1. Basics of Supply Chain Management
Session 1
Introduction to Supply Chain Management

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.

3. Basics of Supply Chain Management
Introduction to Supply Chain Management 1.
Demand Management 2.
Master Planning 3.
Material Requirements Planning 4.
Capacity Management and Production Activity Control 5.
Aggregate Inventory Management
Item Inventory Management
Purchasing and Physical Distribution
Lean and Quality Systems
Theory of Constraints 6. 7. 8. 9.
10.

4. Learning Objectives Introduction to Manufacturing
Explain the significance of the United Nations (UN) Global Compact.
Describe the components of the manufacturing business model.
Describe the impact of four significant aspects of the business environment on manufacturing.
Manufacturing Environments and Process Choices
Explain five manufacturing environments and their determinants.
Explain the differences among the three process choices.
The Manufacturing Supply Chain
Differentiate between internal and external supply chains.
Differentiate between conventional 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.

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 (MPC) 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, total quality management (TQM), six sigma, and the theory of constraints (TOC).

6. Introduction to Supply Chain Management
Session 1
Introduction to Supply Chain Management
Introduction to Manufacturing 6

7. Adding value creates wealth
Role of Manufacturing
Adding value creates wealth
Raw material
Product
Value to the customer

8. United Nations Global Compact
Voluntary strategic policy initiative for businesses
Alignment of business operations with principles in four areas:
human rights
labor practices
environment
anti-corruption
Adoption of UN Global Compact Management Model
Source: United Nations Global Compact: Corporate Sustainability in the World Economy, February 2011

9. Ten Principles Human rights Labor practices Environment
1 – Support and protect internationally proclaimed human rights. 2 – Ensure non-complicity in human rights abuses.
3 – Uphold freedom of association and right to collective bargaining.
4 – Eliminate forced and compulsory labor.
5 – Abolish child labor.
6 – Eliminate discrimination in employment and occupation.
Labor practices
7 – Support a cautionary approach to environmental challenges.
8 – Promote greater environmental responsibility.
9 – Encourage the development and diffusion of environmentally friendly technologies.
Environment
Anti-corruption
10 – Work against corruption in all of its forms including extortion and bribery.
Source: United Nations Global Compact: Corporate Sustainability in the World Economy, February 2011

10. UN Global Compact Management Model
Commit
Leadership commitment to mainstream Global Compact principles.
Assess
Assess risks, opportunities, and impacts.
Define
Define goals, strategies, and policies.
Implement
Implement strategies and policies across the company and supply chain.
Measure
Measure and monitor impacts and progress toward goals.
Communicate
Communicate progress and strategies; engage stakeholders.
Source: United Nations Global Compact Management Model: Framework for Implementation, June 2010

11. Manufacturing Business Model
Defining products and customers
Designing products and processes
Managing material flow
Providing customer service and support

12. Customers and Products
Product definition
Customer definition
Positioning
Breadth of product line
Price
Quality
Brand name or generic
Design
Packaging
Returns policy
Types of customers:
industrial
consumer
institutional
government
Market segmentation
Sales channels
Market share/profitability
Product
design
Choice of manufacturing environment
(ETO, MTO, ATO, MTS)
Choice of manufacturing process
(project, intermittent, repetitive flow, continuous flow)

13. Designing Products and Processes
Cost effectiveness
Meet customer needs
Quality
DESIGN
Accommodate planning parameters
Efficiency

14. Managing Material Flow
Material acquisition
Manufacturing
Distribution

15. Providing Customer Service and Support
Understanding and meeting customer wants and needs
Two-way communication
Working with customers to solve problems

16. Global Environment Global competition
Economic, government, and regulatory influences
Customer expectations
Corporate social responsibility

17. Customer Expectations
Characteristics that provide value to the customer:
Cost (price)
Quality
Speed (order lead time)
Dependability
Flexibility (product and volume)

18. Corporate Social Responsibility and Sustainability
Human rights
Responsible economic growth that benefits all segments of society in an equitable manner
Labor practices
Environment
Anti-corruption

19. Introduction to Supply Chain Management
Session 1
Introduction to Supply Chain Management
Manufacturing Environments and
Process Choices 19

20. Manufacturing Environments
Engineer-to-order (ETO)
Make-to-order (MTO)
Assemble-to-order (ATO)
Make-to-stock (MTS)
Mass customization

21. Determinants of Manufacturing Environments
Lead time expectations
Product design input from customers
Product volume and variety
Product life cycle

22. Lead Time and Manufacturing Environments
Engineer-to-
order
ETO delivery lead time
Design
Purchase
Manufacture
Assemble
Ship
Make-to-order
MTO delivery lead time
Inventory
Manufacture
Assemble
Ship
Assemble-to-
order
ATO delivery lead time
Manufacture
Inventory
Assemble
Ship
MTS delivery
Make-to-stock
lead time
Manufacture
Assemble
Inventory
Ship
Source: Arnold et al., Introduction to Materials Management, 7th ed. Reprinted by Permission of Pearson Education

23. Volume and Variety Relationships
High
Engineer-to-order
Mass
customization
Make-to-order
Product variety
Assemble-to-order
Make-to-stock
Low
High
Product volume

24. Product Life Cycle Units sold Time Introduction Growth Maturity
Decline
Phase-out
Units sold
Time

25. Product Life Cycle and Manufacturing Environments
Introduction
Growth
Maturity
Decline
Phase-out
Units sold
Time
ETO
MTO
ATO
MTS
Mass customization

26. Choice of Processes and Layouts
Intermittent
Flow
repetitive/line
continuous
Project

27. Intermittent Manufacturing
Source: Arnold et al., Introduction to Materials Management, 7th ed. Reprinted by Permission of Pearson Education

28. Intermittent Manufacturing Characteristics
Intermittent lot or 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

29. Intermittent Manufacturing Layout
Intermittent manufacturing layout is called process layout.
It also is called functional or job shop layout.
Equipment and operations are grouped together by functional specialty.
There are similar types of skills and equipment in each department.
Volume is not high enough to justify assembly line.

30. Flow Manufacturing
Workstations are in the sequence needed to make the product.
Work flows at a nearly constant rate.
There is little WIP inventory.

31. Flow Manufacturing Characteristics
Layout is called product layout.
There are fixed routings and dedicated machinery.
The process is capital intensive.
There are two types of flow: repetitive (line) and continuous.
Repetitive produces discrete units, such as cell phones and automobiles.
Continuous produces non-discrete products, such as liquids.
There is a limited range of similar products.
High product volumes occur.

32. Advantages of Product Layout
Little WIP inventory
Short throughput and manufacturing lead times
Lower unit cost

33. Project Manufacturing
Used for large, complex projects
Project remains in one location for assembly
Product made at one site
Avoids cost of moving the product

34. Product Layout Versus Process Layout
Problem 1.1
Product Layout Versus Process Layout
Product
Process
Capital cost
Flexibility
Annual setup cost
Run cost
WIP inventory
Production and inventory control costs
Lead time

35. Product Layout Versus Process Layout
Problem 1.1 Solution
Product Layout Versus Process Layout
Product
Process
Capital cost
Flexibility
Annual setup cost
Run cost
WIP inventory
Production and inventory control costs
Lead time

36. Introduction to Supply Chain Management
Session 1
Introduction to Supply Chain Management
The Manufacturing
Supply Chain 36

37. 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 worldwide logistics, synchronizing supply with demand, and measuring performance globally
─APICS Dictionary

38. Basic Supply Chain: External
External supply chain from a manufacturer’s 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

39. Conventional Internal Supply Chain View
Raw materials
Purchasing
Production
Distribution
Customers
Lowest purchase price
Inventory buffers
High utilization percent
Long runs (minimal changeovers)
Low unit costs
Safety stocks
Full truckload quantities
Best shipping rate
Safety stocks

40. Cross-Functional Supply Chain View
Supply chain processes
Manage customer orders and reverse logistics
Develop products and services
Manage procurement
Produce products
Manage distribution
Perform marketing and sales
Key support processes:
Manage finance
Manage human resources
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 primary value chain processes.

41. Conflicts in Conventional Supply Systems
Marketing
Operations
Finance
Conventional
objective
Increase revenue and satisfy customers
Reduce manufacturing cost
Increase profit and cash flow, reduce investment 1 4 7
Customer service 2 5 8
Production efficiency 3 6 9
Inventory investment

42. Key performance indicators (KPI)
Performance Measures
Key performance indicators (KPI)
Strategic
Tactical
Operational

43. Balanced Scorecard “Balanced” to show KPIs from the
customer perspective
business process perspective
financial perspective
innovation and learning perspective.

44. Role of Materials Management
Demand
Resources

45. Introduction to Supply Chain Management
Session 1
Introduction to Supply Chain Management
Manufacturing Planning
and Control (MPC) 45

46. Objectives of Manufacturing
The right products
Of the right quality
In the right quantities
At the right time
At the right cost

47. Why Plan?
To satisfy customer demand and ensure the availability of the following resources:
material
capacity
Demand
Resources

48. A Good Planning and Control System
What must we get and when?
These are questions of priority and capacity. 48

49. Manufacturing Planning and Control
Strategic and business planning
Sales and operations planning
Resource planning (RP)
Master scheduling
Rough-cut capacity planning (RCCP)
Priority planning
Capacity planning
MPC activities
Material requirements planning (MRP)
Capacity requirements planning (CRP)
Input/output control
Execution
Execution
Order sequencing

50. Introduction to Supply Chain Management
Session 1
Introduction to Supply Chain Management
From MRP to ERP 50

51. Evolution from MRP to ERP
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

52. Introduction to Supply Chain Management
Session 1
Introduction to Supply Chain Management
The Impact of New Systems and Philosophies 52

53. Impact of New Systems TQM Lean Lean six sigma Six sigma
TOC
Lean six sigma
Six sigma
Reduced lead times
Reduced inventory levels
Improved worker productivity
Improved product quality
Cost reductions
Increased profitability

54. Introduction to Supply Chain Management
Session 1
Introduction to Supply Chain Management
Wrap-Up and Homework 54

55. Learning Objectives Introduction to Manufacturing
Explain the significance of the UN Global Compact.
Describe the components of the manufacturing business model.
Describe the impact of four significant aspects of the business environment on manufacturing.
Manufacturing Environments and Process Choices
Explain five manufacturing environments and their determinants.
Explain the differences among the three process choices.
The Manufacturing Supply Chain
Differentiate between internal and external supply chains.
Differentiate between conventional 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.

56. Learning Objectives (cont.)
Manufacturing Planning and Control
Identify five objectives of manufacturing.
Describe the concepts of priority and capacity.
Present an overview of the MPC 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, TQM, six sigma, and TOC.

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

58. 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