Operations and Production Management
This domain tests capacity, forecasting, inventory, quality, process design, scheduling, project planning and supply-chain trade-offs.
Core rules
- Capacity: design, effective and actual capacity; utilisation = actual/design; efficiency = actual/effective.
- Forecasting: moving average smooths; exponential smoothing uses α between 0 and 1; higher α reacts faster.
- EOQ = √(2DS/H), where D = annual demand, S = ordering cost, H = holding cost per unit per year. Reorder point = demand during lead time + safety stock.
- JIT reduces inventory but requires reliable suppliers and stable demand.
- TQM: customer focus, continuous improvement, employee involvement. Six Sigma DMAIC: define, measure, analyse, improve, control; target 3.4 defects per million opportunities.
- SPC: control charts distinguish common and special cause variation; Cp measures potential capability, Cpk accounts for centring.
- Project: CPM deterministic; PERT uses optimistic, most likely and pessimistic times with expected = (O + 4M + P)/6. Critical path is the longest path.
Worked example. D = 10,000 units/year; S = ₹100/order; H = ₹8/unit/year. EOQ = √(2 × 10,000 × 100/8) = √250,000 = 500 units. Orders = 20/year; ordering cost = ₹2,000; average inventory = 250; holding cost = ₹2,000 - equal at EOQ.
Traps. EOQ ignores quantity discounts and demand variability. PERT is probabilistic, not a guarantee. The critical path has zero slack; it is not the shortest path. Cpk can be negative if the mean is outside specification. JIT is not simply "zero inventory".