1.1

Basics Of Supply Chain Management

Session 1

Introduction to Supply Chain Management

Basics of Supply Chain Management, Version 2.1 — August 2001

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Course Objectives

Provide a review of the fundamentals of supply chain management

Provide a basis for further study leading to APICS certification

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Basics of Supply Chain Management

Definitions and concepts for Planning and controlling Flow of materials

–into, through, and out of an organization–from initial raw materials to the ultimate

consumption of the finished product


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Session 1: Introduction to Supply Chain Management

Session 2: Forecasting

Session 3: Master Planning

Session 4: Material Requirements Planning

Session 5: Capacity Management and Production Activity Control

Session 6: Inventory Fundamentals

Session 7: Inventory Management

Session 8: Physical Distribution

Session 9: Quality Management and Purchasing

Session 10:Just-in-Time Manufacturing

Course Outline

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Session 1 Objectives

Role and importance of manufacturing Conflicts in traditional systems Role, objectives, and responsibilities of

materials management Differences among manufacturing

processes

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Session 1 Objectives (cont.)

Importance of planning Planning and control system Planning hierarchy Manufacturing resource planning (MRP II)

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Wealth Creation

What is wealth? Where does wealth

come from? How can we increase

our wealth? How can we add value?

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External Environment

World competition Quality Customer

expectations

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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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Customer Expectations (cont.)

Order qualifiersCompetitive characteristics needed to be a viable competitor

Opinion: O. Qualifiers GS mungkin lebih unggul dari CBI

Order winnersCompetitive characteristics that cause customers to choose firm’s products and services

Opinion:Tetapi CBI bisa menjadi O. Winners bagi customer

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Customer Expectations (cont.)

Meeting customer expectations requires good communications

Understanding customer needs Two-way communication Working with customers to solve design

and production problems Freeness and openness

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Business Strategy

To meet customer expectations, a company must be market oriented.

All functions in a business must support this concept.

Operations must be tuned to meet the needs of the marketplace.

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Lead Time

“A span of time required to perform a process”—APICS Dictionary

Delivery lead time “The time from the receipt of a customer order to the

delivery of the product”—APICS Dictionary

Cumulative lead time “The longest planned length of time to accomplish the

activity in question”—APICS Dictionary

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Manufacturing Strategies

Make-to- Stock

Design

Inventory Manufacture Assemble Ship

Delivery Lead Time

Manufacture Inventory Assemble Ship

Manufacture Assemble Inventory Ship

Purchase Manufacture Assemble ShipEngineer-to-Order

Make-to- Order

Assemble- to-Order

Delivery Lead Time

Delivery Lead Time

Delivery Lead Time

Reprinted with permission, J.R. Tony Arnold, Introduction to Materials Management, Prentice-Hall.

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A Typical Manufacturing Organization

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M a rke tinga n d S a les

R e se a rch a ndD e ve lop m e nt

P ro d u ctD e s ig n

E n g in e e ring H u m anR e so u rce s

In fo rm a tionS ys te m s

F in a n ce

M a n u fac tu ringE n g in e e ring

M a n u fac tu ring Q u a lity

C h ie f E xe cu tiveO ffice r

P ro d u c tion M a te ria lsM a na g e m e nt

IndustrialEngineering


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Traditional “Silo” Organizations

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ENGINEERING

M ARKET ING

SALES

PRODUCTION

F INANCE

QUAL I TY


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Dominant flow of products and services

Dominant flow of demand and design information

Basic Supply Chain

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Physical Supply/Distribution

Movement of goods from suppliers to the beginning of the production process and from the end of the production process to consumers

Activities Transportation Distribution inventory Warehousing Packaging Materials handling Order entry

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Profit = Revenue – Expense

Company Objectives

Best customer service Lowest production costs Lowest inventory investment Lowest distribution costs

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Conflicts in Traditional Supply Systems

FinanceMarketing Operations

This implies

Inventory investment

TraditionalObjective

Customer service

Production efficiency

Increase profit and cash flow, reduce investment

Increase revenue Reduce manufacturing cost

82 5

93 6

71 4

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Role of Materials Management

Demand Resources

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Manufacturing Planning and Control

Involves Production planning Implementation and control Inventory management

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Manufacturing Processes

ContinuousProduction

RepetitiveProduction

Product Layout

Intermittent Production(Job Shop)

Process Layout Project Layout

Manufacturing Processes

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Product Layout

Workstations in sequence needed to make product

Work flows at a nearly constant rate Little work-in-process inventory

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Characteristics of Product Layout

Limited range of similar products Dedicated workstations Sufficient demand Capital intensive

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Advantages of Product Layout

Little work-in-process inventory Short throughput and manufacturing lead

times Lower unit cost

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Process Layout

Reprinted with permission, J.R. Tony Arnold, Introduction to Materials Management, Prentice-Hall.

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Characteristics of Process Layout

Intermittent lot production Many different parts processed at

workstations General-purpose machinery Similar types of skills and equipment in

each department Work moves only to required stations

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Characteristics of Process Layout

Relatively easy to change product or volume

Complex and expensive production and inventory control

High work-in-process inventory levels Longer lead times

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Product ProcessCapital costFlexibilityAnnual setup costRun costWork-in-process inventoryProduction and inventory controlcostsLead time

Product Layout vs. Process Layout

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Characteristics of Project Layout

Used for large, complex projects Project remains in one location for

assembly Avoids cost of moving the product

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Why Plan?

To satisfy customer demand and ensure the availability of resources

Material Capacity

Demand Resources

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These are questions of priority and capacity.

A Good Planning and Control System

What must we get

and when?

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Capacity Management Techniques

CapacityRequirements

Planning (CRP)

Priority Management Techniques

ResourcePlanning

(RP)

ProductionPlan

Rough-CutCapacity

Planning (RCCP)

MasterProductionSchedule

Material Requirements

Planning (MRP)

Production Activity Control

(PAC) Operation Sequencing

Input/Output Control

Planning and Control Hierarchy

At each level, there are three questions:

What are the priorities?

What capacity is available?

How can differencesbe resolved?

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Manufacturing Resource Planning (MRP II)

“A method for the effective planning of all resources of a manufacturing company”

—APICS Dictionary

Objective: to integrate the resources of an organization

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Session 1: Objectives

Describe the role and importance of manufacturing in our economy

Understand the conflicts in traditional systems Understand the role, objectives, and responsibilities of

materials management Understand the differences among the various

manufacturing processes Recognize the importance of planning Describe a planning and control system Understand the planning hierarchy Define manufacturing resource planning (MRP II)

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1.1

Documents

quality management

inventory management

capacity management

b session

customer order

customer expectations

inventory fundamentals

meeting customer expectations