CSS Business Administration Operations and Supply Chain Management Syllabus

Differentiate design capacity, effective capacity, and actual output.

Design capacity = maximum theoretical output under ideal conditions. Effective capacity = max output given product mix, maintenance, and scheduling realities. Actual output = real output achieved (≤ effective).

Give the formulas for capacity efficiency and capacity utilization.

Efficiency = Actual output / Effective capacity. Utilization = Actual output / Design capacity.

What are the three main capacity expansion (timing) strategies?

Lead strategy (capacity added ahead of demand), Lag strategy (capacity added after demand grows), and Match/Tracking strategy (capacity added in small increments to closely follow demand).

What is 'economies of scale' versus 'diseconomies of scale' in capacity?

Economies of scale: average unit cost falls as output rises (fixed costs spread over more units). Diseconomies of scale: average unit cost rises beyond an optimal size due to complexity, coordination, and bureaucracy.

What is a 'bottleneck' in a process?

The resource or operation with the lowest capacity in a sequence; it limits the overall throughput of the entire process and is the constraint to be managed (Theory of Constraints).

What is the main objective of facility location decisions?

To choose a site that minimizes total relevant costs (and/or maximizes service/revenue), balancing proximity to markets, suppliers, labor, and infrastructure for long-term competitiveness.

List key factors influencing facility location decisions.

Proximity to markets and suppliers/raw materials, labor availability and cost, transportation/infrastructure, utilities and land cost, taxes and government incentives, climate, and community/legal factors.

What is the 'factor-rating method' for location selection?

A technique that assigns weights to relevant location factors, scores each candidate site on each factor, computes weighted scores, and selects the site with the highest total weighted score.

What does the 'center-of-gravity method' determine, and what does it minimize?

It finds the location for a distribution center/warehouse that minimizes total weighted distance (transportation cost), using the volume-weighted average of the x and y coordinates of demand points.

What is 'locational break-even (cost-volume) analysis'?

A method comparing the total cost (fixed + variable × volume) of candidate locations across a range of output, selecting the location with the lowest total cost for the expected volume.

Define 'facility layout' and state its main goal.

Facility layout is the physical arrangement of departments, workstations, equipment, and storage within a facility. Its goal is to minimize material handling, distance, and cost while maximizing efficiency and flow.

Name and describe the four basic types of facility layout.

Process (functional) layout: groups similar equipment, used for variety/job shops. Product (line) layout: arranged by sequence of operations for high-volume. Fixed-position layout: product stays still, resources brought to it (ships, buildings). Cellular layout: machines grouped into cells for part families (group technology).

When is a process (functional) layout preferred over a product layout?

Process layout suits low-volume, high-variety production with flexible general-purpose equipment; product layout suits high-volume, standardized output with specialized equipment arranged in a line.

What is 'line balancing' in a product layout?

Assigning tasks to workstations so each station has roughly equal work and the workload is evenly distributed, to minimize idle time and the number of stations needed to meet the required cycle time.

Give the formula for the cycle time and the theoretical minimum number of workstations in line balancing.

Cycle time = Available production time per day / Required units per day. Minimum stations = Sum of all task times / Cycle time (rounded up).

What is the purpose of holding inventory? List the main inventory types.

Inventory decouples operations and buffers against uncertainty. Types: raw materials, work-in-process (WIP), finished goods, and MRO (maintenance, repair, operating) supplies; functionally: cycle, safety, anticipation, pipeline (transit) stock.

What three cost categories are traded off in inventory models?

Holding (carrying) cost, Ordering (setup) cost, and Shortage (stockout) cost. EOQ balances holding cost against ordering cost.

State the Economic Order Quantity (EOQ) formula and define its symbols.

EOQ = √(2DS / H), where D = annual demand, S = ordering (setup) cost per order, H = annual holding cost per unit. It is the order size that minimizes total holding plus ordering cost.

At the EOQ, what is the relationship between annual holding cost and annual ordering cost?

They are equal. The total cost curve is minimized at the quantity where annual holding cost = annual ordering cost.

What is the formula for total annual inventory cost in the basic EOQ model (excluding purchase cost)?

Total Cost = (D/Q)·S + (Q/2)·H, where D/Q is number of orders, S is ordering cost, Q/2 is average inventory, and H is holding cost per unit.

What key assumptions underlie the basic EOQ model?

Constant and known demand, constant lead time, instantaneous replenishment, no quantity discounts, no stockouts (demand fully met), and constant holding and ordering costs.

Distinguish a fixed-order-quantity (Q) system from a fixed-time-period (P) system.

Q-system (continuous review): a fixed quantity is ordered whenever stock hits the reorder point; inventory is monitored continuously. P-system (periodic review): inventory is reviewed at fixed time intervals and a variable quantity is ordered up to a target level.

Define 'reorder point (ROP)' and give its formula without uncertainty.

The inventory level at which a new order is placed. Without uncertainty: ROP = d × L, where d = demand per unit time and L = lead time (in the same units).

Give the reorder point formula that includes safety stock.

ROP = (Average demand during lead time) + Safety Stock = d̄ × L + SS.

Define 'safety stock' and explain why it is held.

Extra inventory held beyond expected demand during lead time to protect against variability in demand and/or lead time, reducing the risk of stockouts and providing a desired service level.

Give the safety stock formula when demand is variable but lead time is constant.

Safety Stock = z × σ_d × √L, where z = service-level factor from the standard normal table, σ_d = standard deviation of demand per period, and L = lead time.

What is the 'service level' (z-value) in safety stock, and how does it relate to stockout risk?

Service level is the probability of not having a stockout during the lead time; a higher service level requires a higher z-value and thus more safety stock. E.g., 95% service ≈ z = 1.65, 99% ≈ z = 2.33.

What is ABC analysis (Pareto inventory classification)?

A method of classifying inventory items into groups A, B, and C by annual dollar usage (value), so that control effort is focused on the most important items (the Pareto 80/20 principle).

Describe the typical A, B, and C class characteristics in ABC analysis.

Class A: ~10-20% of items, ~70-80% of annual dollar value — tight control, frequent review. Class B: ~30% of items, ~15-20% of value — moderate control. Class C: ~50% of items, ~5-10% of value — loose control, bulk ordering.

How is annual dollar usage (the ranking basis for ABC analysis) calculated?

Annual dollar usage = Annual demand (units) × Unit cost. Items are ranked in descending order of this value and grouped into A, B, C classes.

Define Total Quality Management (TQM).

An organization-wide management philosophy of continuous improvement focused on meeting/exceeding customer requirements through the involvement of all employees, processes, and functions.

What are the core principles of TQM?

Customer focus, continuous improvement (kaizen), employee involvement/empowerment, process-centered approach, fact-based decision making, and integrated systems/supplier partnerships.

What is the PDCA (Deming) cycle?

Plan-Do-Check-Act: a four-step iterative cycle for continuous improvement — Plan a change, Do (implement on small scale), Check (evaluate results), and Act (standardize or revise).

Name the 'seven basic tools of quality'.

Check sheet, Histogram, Pareto chart, Cause-and-effect (Ishikawa/fishbone) diagram, Scatter diagram, Control chart, and Flowchart (stratification is sometimes substituted).

Distinguish the 'cost of quality' categories.

Prevention costs (avoiding defects), Appraisal costs (inspection/testing), Internal failure costs (defects found before delivery), and External failure costs (defects found by the customer). Prevention + appraisal are conformance costs; failures are non-conformance costs.

What does 'Six Sigma' aim for in terms of defects?

A quality level of no more than 3.4 defects per million opportunities (DPMO), achieved through the DMAIC methodology (Define, Measure, Analyze, Improve, Control).

Define Statistical Process Control (SPC).

The use of statistical methods (especially control charts) to monitor and control a process, distinguishing normal common-cause variation from special-cause variation so the process stays in control.

Distinguish 'common-cause' from 'special-cause' (assignable) variation.

Common-cause variation is inherent, random, and predictable (process in control). Special-cause variation is due to identifiable, non-random factors (process out of control) that should be investigated and removed.

What is the difference between control charts for variables and for attributes?

Variables charts measure continuous data (X̄ and R charts for mean and range). Attributes charts count defects/defectives (p-chart for fraction defective, c-chart for number of defects per unit).

How are the upper and lower control limits typically set on a control chart?

At the process center line ± 3 standard deviations (3-sigma limits): UCL = mean + 3σ, LCL = mean − 3σ, capturing about 99.7% of common-cause variation.

What is the difference between an X-bar chart and an R chart, and why are they used together?

The X-bar chart monitors the process mean (central tendency); the R (range) chart monitors process variability (spread). Both are needed because a process can shift in average or in dispersion independently.

What does a process capability index (Cp / Cpk) measure?

It compares the spread/centering of process output to the specification limits. Cp = (USL − LSL)/6σ measures potential capability; Cpk accounts for centering. A value ≥ 1.33 is commonly considered capable.

Distinguish 'quality control' from 'quality assurance'.

Quality control (QC) is reactive — inspecting and testing output to detect and correct defects. Quality assurance (QA) is proactive — building processes and systems to prevent defects from occurring.