Basics of Supply Chain Management

Introduction to Supply Chain Management

Session 1

APICS Certified in Production and Inventory Management (CPIM)

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Course Objectives
Provide a review of supply chain management from a manufacturing, planning and control perspective

Provide a basis for further study leading to APICS CPIM certification

APICS The Association for Operations Management, is a not-for-profit international education organization, offering certification programs, training tools and networking opportunities to increase workplace performance. It was founded in 1957 as the American Production and Inventory Control Society, and currently has more than 43,000 individual and corporate members in more than 10,000 companies worldwide. In April 2008, the organization relocated to Chicago.
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Building the CPIM Program

Detailed Scheduling And Planning

Master Planning of Resources Basics of Supply Chain Management

Execution and Control of Operations

2009 APICS CONFIDENTIAL AND PROPRIETARY See Course Overview at the beginning of Session 1 in your participant guide

Basics of Supply Chain Management

1.
Introduction to Supply Chain Management

2.

3.

4.
Material Requirements Planning

5.
Capacity Management and Production Activity Control

Demand Management

Master Planning

Aggregate Inventory Management

Item Inventory Management

Purchasing and Physical Distribution

Lean/JIT and Quality Systems

Theory of Constraints and Review Activity

6.

7.

8.

9.

10.

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Introduction to Supply Chain Management

Session 1

Introduction to Manufacturing

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Customers and Products

Product Definition Positioning Breadth of product line Price Quality Brand name or generic Packaging Returns policy Design

Customer Definition
Types of customers Industrial Consumer Institutional Government Market segmentation Sales channels Market share/profitability

Product Design

Choice of production environment (ETO, MTO, ATO, MTS) Choice of manufacturing process (Project, intermittent, repetitive flow, continuous flow)

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Customer Expectations
Characteristics that provide value to the customer A fair Price Higher Quality Delivery lead time Better Pre- and post-sale service Cost effective Flexibility (product and volume)
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Introduction to Supply Chain Management

Session 1

Production Environments and Process Choices

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Production Environments
Engineer-to-order Make-to-order Assemble-to-order Make-to-stock Mass customization

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Lead Time and Production Environments

ETO Delivery Lead Time Design Purchase Manufacture Assemble Ship

Engineer-toOrder

MTO Delivery Lead Time Inventory Manufacture Assemble Ship

Make-toOrder

ATO Delivery Lead Time

Manufacture

Inventory

Assemble

Ship
MTS Delivery Lead Time

Assemble-toOrder

Manufacture

Assemble

Inventory

Ship

Make-toStock

Source: Arnold et al., Introduction to Materials Management, 6th ed. Reprinted by Permission of Pearson Education
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Product Life Cycle and Production Environments

Units sold

Time

Introduction

Growth

Maturity

Decline

Phase-out

ETO
MTO ATO MTS MC
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Intermittent Manufacturing Process

Workstations

Product A

1
Grinding

2
Mixing

3
Trying

Product B

4
Grinding

5
Mixing

6
Trying

Product C

7
Grinding

8
Mixing

9
Trying

Source: Arnold et al., Introduction to Materials Management, 6th ed. Reprinted by Permission of Pearson Education
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Intermittent Process Characteristics

Intermittent lot / batch production Work moves only to required stations Many different parts processed at workstations General-purpose machinery

Relatively easy to change product or volume

Complex and expensive production and inventory control High WIP inventory levels; long lead time
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Intermittent Manufacturing Layout

Intermittent manufacturing layout is called process layout Also called functional or job shop layout Equipment and operations grouped together by functional specialty Similar types of skills and equipment in each department Volume not high enough to justify assembly line
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Flow Manufacturing Process

Workstations Input
1
Grinding

Output
2
Mixing

3
Drying

4
Filling

Workstations are in the sequence needed to make the product Work flows at a nearly constant rate Little work-in-process inventory
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Flow Process Characteristics

Layout is called product layout Fixed routings and dedicated machinery Capital intensive Two types of flow: repetitive/line and continuous Repetitive = discrete units
(Automoblie)

Continuous = not discrete (Steel/ Mixing, heating, cooling, ..) Limited range of similar products

High product volumes

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Advantages of Product Layout (Flow Mfg)

Little work-in-process inventory Short throughput and manufacturing lead times Lower unit cost

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Project Manufacturing
Used for large, complex projects Project remains in one location for assembly Site layout Avoids cost of moving the product

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Problem 1.1 Solution

Product Layout vs. Process Layout

Workstations Input
1
Grinding

2
Mixing

3
Drying

4
Filling

Output

Product Process

Capital cost Flexibility Annual setup cost Run cost

Work-in-process inventory
Production and inventory control costs

Lead time
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Introduction to Supply Chain Management

Session 1

The Manufacturing Supply Chain

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Supply Chain Management Definitions

Supply chain: The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash. Supply chain management: The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging world-wide logistics, synchronizing supply with demand, and measuring performance globally. APICS Dictionary
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Basic Supply Chain: External

External supply chain from a manufacturers perspective
Dominant flow of goods and services Returns and reverse logistics

Suppliers

Manufacturer

Distributors

Retailers
Consumers

Dominant flow of demand and design information

Dominant flow of cash

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Traditional Supply Chain View

Raw Materials

Purchasing

Production

Distribution

Customers

Lowest purchase price Inventory buffers

High utilization % Long runs minimize changeovers Low unit costs Safety stocks

Full truckload quantities Best shipping rate Safety stocks

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Conflicts in Traditional Supply Systems

Marketing
Traditional Objective

Operations

Finance

Reduce Increase profit and Increase revenue/ satisfy customers manufacturing cost cash flow, reduce investment

Customer service Production efficiency

1 2

4 5

7 8

Inventory investment

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Performance Measures
Key Performance Indicators

High Level, Long Term

Strategic

Mid Level, Medium Term

Tactical

Day-to-Day, Detailed

Operational

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Role of Materials Management

Plan & Control

Balance company resources with demands Balance conflicting objectives by:

Demand

Resources Maximizing the use of the firms resources

Providing the required level of customer service Manufacturing planning and control Physical supply / distribution

Involved with:

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Introduction to Supply Chain Management

Session 1

Manufacturing Planning and Control (MP&C)

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Objectives of Manufacturing
The right products Of the right quality In the right quantities At the right time At minimum cost (right price)

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Why Plan?
To satisfy customer demand and ensure the availability of resources
Material

Capacity

Demand
Plan & Control
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Resources

Manufacturing Planning and Control

Master Planning
Business Planning

Priority Planning

Sales & Operations Planning Master Scheduling

Resource Planning (RP) Rough-Cut Capacity Planning (RCCP) Capacity Requirements Planning (CRP)

Capacity Planning

Material Requirements Planning (MRP)

Execution

Execution

Production Activity Control (PAC)

Input/Output Control Order Sequencing

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Introduction to Supply Chain Management

Session 1

The Impact of New Systems and Philosophies

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Impact of New Systems

Lean/JIT TQM
Six Sigma Reduced lead times Reduced inventory levels Improved worker productivity Improved product quality Cost reductions
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Theory of Constraints Each of these philosophies will be covered in a later class session