Operations and Supply Chain Management
Core Concepts
Operations management focuses on efficiently producing goods and services. Key topics: process design, capacity planning, quality management (TQM, Six Sigma), inventory management (EOQ, JIT, safety stock), and supply chain coordination. The bullwhip effect describes how demand variability amplifies upstream. Lean principles eliminate waste (muda). Project management basics (critical path, Gantt) may appear.
Traps in Questions
- Confusing JIT (minimal inventory, demand-driven) with EOQ (optimal order quantity balancing ordering and holding costs). JIT requires reliable suppliers; EOQ assumes stable demand.
- Misunderstanding the bullwhip effect: it’s caused by lack of information sharing, not just demand fluctuations. Solutions include information sharing and vendor-managed inventory.
- Assuming higher capacity utilization is always better: it can lead to bottlenecks and reduced flexibility.
- Mixing up quality control (inspection) with quality assurance (process design).
- Forgetting that safety stock protects against variability in demand and lead time.
Worked Example / Rule of Thumb
A retailer faces annual demand of 10,000 units, ordering cost $50 per order, holding cost $2 per unit per year. EOQ = sqrt(2DS/H) = sqrt(21000050/2) = sqrt(500,000) = 707 units. Rule: EOQ minimizes total ordering and holding costs; use it when demand is stable and lead time is known.
Supply Chain
Understand push vs pull systems: push (forecast-driven) vs pull (demand-driven). A trap is to assume push is always bad; it can be efficient for stable, predictable products. Also, know the difference between efficiency (cost) and responsiveness (speed, flexibility) and the trade-off.