CMA Intermediate · Operations Management and Strategic Management

Designing of Operational Systems and Control: formula sheet

Full chapter guide

Key formulas

Transformation model: Inputs → Transformation process → Outputs (with feedback and control); Draw this in every descriptive answer. Add an example of each element.
Four Rs of operations (memory aid): Right quality, right quantity, right time, right cost; A common way to remember the objectives. Use it as a memory aid, not a fixed ICMAI list.
Productivity: Productivity = Output ÷ Input; Measures how efficiently resources are converted. Output and input must be in comparable units.
Product development stages: Idea generation → Screening → Concept development and business analysis → Design and prototype → Testing → Commercialisation → Feedback; Stage names vary between books. Keep the order and the logic of narrowing down, and your answer will be accepted.
Standardisation: Standardisation = uniform parts, products or processes to fixed specifications; Gains: interchangeability, lower cost, easier quality control, simpler inventory. Limit: less variety for the customer.
Simplification: Simplification = fewer varieties, sizes or models in the product line; It cuts the range. Standardisation fixes the specification. Do not mix them up.
Specialisation: Specialisation = narrow focus of a worker, machine or unit on limited tasks or products; Gains: skill, speed, lower unit cost. Risks: monotony and low flexibility.
Service characteristics: Intangibility, Inseparability, Heterogeneity, Perishability; Add customer participation and difficulty of measuring quality as related points.
Layout selection rule: High volume + low variety → Product; Low volume + high variety → Process; One large immovable item → Fixed position; Part families of medium volume → Cellular; This is a guide, not a fixed law. Always justify with the nature of the product and the demand.
Primary location factors: Raw material + Market + Labour + Power + Transport + Land cost; A memory list of the main economic factors. Add government policy and expansion scope as other factors.
Weighted factor score: Total score of a site = Σ (weight of factor × rating of site on that factor); Used to compare sites when factors differ in importance. The site with the highest total is preferred. Weights should add to 1 or 100.
Capacity utilisation: Utilisation = Actual output ÷ Design capacity × 100; Shows how much of the maximum possible capacity is actually used.
Efficiency: Efficiency = Actual output ÷ Effective capacity × 100; Compares output with what is realistically achievable after allowances for maintenance, set-ups and breaks.
Effective capacity: Effective capacity = Design capacity − Planned allowances (maintenance, set-up, breaks, etc.); Effective capacity is normally less than or equal to design capacity.
Capacity in input terms: Available hours = Number of machines (or workers) × Hours per shift × Shifts × Working days; Use when products differ and output units cannot be added.
Order of measures: Actual output ≤ Effective capacity ≤ Design capacity; Use as a quick check on any numerical answer.
Sequence of PPC functions: Planning → Routing → Scheduling → Dispatching → Follow-up; Learn this order. Routing answers 'how and where', scheduling 'when', dispatching 'start now', follow-up 'is it on track?'.
Core question for each function: Routing = path; Scheduling = time; Dispatching = release; Follow-up = check; Use these one-word keys to avoid mixing up definitions in written answers.
Outputs of each function: Routing: route sheet, bill of materials | Scheduling: schedule, Gantt chart | Dispatching: job card, requisition | Follow-up: progress report; Naming the document earns marks in descriptive answers.
Normal time: Normal time = Observed time × Rating ÷ 100; Use the average observed time per element. Rating of 100 is standard pace; above 100 means a faster worker.
Standard time (allowance on normal time): Standard time = Normal time + Allowances = Normal time × (1 + allowance %); Use when the allowance is given as a percentage of normal time.
Standard time (allowance on total time): Standard time = Normal time ÷ (1 − allowance %); Use when the question says allowance is a percentage of the standard (total) time.
Work sampling: percentage of activity: Activity % = Observations of the activity ÷ Total observations × 100; Observations must be random and numerous for the result to be reliable.
Method study procedure: SREDIM: Select, Record, Examine, Develop, Install, Maintain; Write the steps in this order in theory answers.
Control limits for X-bar chart: UCL = X̿ + A₂R̄ ; LCL = X̿ − A₂R̄; X̿ is the grand mean of sample means and R̄ the mean range. A₂ is given in the question's table for the sample size.
Control limits for R chart: UCL = D₄R̄ ; LCL = D₃R̄; D₃ and D₄ depend on sample size and are supplied in the question. Do not use memory.
Fraction defective (p): p = Number of defectives ÷ Number inspected; p̄ = total defectives ÷ total items inspected across all samples.
p chart control limits: p̄ ± 3 × √[p̄(1 − p̄) ÷ n]; n is the sample size. If the lower limit is negative, take it as zero.
c chart control limits: c̄ ± 3 × √c̄; c̄ is the average number of defects per unit. A negative lower limit is taken as zero.
Six Sigma target: About 3.4 defects per million opportunities (DPMO); DPMO = (Defects ÷ (Units × Opportunities per unit)) × 10,00,000.
DMAIC cycle: Define → Measure → Analyse → Improve → Control; Keep the order. It is a common one-line question.
Total maintenance-related cost: Total cost = Cost of maintenance work + Cost of breakdowns (lost contribution, idle labour, repairs, spoilage); The best policy has the lowest total, not the lowest maintenance spend alone.
Cost of breakdown maintenance: Expected breakdown cost = Expected number of breakdowns × Cost per breakdown; Use the same time period for both sides when comparing policies.
Downtime (idle) loss: Downtime loss = Hours lost × Loss per hour; Loss per hour is usually contribution lost plus idle wages and fixed charges stated in the question.
Availability: Availability % = (Scheduled running time − Downtime) ÷ Scheduled running time × 100; A simple measure of how well maintenance supports operations.
Decision rule: Prefer preventive maintenance if total cost under preventive < total cost under breakdown; Mention non-cost factors such as safety and quality as well.

Quick revision

Operations management is the planning, organising and control of the transformation of inputs into goods or services.
Product and service design must balance customer need, cost, quality and ease of making or delivery.
Plant location depends on factors such as raw materials, market, labour, power, transport and regulations.
Product layout suits continuous, high-volume output; process layout suits varied, low-volume work.
Capacity planning matches the ability to produce with expected demand.
PPC covers planning, routing, scheduling, dispatching and follow-up.
Method study improves how a job is done; work measurement finds the time it should take.
Quality control checks output against standards; quality management covers the whole organisation's approach.
Preventive maintenance is done on a schedule to avoid breakdowns; breakdown maintenance is done after failure.
Operational control compares actual performance with plan and corrects gaps.
In MCQs, spot the keyword in the stem and match it to the exact concept before reading options.

Common mistakes

Treating operations management as only factory production. Fix: Always mention services such as banking, hospitals and logistics alongside manufacturing.
Listing objectives without explaining them. Fix: Add one line for each point, for example: right quality means meeting the specification the customer expects.
Treating standardisation and simplification as the same thing Fix: Standardisation fixes how items are made (uniform specification). Simplification cuts how many items are offered. Write this in one line each.
Skipping screening or placing it after launch Fix: Screening comes right after idea generation. Its job is to drop weak ideas early because later stages cost far more.
Mixing up product layout and process layout. Fix: Product layout follows the product, one line for one product. Process layout groups by process. Tie each to volume and variety.
Listing location factors without linking them to the case. Fix: Pick the two or three dominant factors for the given industry and explain why they matter here.
Calling batch production the same as mass production. Fix: Batch production makes lots and then switches products with a set-up. Mass production runs a dedicated line for one standard product.
Mixing up utilisation and efficiency denominators. Fix: Utilisation uses design capacity. Efficiency uses effective capacity. Write the formula before substituting.
Treating scheduling and routing as the same thing. Fix: Routing decides the path and sequence. Scheduling attaches dates and times to that path.
Defining dispatching as delivering goods to customers. Fix: In PPC, dispatching means releasing work orders, materials and tools to start production.

Exam tips

Expect MCQs on the elements of the transformation model, such as identifying which item is an input and which is an output. Read each option against the model.
In MCQs on goods versus services, the usual keywords are intangible, perishable, simultaneous production and consumption, and customer contact.
For written answers, a small diagram with an Indian example is a quick way to show understanding and earn presentation marks.
Learn functions in groups (design, planning, control, improvement) so you can write 6-8 points quickly.
Do not quote a fixed number of objectives or functions as the only correct list. Cover the core points and explain each.
Distinction questions on standardisation, simplification and specialisation are common. Prepare a two-column answer with meaning, focus, benefit and example.
Write stages as numbered points with a short purpose each. Examiners give step marks for sequence and clarity.
For service design, always link each characteristic to a design consequence, not just a definition.