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© 2014 APICS i Instructor Guide Version 4.2

Table of Contents

Session 1—Introduction to Supply Chain Management

Introduction to Manufacturing ...................................................................................... 1-9 Role of Manufacturing................................................................................................................ 1-9

Global Citizenship ....................................................................................................................... 1-11

Manufacturing Business Model ................................................................................................. 1-15

Business Environment ............................................................................................................... 1-23

Manufacturing Environment and Process Choices ...................................................... 1-27 Manufacturing Environments .................................................................................................... 1-27

Product Life Cycle and Manufacturing Environments .............................................................. 1-33

Choice of Processes and Layouts .............................................................................................. 1-35

The Manufacturing Supply Chain ................................................................................... 1-45 The Supply Chain Concept ......................................................................................................... 1-45 Views of the Supply Chain .......................................................................................................... 1-47 Supply Chain Organizational Issues .......................................................................................... 1-51

Performance Measures.............................................................................................................. 1-53 Role of Materials Management ................................................................................................. 1-55

Manufacturing Planning and Control ............................................................................ 1-57 Objectives of Manufacturing. ..................................................................................................... 1-57 Priority and Capacity Planning ................................................................................................... 1-57

Manufacturing Planning and Control Hierarchy ....................................................................... 1-59

From MRP TO ERP .......................................................................................................... 1-61 From MRP to ERP ....................................................................................................................... 1-61

From MRP to MRP II ................................................................................................................... 1-61

From MRP II to ERP. ................................................................................................................... 1-63

Impact of New Systems and Philosophies .................................................................... 1-65

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Basics of Supply Chain Management

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Session 2—Demand Management

Demand Management Processes ................................................................................. 2-7 Marketing Management ............................................................................................................. 2-7 Customer Relationship Management ........................................................................................ 2-11 Demand Planning ....................................................................................................................... 2-11

Characteristics of Demand ............................................................................................ 2-13 Independent Versus Dependent Demand ................................................................................. 2-13 Sources of Demand .................................................................................................................... 2-13 Demand Patterns and Stability .................................................................................................. 2-15

Forecasting ..................................................................................................................... 2-19 Purposes and Uses of the Forecast ........................................................................................... 2-19

Principles of Forecasting ............................................................................................................ 2-21

Data Collection and Preparation Principles .............................................................................. 2-23

Forecasting Techniques ................................................................................................. 2-25 Qualitative Techniques ............................................................................................................... 2-25

Quantitative Techniques: Extrinsic............................................................................................. 2-25

Quantitative Techniques: Intrinsic ............................................................................................. 2-27

Moving Average Forecast ........................................................................................................... 2-27

Exponential Smoothing............................................................................................................... 2-35

Seasonal Forecast ...................................................................................................................... 2-39

Tracking the Forecast .................................................................................................... 2-43 Bias .............................................................................................................................................. 2-43

Random Variation (Error) ............................................................................................................ 2-43

Measuring Forecast Error ........................................................................................................... 2-45

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Session 3—Master Planning

Purpose and Scope of Master Planning ........................................................................ 3-7 Priority Planning .......................................................................................................................... 3-7 Planning Horizon and Level of Detail ........................................................................................ 3-7

S&OP and Production Planning ..................................................................................... 3-9 Sales and Operations Planning ................................................................................................. 3-9 Production Planning ................................................................................................................... 3-11

Master Scheduling and Master Production Schedule .................................................. 3-37 Purpose ....................................................................................................................................... 3-37 Objectives ................................................................................................................................... 3-37 Inputs .......................................................................................................................................... 3-39 Relationship to the Production Plan .......................................................................................... 3-39 Developing a Master Schedule .................................................................................................. 3-41 Projected Available Balance ...................................................................................................... 3-41 Preliminary MPS ......................................................................................................................... 3-43 Planning Horizon ........................................................................................................................ 3-47 Time Fences and Zones ............................................................................................................. 3-49 Aggregating the Master Schedules ........................................................................................... 3-49 Rough-Cut Capacity Planning .................................................................................................... 3-51 Resolving Differences and Publishing the MPS ....................................................................... 3-51

Master Scheduling and Sales ........................................................................................ 3-53 MPS and Delivery Promises ....................................................................................................... 3-53

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Session 4—Material Requirements Planning (MRP)

Material Requirements Planning Environment ............................................................ 4-7 Nature of Demand ...................................................................................................................... 4-7 Linkages with Other Manufacturing Planning and Control Functions ..................................... 4-7 Objectives of MRP ....................................................................................................................... 4-9 MRP Process Inputs and Outputs .............................................................................................. 4-11 Planning Software ....................................................................................................................... 4-13

Bill of Material ................................................................................................................ 4-15 Introduction ................................................................................................................................. 4-15 Summarized Bill of Material and the Indented Bill ................................................................... 4-15 Single-Level Bill of Material ........................................................................................................ 4-17 Multilevel Bill of Material ............................................................................................................ 4-17 Parent-Component Relationship ................................................................................................ 4-17 Bill of Material: Summary ........................................................................................................... 4-19 Planning Bill ................................................................................................................................. 4-23 Where-Used and Pegging Data .................................................................................................. 4-25 Uses of the Bill of Material ......................................................................................................... 4-27

Material Requirements Planning Logic.............................................................. 4-29 Approach to this Section ............................................................................................................ 4-29 MRP Logic Overview .................................................................................................................... 4-29 Lead-Time Offsetting and Exploding .......................................................................................... 4-31 Gross and Net Requirements ..................................................................................................... 4-37 Basic MRP Record ...................................................................................................................... 4-41 Capacity Requirements Planning ............................................................................................... 4-47

Using and Managing the Priority Plan ........................................................................... 4-49 Role of MRP Software ................................................................................................................. 4-49 Order Control ............................................................................................................................... 4-51 Releasing Planned Orders .......................................................................................................... 4-53 Maintaining Priorities and Replanning ...................................................................................... 4-55

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Session 5—Capacity Management and Production Activity Control

Introduction ..................................................................................................................... 5-7 Manufacturing Planning and Control Hierarchy. ...................................................................... 5-7 Transition from MRP to CRP and PAC ....................................................................................... 5-7

Capacity Management ................................................................................................... 5-9 Phases of Capacity Management .............................................................................................. 5-9 Definition of Capacity ................................................................................................................. 5-11 Capacity Planning Process ......................................................................................................... 5-11 Determining Capacity Available ................................................................................................ 5-13 Rated Capacity............................................................................................................................ 5-21 Demonstrated Capacity ............................................................................................................. 5-25

Capacity Requirements Planning .................................................................................. 5-27 Introduction................................................................................................................................ 5-27 Key Inputs ................................................................................................................................... 5-27 CRP Process ................................................................................................................................ 5-33

Production Activity Control ............................................................................................ 5-41 Objectives ................................................................................................................................... 5-41 Functions .................................................................................................................................... 5-43 Information Requirements ......................................................................................................... 5-45 Data Requirements .................................................................................................................... 5-47

Scheduling. ...................................................................................................................... 5-49 Introduction................................................................................................................................ 5-49 Scheduling and Loading Techniques ........................................................................................ 5-49 Bottleneck Scheduling ............................................................................................................... 5-53

Implementation ............................................................................................................... 5-55 Shop Order Packet ..................................................................................................................... 5-55 Order Release Process ............................................................................................................... 5-55

Control ............................................................................................................................. 5-57 Goals, Objectives, and Control Levers ...................................................................................... 5-57 Priority Control ............................................................................................................................ 5-59 Input/Output Control .................................................................................................................. 5-61 Flow Control ................................................................................................................................ 5-67

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Basics of Supply Chain Management

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Session 6—Aggregate Inventory Management

Introduction to Inventory ................................................................................................ 6-7 What is Inventory? ...................................................................................................................... 6-7 Aggregate and Item Inventory Management. ............................................................................ 6-9

Aggregate Inventory Management ................................................................................ 6-11 Inventory and the Flow of Materials .......................................................................................... 6-11 Reasons for Carrying Inventory .................................................................................................. 6-13 Functions of Inventory ................................................................................................................ 6-15 Inventory Objectives.................................................................................................................... 6-17

Inventory Costs ............................................................................................................... 6-21 Item Costs.................................................................................................................................... 6-21 Carrying Costs ............................................................................................................................. 6-23 Ordering Costs ............................................................................................................................. 6-25 Stockout Costs ............................................................................................................................ 6-29 Capacity-Related Costs ............................................................................................................... 6-29

Financial Statements and Inventory ............................................................................. 6-33 Balance Sheet and Income Statement Accounts ..................................................................... 6-33 Balance Sheet ............................................................................................................................. 6-35 Income Statement ...................................................................................................................... 6-37 Aggregate Inventory Management and Financial Statements ................................................. 6-39 Cash Flow Analysis ...................................................................................................................... 6-43 Inventory Valuation ..................................................................................................................... 6-45 Financial Inventory Performance Measures ............................................................................. 6-47

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Session 7—Item Inventory Management

Order Quantities .............................................................................................................. 7-7 How Much to Order..................................................................................................................... 7-7 Lot-Size Decision Rules .............................................................................................................. 7-9 Economic Order Quantity (EOQ) ................................................................................................ 7-13 Economic Order Quantity Formula ............................................................................................ 7-21 Validity of EOQ Assumptions.................................................................................................. 7-25

Independent Demand Ordering Systems ....................................................................... 7-27 Order Point System ..................................................................................................................... 7-29 Safety Stock. ............................................................................................................................... 7-35 Determining When the Order Point is Reached. ....................................................................... 7-43 Periodic Review System ............................................................................................................. 7-47

ABC Inventory Control .................................................................................................... 7-55 ABC Principles ............................................................................................................................. 7-55 ABC Classification ....................................................................................................................... 7-57 ABC Process ................................................................................................................................ 7-57 Sample Calculation .................................................................................................................... 7-59 Control Based on ABC Classification ......................................................................................... 7-63

Auditing Inventory Records ............................................................................................ 7-65 Periodic Inventory Audit ............................................................................................................. 7-65 Cycle Counting ............................................................................................................................ 7-67

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Basics of Supply Chain Management

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Session 8—Purchasing and Physical Distribution

Purchasing ...................................................................................................................... 8-7 Types of Purchased Items .......................................................................................................... 8-7 Purchasing Objectives ................................................................................................................ 8-9

Purchasing Activities and Participants ......................................................................... 8-11 Purchasing Activities ................................................................................................................... 8-11

Physical Distribution ....................................................................................................... 8-29 Scope and Value ......................................................................................................................... 8-29 Global Distribution ...................................................................................................................... 8-29 Influence of Marketing................................................................................................................ 8-31 Interface with Production and Finance ...................................................................................... 8-33 Other Factors: Distribution Channels .. ...................................................................................... 8-37 Scope of Physical Distribution Factors ...................................................................................... 8-37

Distribution Inventory ..................................................................................................... 8-39 Purpose of Distribution Inventory .............................................................................................. 8-39 Objectives .................................................................................................................................... 8-41 Distribution Inventory Planning Systems ................................................................................... 8-43 Push System ................................................................................................................................ 8-45 Distribution Requirements Planning (DRP) ............................................................................... 8-45

Transportation ................................................................................................................. 8-49 Introduction ................................................................................................................................ 8-49 Reverse Logistics ........................................................................................................................ 8-55 Basic Transportation Modes ...................................................................................................... 8-55 Costs of Moving Goods ............................................................................................................... 8-65

Warehousing ................................................................................................................... 8-71 Purpose of Warehousing ............................................................................................................ 8-71 Warehousing Process and Activities .......................................................................................... 8-71 Stock Location Systems ............................................................................................................. 8-73 Public Versus Private Warehousing ........................................................................................... 8-75

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Session 9—Lean and Quality Systems

Product and Quality Systems ......................................................................................... 9-7 Product and Quality Cycle .......................................................................................................... 9-7 Objectives .................................................................................................................................... 9-7 Systems and Methodologies ...................................................................................................... 9-9 Principles, Practices, and Tools ................................................................................................ 9-11

Focus on the Customer ................................................................................................... 9-13 Value of a Product to the Customer .......................................................................................... 9-15 Quality Functional Deployment .................................................................................................. 9-15

Lean.................................................................................................................................. 9-17 House of Toyota .......................................................................................................................... 9-17 Why Implement Lean?................................................................................................................ 9-17 Waste .......................................................................................................................................... 9-19 Continuous Flow Production ...................................................................................................... 9-21 Pull Systems. ............................................................................................................................... 9-21 Work Layouts .............................................................................................................................. 9-23 Process Flexibility ....................................................................................................................... 9-25 Total Productive Maintenance ................................................................................................... 9-27 Process and Continuous Improvement ..................................................................................... 9-29 Employee Involvement and Empowerment .............................................................................. 9-31 Lean Tools and Techniques ....................................................................................................... 9-33 Supplier Partnerships. ................................................................................................................ 9-35

Total Quality Management ............................................................................................. 9-37 Product Quality ........................................................................................................................... 9-37 Quality-Related Costs ................................................................................................................. 9-41 Quality Control Tools ................................................................................................................... 9-43 Six Sigma ..................................................................................................................................... 9-57 Summary ..................................................................................................................................... 9-63

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Session 10—Theory of Constraints

Introduction to Theory of Constraints ............................................................................ 10-7 Philosophy and Basic Principles ................................................................................................ 10-7 Types of Constraints ................................................................................................................... 10-9 Problem-Solving Tools ................................................................................................................ 10-9

General Applications ...................................................................................................... 10-11 VATI Analysis ................................................................................................................................ 10-11 Drum-Buffer-Rope Planning and Scheduling ............................................................................ 10-13 Simplified Drum-Buffer-Rope (S-DBR) ....................................................................................... 10-27 Throughput Accounting ............................................................................................................... 10-29 Critical-Chain Method ................................................................................................................. 10-31 Distribution .................................................................................................................................. 10-33

Appendix Progress Check Answer Sheet. ...................................................................................... A-1 Bibliography .................................................................................................................... A-2

Index

Index ................................................................................................................................ Index 1

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