'AEV is unable to meet this demand due to a lack of capacity and supply constraints' (Lines 47-48). Other than expansion of CellX, discuss ways in which the Operations Management Department of AEV could solve this problem.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2019). The mark or mark type is shown in brackets.

1. [Knowledge] Definition of capacity: maximum output achievable with current resources
2. [Knowledge] Identification/understanding of options
3. [Knowledge] Outsourcing production
4. [Knowledge] Improve efficiency – increase labour productivity, e.g. by motivating employees more effectively
5. [Knowledge] Reduce labour turnover
6. [Knowledge] New manufacturing base
7. [Knowledge] Find new suppliers
8. [Knowledge] Take over supplier
9. [Knowledge] JIT manufacturing/lean production (more efficient use of existing resources)
10. [Knowledge] Increase capital intensity at CellX
11. [Application] Workers already facing compulsory overtime
12. [Application] Increase in production required is significant. Current production is 100 000 units per year
13. [Application] Akira is worried about labour turnover. This is a contributory factor that reduces output
14. [Application] Source materials for batteries from countries other than country C
15. [Application] Take over supplier in country C
16. [Application] Invest in new manufacturing plant in country
17. [Application] Negotiate with trade union as 80% of workforce is unionised
18. [Application] Outsourcing production of batteries/cars
19. [Analysis] Outsourcing could risk loss of control over quality of components such as batteries. This could further impact reputation of AEV
20. [Analysis] Outsourcing involves no major capital investment and therefore aids AEV's cash flow
21. [Analysis] Establishing a new manufacturing base will be expensive and affect AEV's cash flow and result in greater coordination problems – diseconomies of scale
22. [Analysis] Reducing labour turnover will ensure that AEV keeps experienced workers and thus enable an increase in output
23. [Analysis] JIT manufacturing/lean production enables a more efficient use of resources thus increasing output per worker
24. [Analysis] JIT can reduce storage of inventory and allow a more efficient use of space for production leading to an increase in output
25. [Evaluation] Depends on the cost of outsourcing
26. [Evaluation] Difficult working conditions may make reducing labour turnover challenging
27. [Evaluation] As batteries depend on rare materials it may not be possible to source the materials from elsewhere
28. [Evaluation] Given the increase in production required expansion of CellX may be only viable approach but this will take time and not alleviate the immediate capacity problems faced
29. [Evaluation] Supplier constraints likely to be faced by all manufacturers of electric vehicles so gaining control of supplier may be the best option
30. [Evaluation] Some options may in theory enable an increase in capacity but do not necessarily address the supply constraints faced
31. [Evaluation] JIT manufacturing
32. [Evaluation] Improvements in efficiency
33. [Evaluation] Reduction in wastage