basicsofsupplychainmanagement toc

Table of Contents

Instructor Guide

© 2013 APICS Confidential and Proprietary

Table of Contents

Participant Workbook Page

© 2013 APICS i Instructor Guide Version 4.1

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

Basics of Supply Chain Management

Instructor Guide Version 4.1 ii © 2013 APICS

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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© 2013 APICS iii Instructor Guide Version 4.1

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


Instructor Guide Version 4.1 iv © 2013 APICS

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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© 2013 APICS v Instructor Guide Version 4.1

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


Instructor Guide Version 4.1 vi © 2013 APICS

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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© 2013 APICS vii Instructor Guide Version 4.1

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


Instructor Guide Version 4.1 viii © 2013 APICS

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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© 2013 APICS ix Instructor Guide Version 4.1

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


Instructor Guide Version 4.1 x © 2013 APICS

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 Course Evaluation.............................................................................................. A-3

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