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1. 1  1
Introduction to Supply Chain Management
Basics of Supply Chain Management
APICS Certified in Production and Inventory Management (CPIM)
Session 1
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2. 1  2
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
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3. 1  3
Basics of Supply Chain Management
Introduction
to Supply
Chain
Management
Aggregate
Inventory
Management
Demand
Management
Item Inventory
Management
Capacity
Management
and Production
Activity
Control
Theory of
Constraints
and Review
Activity
Material
Requirements
Planning
Lean/JIT and
Quality
Systems
Master
Planning
Purchasing
and Physical
Distribution
1. 2. 3. 4. 5.
6. 7. 8. 9. 10.
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4. Learning Objectives
Introduction to Manufacturing
–Describe the components of the manufacturing business model
–Describe the impact of four significant aspects of the business
environment on manufacturing
Production Environments and Process Choices
–Explain five production environments and their determinants
–Explain the difference between three process choices
The Manufacturing Supply Chain
–Differentiate between internal and external supply chains
–Differentiate between traditional and cross-functional supply chains
–Explain common supply chain conflicts and how to resolve them
–Explain the relationship between strategic, tactical, and operational
performance measures
–Explain the role of materials management

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5. 1  5
Learning Objectives (cont.)
Manufacturing Planning and Control
–Identify five objectives of manufacturing
–Describe the concepts of priority and capacity
–Present an overview of the manufacturing planning and control
hierarchy
–Describe the four steps in the evolution of MRP to ERP
The Impact of New Systems and Philosophies
–Present a high-level description of lean/JIT, total quality management,
six sigma, and the theory of constraints
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6. 1  6
Introduction to
Manufacturing
Introduction to Supply Chain Management
Session 1
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7. 1  7
Role of Manufacturing
Product
Adding value creates wealth
Value to the customer
Raw material
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8. 1  8
Manufacturing Business Model
Defining products and customers
Designing products and processes
Managing material flow
Providing customer service and support
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9. 1  9
Customers and Products
Types of customers
•Industrial
•Consumer
•Institutional
•Government
Market segmentation
Sales channels
Market share/profitability
Product Definition Customer Definition
Choice of production environment
(ETO, MTO, ATO, MTS)
Choice of manufacturing process
(Project, intermittent, repetitive flow, continuous flow)
Product
Design
Positioning
Breadth of product line
Price
Quality
Brand name or generic
Design
Packaging
Returns policy
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10. 1  10
Designing Products and Processes
Meets
Customer
Needs
Cost
Effective
Quality Efficiency
DESIGN
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11. 1  11
Managing Material Flow



Material
Acquisition
Manufacturing
Distribution
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12. 1  12
Providing Customer Service/Support
Understanding and meeting customer wants and needs
Two-way communication
Working with customers to solve problems
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13. 1  13
Global Environment
Global competition
Customer expectations
Economic and government/regulatory
influences


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14. 1  14
Customer Expectations
Characteristics that provide value to the customer
Price
Quality
Delivery
Pre- and post-sale service
Flexibility (product and volume)
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15. 1  15
Customer Expectations (cont.)
Order qualifiers
Competitive characteristics that a firm’s products must
exhibit in order to be considered by customers
Order winners
Competitive characteristics that cause customers to
choose a firm’s products and services
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16. 1  16
Production
Environments and
Process Choices
Introduction to Supply Chain Management
Session 1
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17. 1  17
Production Environments
Engineer-to-order
Make-to-order
Assemble-to-order
Make-to-stock
Mass customization

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18. 1  18
Determinants of Production Environments
Lead time expectations
Product design input from customers
Product volume and variety
Product life cycle
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19. 1  19
Lead Time and Production Environments
Design Purchase Manufacture Ship
Inventory Manufacture Ship
Manufacture Inventory Ship
MTS Delivery
Lead Time
Manufacture Assemble Ship Inventory
ETO Delivery Lead Time
MTO Delivery Lead Time
ATO Delivery Lead Time
Assemble
Assemble
Assemble
Engineer-to-
Order
Make-to-Order
Make-to-Stock
Source: Arnold et al., Introduction to Materials Management, 6
th
ed.
Reprinted by Permission of Pearson Education
Assemble-to-
Order
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20. 1  20
Volume/Variety Relationships
Product Volume
Product Variety

High Low
High
Engineer-to-Order
Make-to-Order
Assemble-to-Order
Make-to-Stock
Mass
Customization
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21. 1  21
Product Life Cycle
Introduction Growth Maturity Decline Phase-out
Units
sold Time
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22. 1  22
Product Life Cycle and Production Environments
ETO
MTO
ATO
MTS
MC
Introduction Growth Maturity Decline Phase-out
Units
sold Time
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23. 1  23
Choice of Processes and Layouts
Intermittent
Flow
–Repetitive/Line
–Continuous
Project
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24. 1  24
Intermittent Manufacturing Process
Source: Arnold et al., Introduction to Materials Management, 6
th
ed.
Reprinted by Permission of Pearson Education
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25. 1  25
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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26. 1  26
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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27. 1  27
Flow Manufacturing Process
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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28. 1  28
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
Continuous = not discrete (liquids)
Limited range of similar products
High product volumes

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29. 1  29
Advantages of Product Layout
Little work-in-process inventory
Short throughput and manufacturing lead times
Lower unit cost
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30. 1  30
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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31. 1  31 Product Process
Capital cost
Flexibility
Annual setup cost
Run cost
Work-in-process inventory
Production and inventory control costs
Lead time


Problem 1.1
Product Layout vs. Process Layout
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32. 1  32 Product Process
Capital cost
Flexibility
Annual setup cost
Run cost
Work-in-process inventory
Production and inventory control costs
Lead time


Problem 1.1 Solution
Product Layout vs. Process Layout
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33. 1  33
The Manufacturing
Supply Chain
Introduction to Supply Chain Management
Session 1
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34. 1  34
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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35. 1  35
Basic Supply Chain: External
Manufacturer Suppliers Distributors Retailers
Consumers
Dominant flow of goods and services
Dominant flow of demand and design information
Dominant flow of cash
External supply chain from a manufacturer’s perspective
Returns and reverse logistics
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36. 1  36
Traditional Internal Supply Chain View
Raw Materials
Customers
Purchasing Production Distribution
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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37. 1  37
Cross-Functional Supply Chain View
Develop
Products
and
Services
Manage
Procurement
Produce
Products
Supply chain processes
The value chain consists of the value-adding processes that enable a
company to take its products from conception to market
The internal supply chain is a subset of the value chain
Support processes are important but are not considered value chain
processes
Manage Customer Orders and Reverse Logistics
Manage
Distribution
Perform
Marketing
and Sales
Manage Finance
Manage Human Resources
Key support processes:
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38. 1  38
Conflicts in Traditional Supply Systems

Finance Marketing Operations
Inventory investment
Traditional
Objective
Customer service
Production efficiency
Increase profit and
cash flow, reduce
investment
Increase revenue/
satisfy customers
Reduce
manufacturing cost
8 2 5
9 3 6
7 1 4
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39. 1  39
Performance Measures
Key Performance Indicators
Strategic
Tactical
Operational
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40. 1  40
Balanced Scorecard
“Balanced” to show KPIs from the:
–Customer perspective
–Business process perspective
–Financial perspective
–Innovation and learning perspective
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41. 1  41
Role of Materials Management
Demand Resources
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42. 1  42
Manufacturing
Planning and Control
(MPC)
Introduction to Supply Chain Management
Session 1
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43. 1  43
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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44. 1  44
Why Plan?
To satisfy customer demand and ensure the availability
of resources
– Material
– Capacity
Demand Resources
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45. 1  45 1  45
These are questions of priority and capacity.
A Good Planning and Control System
What must
we get
and
when?
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46. 1  46
Manufacturing Planning and Control
Order
Sequencing
Input/Output
Control
Master Scheduling
Capacity
Requirements
Planning (CRP)
Sales & Operations
Planning
Business Planning
Master Planning
Resource
Planning (RP)
Rough-Cut
Capacity Planning
(RCCP)
Priority Planning

Execution

Capacity Planning

Execution

Material
Requirements
Planning (MRP)
Production Activity
Control (PAC)
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47. 1  47
From MRP to ERP
Introduction to Supply Chain Management
Session 1
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48. 1  48
Evolution from MRP to ERP
MRP
MRP
Closed
Loop
MRP II ERP
MRP Processor
Closed-Loop Feedback
Best Practice Processes
Common Database
Sales and Operations
Planning
Total Cross-Functional
Software Process Integration
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49. 1  49
The Impact of
New Systems and
Philosophies
Introduction to Supply Chain Management
Session 1
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50. 1  50
Impact of New Systems

Reduced lead times
Reduced inventory levels
Improved worker productivity
Improved product quality
Cost reductions
Increased profitability
Theory of Constraints
Lean/JIT
TQM
Six Sigma
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51. 1  51
Introduction to Supply Chain Management
Session 1
Wrap-Up and
Homework
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52. Learning Objectives
Introduction to Manufacturing
–Describe the components of the manufacturing business model
–Describe the impact of four significant aspects of the business
environment on manufacturing
Production Environments and Process Choices
–Explain five production environments and their determinants
–Explain the difference between three process choices
The Manufacturing Supply Chain
–Differentiate between internal and external supply chains
–Differentiate between traditional and cross-functional supply chains
–Explain common supply chain conflicts and how to resolve them
–Explain the relationship between strategic, tactical, and operational
performance measures
–Explain the role of materials management

© APICS CONFIDENTIAL AND PROPRIETARY 1  52

53. 1  53
Learning Objectives (cont.)
Manufacturing Planning and Control
–Identify five objectives of manufacturing
–Describe the concepts of priority and capacity
–Present an overview of the manufacturing planning and control
hierarchy
–Describe the four steps in the evolution of MRP to ERP
The Impact of New Systems and Philosophies
–Present a high-level description of lean/JIT, total quality management,
six sigma, and the theory of constraints
© APICS CONFIDENTIAL AND PROPRIETARY

54. 1  54
Vocabulary Check
Objective: Reinforce terminology used in this session
Complete the activity in class, individually or in pairs, or
as homework

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55. 1  55
Vocabulary Check Solution
1. f
2. i
3. l
4. k
5. d
6. h

7. g
8. a
9. j
10. c
11. e
12. b
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