Operations and Supply Chain Management
Operations management concerns designing and controlling processes that transform inputs into outputs. Know the difference between manufacturing and service characteristics (intangibility, perishability, simultaneity, heterogeneity). Process analysis uses capacity, throughput time, and bottlenecks; the bottleneck sets system capacity, and the theory of constraints focuses improvement there.
Inventory management distinguishes holding, ordering, and stockout costs. The economic order quantity (EOQ) balances ordering and holding costs; reorder point accounts for demand during lead time and safety stock. Know push versus pull systems, just-in-time (JIT), and the bullwhip effect, where demand variability amplifies upstream in the supply chain. Quality tools include the cost of quality (prevention, appraisal, internal and external failure), statistical process control, and Six Sigma's DMAIC cycle. Lean thinking targets waste (overproduction, waiting, transport, inventory, motion, overprocessing, defects).
Forecasting methods split into qualitative (Delphi, market research) and quantitative (moving average, exponential smoothing, regression); smoothing constant choice trades responsiveness against stability.
Traps: assuming higher capacity at a non-bottleneck raises output; confusing EOQ with reorder point; and treating JIT as simply low inventory rather than a pull-based system with supplier reliability.
Worked example: three stations with capacities 100, 80, and 120 units per hour. System capacity is 80; improving station one to 110 changes nothing. Rule of thumb: find the smallest capacity, improve there first, then re-evaluate because the bottleneck can move.