Operations, Supply Chain and Quality Management
This section covers Operations, Supply Chain and Quality Management. The exam tests process flow, capacity, inventory and quality control, with emphasis on identifying the constraint and using data.
Core rules and concepts
- Little's Law: inventory = throughput × flow time. Capacity is set by the bottleneck; non-bottleneck utilisation does not raise output. Throughput is the rate the system delivers.
- Inventory decouples stages but hides variability and quality problems. EOQ balances ordering and holding costs; safety stock buffers demand and lead-time uncertainty.
- Quality is conformance to requirements and fitness for use. SPC distinguishes common from special cause variation. Cp measures potential capability; Cpk measures capability relative to the specification centre.
Worked example
A three-step process has capacities of 60, 45 and 50 units per hour. The bottleneck is 45 units/hour, so system capacity is 45. If demand is 50, the process cannot meet it without expanding step two. If average flow time is 2 hours, Little's Law gives WIP = 45 × 2 = 90 units. Reason: adding capacity at steps one or three adds cost but not throughput.
Traps
Confusing capacity with utilisation; assuming high local efficiency improves flow; using EOQ when demand is lumpy or lead times are unreliable; treating Cp as sufficient without Cpk; believing inspection creates quality.