CMA Inter Paper 9: OMSM cheat sheet

Operations management is the design, operation and improvement of the transformation system that converts inputs (materials, labour, capital, information) into outputs (goods and services).

Four decision areas of operations: process, quality, capacity, inventory; the operations manager sets the trade-offs among them.

Production system types: job shop (high variety, low volume), batch, mass/line, and continuous flow (low variety, high volume); variety and volume are inversely related.

Service characteristics that shape operations: intangibility, inseparability of production and consumption, perishability, and customer participation.

Operations strategy must align with corporate strategy; competitive priorities are cost, quality, delivery speed, delivery reliability and flexibility.

Order qualifiers are minimum standards to be considered by a customer; order winners are the criteria that actually win the order.

The input-transformation-output model applies to every organisation; feedback and control loops adjust the transformation process.

Productivity is measured as output per unit of input; single-factor measures one input, multifactor/total measures all inputs (see Productivity domain).

Forecasting methods: qualitative (delphi, market survey, judgement) and quantitative (moving average, weighted moving average, exponential smoothing, regression, time-series decomposition).

Exponential smoothing: F(t+1) = alpha*A(t) + (1 - alpha)*F(t); higher alpha gives more weight to recent actual demand.

Aggregate planning strategies: level capacity (constant output, inventory/backlog varies), chase demand (output matched to demand), and mixed plans.

Master Production Schedule (MPS) states which end items to be produced and when; Material Requirements Planning (MRP) explodes the MPS using the bill of materials and inventory records.

MRP net requirement = gross requirement + safety stock - projected on-hand - scheduled receipts.

Capacity planning: Capacity Requirements Planning (CRP) checks whether MRP can be met; Rough-Cut Capacity Planning checks the MPS against key resources.

Scheduling priority rules: FCFS, SPT (usually minimises average flow time), EDD (minimises maximum lateness), and critical ratio = (due date - now) / remaining processing time.

Inventory control: EOQ = sqrt(2DS/H) where D is annual demand, S is order cost and H is holding cost per unit per year; reorder point = demand rate x lead time + safety stock.

Productivity = Output / Input; it is a ratio, not a difference, so it can be improved by raising output, lowering input, or both.

Single-factor productivity uses one input (e.g., labour productivity = output / labour hours); multifactor productivity uses a bundle of inputs, often cost-weighted.

Total factor productivity = total output / total inputs, commonly expressed in value terms so unlike inputs can be summed.

Percentage change in productivity = (new productivity - old productivity) / old productivity x 100.

Labour productivity is affected by skill, method, technology, management and work environment; capital productivity by utilisation and technology.

Improving productivity lowers unit cost without a price change, raising margin; with a price reduction it can raise demand and market share.

Partial productivity measures can mislead: substituting capital for labour may raise labour productivity while total productivity falls.

Productivity is a key source of national competitiveness; it differs from production volume, which ignores the inputs consumed.

Cost of quality components: prevention, appraisal, internal failure and external failure costs; external failure is usually the most expensive per defect.

Quality gurus: Deming (PDCA, 14 points), Juran (quality trilogy, fitness for use), Crosby (zero defects, cost of non-conformance) and Feigenbaum (total quality).

Statistical process control: control limits are usually mean +/- 3 standard deviations; process capability compares specification width to process spread (Cp, Cpk).

Lean core practices: pull (kanban), continuous flow, takt time, levelled production (heijunka), quick changeover (SMED) and standardised work.

The seven wastes (TIMWOOD): transportation, inventory, motion, waiting, overproduction, overprocessing and defects.

JIT aims to eliminate inventory buffers; it requires reliable suppliers, small lots and stable demand, and is vulnerable to disruption.

Kaizen is continuous incremental improvement; kaizen blitz is a short focused improvement event; 5S orders and standardises the workplace.

Six Sigma targets 3.4 defects per million opportunities using DMAIC (define, measure, analyse, improve, control) for existing processes.

Project characteristics: defined objective, unique, temporary, constrained by time, cost and scope (the triple constraint).

CPM uses deterministic activity durations; PERT uses three-point estimates with expected time = (optimistic + 4*most likely + pessimistic)/6.

Critical path is the longest path through the network; it sets project duration and has zero total float.

Earned Value Management: CV = EV - AC (positive is under budget); SV = EV - PV (positive is ahead of schedule); CPI = EV/AC; SPI = EV/PV.

Estimate at completion (EAC) = BAC / CPI when current cost performance is expected to continue.

Supply chain flows: material forward, cash backward, and information in both directions; the bullwhip effect amplifies demand variation upstream.

Bullwhip causes: demand forecasting, order batching, price fluctuations, shortage gaming and rationing; countermeasures include information sharing and EDI.

Logistics and integration tools: vendor managed inventory, collaborative planning (CPFR), postponement, cross-docking, third-party logistics and reverse logistics.

Strategic management process: environmental scanning, strategy formulation, strategy implementation, and evaluation and control.

Strategy is a long-term direction and scope of an organisation that achieves advantage through configuration of resources in a changing environment.

Mintzberg's 5 Ps of strategy: plan, ploy, pattern, position and perspective.

Levels of strategy: corporate (portfolio, diversification), business (competitive advantage) and functional/operational (marketing, operations, finance).

Vision states the desired future; mission states the organisation's purpose and scope; objectives are measurable targets derived from them.

Strategic intent and stretch (Hamel and Prahalad) emphasise ambition beyond current resources; core competence is a bundle of skills difficult for rivals to imitate.

Hierarchy of goals: vision, mission, strategic objectives, tactical objectives, operational goals; each level must be consistent with the one above.

Strategic decisions are typically long-term, involve significant resource commitment, and are hard to reverse.

PESTLE analyses macro-environment: political, economic, social, technological, legal and environmental factors.

Porter's Five Forces: threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes and rivalry among existing competitors; high forces mean low industry attractiveness.

Porter's diamond explains national competitive advantage through factor conditions, demand conditions, related and supporting industries, and firm strategy, structure and rivalry.

Value chain (Porter) splits activities into primary (inbound logistics, operations, outbound logistics, marketing and sales, service) and support (firm infrastructure, HR, technology, procurement).

VRIO test: a resource must be valuable, rare, hard to imitate and organisationally supported to yield sustained competitive advantage.

SWOT combines internal strengths and weaknesses with external opportunities and threats; it is a matching tool, not an analysis in itself.

BCG matrix: stars (high growth, high share), cash cows (low growth, high share), question marks (high growth, low share) and dogs (low growth, low share).

Industry life cycle stages: introduction, growth, maturity, decline; competition and margin pressure differ at each stage.

Porter's generic strategies: cost leadership, differentiation and focus (cost focus or differentiation focus); being stuck in the middle means no clear advantage.

Ansoff matrix: market penetration, market development, product development and diversification, ordered by increasing risk.

Corporate growth routes: horizontal integration, vertical integration (backward toward suppliers, forward toward customers) and diversification (related or unrelated).

BCG/portfolio logic: fund stars and selected question marks from cash cow surpluses, and divest or harvest dogs.

Strategy evaluation criteria: suitability (does it address the situation), acceptability (risk, return, stakeholder reactions) and feasibility (resources and competences).

Diversification succeeds when it exploits economies of scope, transfers core competences, or lowers transaction costs of market failure.

Mergers and acquisitions fail often because of overpayment, poor cultural fit and overestimated synergies; joint ventures share risk but dilute control.

Blue ocean strategy seeks uncontested market space through value innovation, breaking the value-cost trade-off rather than beating rivals.

Structure follows strategy (Chandler); growth strategies typically require a shift from functional to divisional structure.

Mintzberg's structural configurations: simple structure, machine bureaucracy, professional bureaucracy, divisionalised form and adhocracy.

7S framework: strategy, structure, systems (hard) plus staff, skills, style and shared values (soft); all must fit for implementation to succeed.

Corporate culture types (Handy): power, role, task and person culture; culture can be a source of competitive advantage or a barrier to change.

Kotter's eight steps of change start with urgency and coalition building and end with anchoring change in culture.

Strategy evaluation criteria: consistency, consonance, feasibility and advantage (Rumelt).

Balanced Scorecard perspectives: financial, customer, internal business process, and learning and growth; each with objectives, measures, targets and initiatives.

Control types: feedforward (before), concurrent (during) and feedback (after); corrective action closes the control loop, and benchmarking compares performance to best practice.