson oronlineA service is produced and delivered at the same time, so its quality is checked as it happens.
Fig 1A production process: inputs go through ordered steps with quality checks to become outputs.
StepWhat happensTime per hoodie (minutes)
1. CutThe cutting machine cuts the design out of a sheet of heat-transfer vinyl4
2. WeedPeel away the vinyl that is not part of the design8
3. PressLine up the design and heat-press it onto the hoodie3
4. InspectCheck spelling, placement, size and that the vinyl is stuck down2
5. PackFold, bag and label with the customer's name3
Total20
Class Act Hoodies' first process: 20 minutes of work for each hoodie.
  • Time per unit is the total working time to make one item: add the time for every step. For Class Act Hoodies, minutes.
  • Capacity is the most a business can make in a set time. In a 3-hour (180-minute) Saturday shift: hoodies.
  • Quality control means checking work against a standard and catching mistakes before the customer does. Step 4 is Class Act Hoodies' quality check.
  • A bottleneck is the slowest step, the one that limits how fast everything else can go. Here it is weeding, at 8 minutes.
Quick checkTry it before you read on
1
Using the 20-minute process, how many hoodies can one person finish in a 4-hour shift?
A blue clamshell heat press in a print studio with a printed white apron on its lower plate and a Caution hot surfaces label on the top plate.
PhotoA heat press in a small print studio, the same kind of equipment Maya uses. It is one of the process's inputs, and its Caution hot surfaces label is a reminder that safety belongs in the process design.Scrud123, CC BY-SA 3.0, via Wikimedia Commons

How businesses improve their processes

Businesses do not just ask "how fast can we go?" They also ask whether the process is safe for workers, fair to the people who make the materials, and gentle on the environment. Here are four kinds of improvement that real businesses use all the time.

GoalCommon practiceWhat it could look like at Class Act Hoodies
EfficiencyLean thinking: find and remove waste (waiting, extra motion, defects, overproduction); work in batches; fix the bottleneck firstCut four designs on one vinyl sheet at once; use a lighted weeding pad; set up a fold-and-bag station
Health and safetySafety training, protective equipment, clear work areas, regular breaks, reporting near-missesHeat-resistant gloves, a written press checklist, the press on a stable table away from walkways
EthicsEthical sourcing: buy from suppliers who treat workers fairly and say where items are made; honest product descriptionsChoose a blank-hoodie supplier that publishes where and how its hoodies are made
SustainabilityReduce, reuse, recycle; less packaging; less energy; make to order instead of guessingMake hoodies only after they are ordered; switch to paper mailers; nest designs to cut vinyl scrap
Four kinds of process improvement, with examples for a small venture.
Where lean thinking comes from
Lean thinking grew out of the Toyota Production System in Japanese car manufacturing. Its core idea fits any business: anything that uses time, money or materials without adding value for the customer is waste, and waste can be removed.
VideoSee how the Toyota Production System cut waste on the factory floor, the origin of the lean thinking described in this section.Watch on YouTube

Outlining your own process

To outline a process for your own venture, list the inputs, write each step in order with a time estimate, mark where quality is checked, and then go through it four times asking: Is it efficient? Is it healthy and safe? Is it ethical? Is it sustainable? Finally, work out the cost per unit, because a process that is fast but too expensive still fails.

Worked examples

Reveal one step at a time and try to beat it to the next line.

Example 1
Maya improves her process: batch cutting drops cutting to 2 minutes, a lighted weeding pad drops weeding to 6 minutes, and a ready-made packing station drops packing to 2 minutes. Pressing (3) and inspecting (2) stay the same. Find the new time per unit and the new capacity in a 3-hour shift.
Example 2
Class Act Hoodies pays its helper $20 per hour. After the improvements, each hoodie uses a $18.00 blank hoodie, $2.50 of vinyl and a $0.50 paper mailer, and takes 15 minutes of work. Find the cost per hoodie.
Example 3
Before the improvements, vinyl cost $3.00 per hoodie and work took 20 minutes. Find the old cost per hoodie and the total saving on an order of 100 hoodies.
Example 4
Outline an efficient, healthy, safe, ethical and sustainable process for Class Act Hoodies by checking each step against the four goals.

Where marks get lost

  • Forgetting to convert hours to minutes (or minutes to hours) before dividing, e.g. dividing 3 hours by 15 minutes and getting 0.2 hoodies.
  • Rounding capacity up: if a shift fits 7.8 units, only 7 are finished, so round down.
  • Leaving labour out of cost per unit because "it's just my time". Your time has value, and a helper must be paid.
  • Speeding up a step that is not the bottleneck and expecting the whole process to get much faster.
  • Treating sustainability or ethics as an add-on at the end instead of building them into how each step is done.

Flashcards 8

Operations
Inputs
Time per unit
Capacity
+ 4 more

Practice

1
Which of these is an output of Class Act Hoodies' production process?
2
A tutoring service spends 10 minutes preparing, 45 minutes teaching and 5 minutes writing a summary for each session. What is the time per session in minutes?
minutes
3
A bracelet takes 12 minutes to make. How many complete bracelets can one person make in a 2-hour session?
4
A helper earns $18 per hour and each item takes 20 minutes. What is the labour cost per item, to the nearest cent?
$
5
Materials for a candle cost $4.50 and labour costs $2.25 per candle. What is the cost per candle, to the nearest cent?
$
6
Class Act Hoodies' steps take 4, 8, 3, 2 and 3 minutes. Which change would most likely increase capacity the most?
7
Match each improvement to the goal it mainly serves.
Cutting four designs on one vinyl sheet
Heat-resistant gloves at the press
A supplier that says where its hoodies are made
Paper mailers instead of plastic bags
8
Put Class Act Hoodies' process steps in order.
  1. 1Fold, bag and label
  2. 2Inspect the hoodie
  3. 3Press onto the hoodie
  4. 4Cut the design
  5. 5Weed the vinyl
9
What one word describes the slowest step in a process, the one that limits the speed of everything else?
10
Why is making to order (only after an order is placed) considered both efficient and sustainable?

Spot a mistake on this page? Let us know