Paper 9: Operations Management & Strategic Management
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INTERMEDIATE : PAPER - 9 SYLLABUS - 2016 OPERATIONS MANAGEMENT & STRATEGIC MANAGEMENT INTERMEDIATE STUDY NOTES The Institute of Cost Accountants of India CMA Bhawan, 12, Sudder Street, Kolkata - 700 016 First Edition : August 2016 Published by : Directorate of Studies The Institute of Cost Accountants of India (ICAI) CMA Bhawan, 12, Sudder Street, Kolkata - 700 016 www.icmai.in Printed at : Copyright of these Study Notes is reserved by the Institute of Cost Accountants of India and prior permission from the Institute is necessary for reproduction of the whole or any part thereof. Syllabus - 2016 PAPER 9: OPERATIONS MANAGEMENT & STRATEGIC MANAGEMENT (OMSM) Syllabus Structure The syllabus comprises the following topics and study weightage: A Operations Management 70% B Strategic Management 30% B 30% A 70% ASSESSMENT STRATEGY There will be written examination paper of three hours. OBJECTIVE To provide an in depth study of the various business process, analyze operations, production planning and strategic management. Learning Aims The syllabus aims to test the student’s ability to: Understand the business process and analyze the operations Acquire knowledge of production planning and resource management Understand the concept of Corporate Vision - Mission and Objectives Understand the concept of SWOT and Portfolio Analysis Understand the different stages in strategy formulation process Understand the concept of Strategic Business Unit and Business Process re-enginnering Skill Set required Level B: Requiring the skill levels of knowledge, comprehension, application and analysis. Section A : Operations Management 70% 1. Operations Management – Introduction 2. Operations Planning 3. Designing of Operational Systems and control 4. Production Planning and control 5. Productivity management and quality management 6. Project Management 7. Economics of Maintenance and Spares management Section B : Information Systems 30% 8. Strategic Management Introduction 9. Strategic Analysis and Strategic Planning 10. Formulation and Implementation of Strategy SECTION A: OPERATIONS MANAGEMENT [70 MARKS] 1. Operation Management Introduction: Scope characteristics of modern operations functions - recent trends in production / operations management. 2. Operations Planning: Demand forecasting – capacity planning - capacity requirement planning - facility location - facility layout – Resource aggregate planning – Material requirements planning – Manufacturing resource planning – Economic Batch quantity. 3. Designing of operational systems and control: Product Design, Process design - Selection - Product Life Cycle – Process Planning – Process Selection. 4. Production planning and Control: Introduction – Control Measures – Time study, Work study, Method study, Job Evaluation, Job Allocation (Assignment Technique), Scheduling Queuing Models, Simulation and Line Balancing – Optimum Allocation of resources – Lean Operations – JIT – Transportation Model and Linear Programming Technique (Formulation of equations only). 5. Productivity Management and Quality Management: Measurement techniques of productivity index, productivity of employee, productivity of materials, productivity of management resources, productivity of other factors – productivity improving methods – TQM basic tools and certification – ISO standards basics. 6. Project Management: Project planning – project life cycle – Gantt charts, PERT and CPM. 7. Economics of Maintenance and Spares Management: Break down Maintenance – Preventive Maintenance – Routine Maintenance – Replacement of Machine – Spare Parts Management. Section B: Strategic Manangement [30 marks] 8. Strategic Management Introduction Vision- Mission and objective 9. Strategic Analysis and Strategic Planning Situational Analysis –SWOT Analysis – Portfolio Analysis – BCG Matrices – Stages in Strategic Planning – Alternatives in Strategic Planning 10. Formulation and Implementation of Strategy: Strategy formulation function wise (Production Strategy, Marketing Strategy, Man Power Strategy) – Structuring of Organisation for implementation of strategy – Strategic Business Unit – Business Process re-engineering. Contents Study Note 1 : Operation Management – Introduction 1.1 Operations Management - Introduction 1 1.2 Production Management vs. Operation Management 3 1.3 Characteristic of Modern Operation Function 4 1.4 Recent Trends in Production / Operations Management 4 Study Note 2 : Operations Planning 2.1 Demand Forecasting 7 2.2 Capacity Planning 15 2.3 Capacity Requirement 17 2.4 Facility Location 21 2.5 Facility Layout 24 2.6 Resource Aggregate Planning 33 2.7 Material Requirements Planning 36 2.8 Manufacturing Resource Planning 37 2.9 Enterprise Resource Planning 38 2.10 Economic Batch Quantity 38 Study Note 3 : Designing of Operational System and Control 3.1 Production Design 45 3.2 Process Design & Selection 48 3.3 Process Planning 48 3.4 Product Life Cycle 50 3.5 Process Selection 51 Study Note 4 : Production Planning and Control 4.1 Production Planning and Control Introduction 53 4.2 Time Study, Work Study, Method Study & Job Evaluation 56 4.3 Job Allocation – Assignment Technique 59 4.4 Scheduling 68 4.5 Queuing Models 73 4.6 Simulation 83 4.7 Line Balancing 92 4.8 Lean Operations 97 4.9 Just-In-Time (JIT) 97 4.10 Transportation Model 98 4.11 Linear Programming Technique 111 Study Note 5 : Productivity Management and Quality Management 5.1 Measurement Techniques of Productivity Index 133 5.2 TQM Basic Tools and Certification 141 5.3 ISO Standard Basics 143 Study Note 6 : Project Management 6.1 Project Planning 147 6.2 Gantt Charts 151 6.3 PERT and CPM 156 Study Note 7 : Economics of Maintenance and Spares Management 7.1 Break Down Maintenance 167 7.2 Preventive Maintenance 167 7.3 Routine Maintenance 168 7.4 Replacement of Machine 170 7.5 Spare Parts Management 173 Study Note 8 : Strategic Management Introduction 8.1 Vission, Mission and Objective 197 Study Note 9 : Strategic Analysis and Strategic Planning 9.1 Situational Analysis 211 9.2 SWOT Analysis 212 9.3 Portfolio Analysis 215 9.4 BCG Matrices 216 9.5 Stages in Strategic Planning 223 9.6 Alternative in Strategic Planning 226 Study Note 10 : Formulation and Implementation of Strategy 10.1 Strategy Formulation Function-wise (Production Strategy, Marketing Strategy, 229 Manpower Strategy 10.2 Structuring of Organisation for Implementation of Strategy 243 10.3 Strategic Business Unit 246 10.4 Business Process Re-engineering 248 Study Note - 1 OPERATIONS MANAGEMENT – INTRODUCTION This Study Note includes 1.1 Operations Management - Introduction 1.2 Production Management vs. Operation Management 1.3 Characteristic of Modern Operation Function 1.4 Recent Trends in Production/Operations Management 1.1 OPERATIONS MANAGEMENT - INTRODUCTION Operations management is the management of that part of an organization that is responsible for producing goods and/or services. There are examples of these goods and services all around you. Every book you read, every video you watch, every e-mail you send, every telephone conversation you have, and every medical treatment you receive involves the operations function of one or more organizations. So does everything you wear, eat, travel in, sit on, and access the Internet with. However, in order to have a clear idea of Operations Management, one must have an idea of ‘Operating Systems’. An Operating System is defined as a configuration of resources combined for the provision of goods or services. Retail organizations, hospitals, bus and taxi services, tailors, hotels and dentists are all examples of operating systems. Any operating system converts inputs, using physical resources, to create outputs, the function of which is to satisfy customers wants. The creation of goods or services involves transforming or converting inputs into outputs. Various inputs such as capital, labour, and information are used to create goods or services using one or more transformation processes (e.g., storing, transporting, and cutting). To ensure that the desired output are obtained, an organization takes measurements at various points in the transformation process (feedback) and then compares with them with previously established standards to determine whether corrective action is needed (control). It is important to note that goods and services often occur jointly. For example, having the oil changed in your car is a service, but the oil that is delivered is a good. Similarly, house painting is a service, but the paint is a good. The goods-service combination is a continuum. It can range from primarily goods, with little service, to primarily service, with few goods. Because there are relatively few pure goods or pure services, companies usually sell product packages, which are a combination of goods and services. There are elements of both goods production and service delivery in these product packages. This makes managing operations more interesting, and also more challenging. OBJECTIVES OF OPERATIONS MANAGEMENT Objectives of operations management can be categorised into (i) Customer service and (ii) Resource utilisation. (i) Customer service The first objective is the customer service for the satisfaction of customer wants. Customer service is therefore a key objective of operations management. The Operations Management must provide something to a specification which can satisfy the customer in terms cost and timing. Thus, primary objective can be satisfied by providing the ‘right thing at the right price at the right time’. These three aspects