CMA Inter Paper 9: OMSM key terms

The design, direction and improvement of the processes that transform inputs such as materials, labour and information into goods and services for customers. It covers capacity, quality, scheduling, inventory and process design decisions.

The set of activities that converts inputs into outputs of greater value. In manufacturing it changes form and assembly; in services it changes location, condition or information state of the customer or their possessions.

The ratio of output produced to the inputs consumed in producing it. Single-factor productivity uses one input such as labour hours; multifactor productivity combines several inputs, often expressed in money terms to allow aggregation.

A productivity measure relating total output to a single class of input, such as labour productivity (output per labour hour) or machine productivity. It is easy to compute but can mislead if input mix changes.

Actual output expressed as a percentage of the maximum output the facility can achieve under realistic operating conditions. Low utilisation raises unit fixed cost; utilisation above design level may strain quality and maintenance.

Estimating future demand or resource requirements from historical data, causal factors and judgement. Forecasts are always wrong to some degree, so planners attach error ranges and build buffer capacity or inventory accordingly.

Medium-term planning that matches overall capacity to expected demand over a horizon of roughly three to eighteen months, using levers such as workforce size, overtime, inventory and subcontracting, without specifying individual products.

A time-phased statement of the quantity of each end product to be completed in each future period. It disaggregates the aggregate plan and drives material requirements planning and shop-floor scheduling.

A computer-based system that explodes the master schedule through the bill of materials to calculate component and raw-material requirements, netting on-hand stock and offsets to give planned order releases and receipts.

The order size that minimises the sum of ordering cost and holding cost for an item with steady demand. It balances the trade-off between placing frequent small orders and carrying large stocks.

Extra inventory held to absorb uncertainty in demand or lead time. It is sized from the variability of demand or lead time and the desired service level, and protects against stockouts without being consumed in normal operation.

The inventory level at which a replenishment order is triggered. It typically equals expected demand during the lead time plus safety stock, so the order arrives before stock runs out.

The operation with the least capacity in a process, which limits the output of the whole system. Throughput can only rise by increasing bottleneck capacity or shifting work away from it.

A management approach holding that every system has at least one binding constraint, and improvement requires identifying it, exploiting it fully, subordinating other decisions to it, elevating it, then repeating the cycle.

A philosophy of producing and delivering items exactly when needed, in the quantity needed, so that work-in-process and finished stock are minimised and problems surface quickly rather than being hidden by inventory.

A signal, often a card or container, that authorises production or withdrawal of material in a pull system. Each kanban corresponds to a standard quantity, and its circulation caps work-in-process.

An approach that relentlessly removes waste, defined as activity that consumes resources without adding customer value, while improving flow, levelling workload and respecting people. It originated in the Toyota production system.

A visual technique that charts every step, material flow and information flow needed to deliver a product family, distinguishing value-adding from non-value-adding steps and highlighting where lead time accumulates.

A quality methodology that reduces variation and defects using a structured define-measure-analyse-improve-control cycle and statistical tools, targeting a defect rate of about 3.4 per million opportunities.

Monitoring a process using control charts that plot sample statistics against limits derived from its natural variation. Points outside the limits or non-random patterns signal an assignable cause requiring action.

The total cost of preventing poor quality, appraising conformance, and bearing internal and external failures. It makes visible the trade-off between prevention spending and failure costs such as rework, warranty and lost goodwill.

A company-wide approach in which quality is defined by customer requirements and pursued through leadership commitment, employee involvement, continuous improvement, supplier partnership and fact-based decision making.

The ongoing, incremental betterment of processes by the people who perform them, using small experiments and standard work. It treats standards as a baseline to be raised repeatedly rather than a fixed ceiling.

The longest sequence of dependent activities through a project network, which fixes the shortest possible project duration. Any delay on it delays completion unless the path is compressed.

A network scheduling method using three time estimates per activity, optimistic, most likely and pessimistic, to compute expected durations and the probability of finishing by a target date when activity times are uncertain.

Shortening project duration by adding resources to activities on the critical path, choosing the cheapest cost-per-period reduction first, until the extra cost outweighs the value of earlier completion.

Coordinating the flow of materials, information and funds from suppliers through production to final customers, so that the chain as a whole balances responsiveness against efficiency rather than optimising each firm separately.

The amplification of demand variability as orders pass upstream through a supply chain, caused by forecast updating, order batching, price promotions and rationing, and countered by information sharing and stable pricing.

The full set of decisions and actions used to formulate and implement strategies that align an organisation with its environment and achieve its long-term objectives.

A structured summary matching an organisation's internal strengths and weaknesses with external opportunities and threats, used to identify strategic options that build on advantages and defend against exposure.

A scan of the macro-environment covering political, economic, social, technological, legal and environmental forces, used to identify changes outside the industry that may reshape demand, costs or rules.

An industry analysis framework assessing rivalry among existing firms, threat of new entrants, threat of substitutes, bargaining power of buyers and bargaining power of suppliers to judge the profit potential of an industry.

The sequence of primary and support activities through which a firm creates and delivers value, analysed to locate where cost is incurred and where differentiation arises relative to competitors.

A bundle of skills and technologies that is hard for competitors to imitate, contributes significantly to customer value and can be applied across several products or markets, forming a durable basis for advantage.

A grid of growth options formed by crossing existing or new products with existing or new markets, yielding market penetration, product development, market development and diversification, with rising risk across them.

A performance measurement system that tracks financial results alongside customer, internal process and learning-and-growth perspectives, linking measures to strategy so that non-financial drivers are not ignored.

Translating chosen strategy into structure, systems, resource allocation, culture and leadership action so that day-to-day decisions across the organisation pull in the intended direction.