Table of Contents

Instructor Guide

2012 APICS Confidential and Proprietary

Table of Contents
Participant Workbook Page

Table of Contents
Session 1Introduction 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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Session 2Demand Management

Demand Management Processes.........................................................................

2-7

Marketing Management...............................................................................................................
Customer Relationship Management..........................................................................................

2-7
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.............................................................................................................
Data Collection and Preparation Principles.................................................................................

2-21
2-23

Forecasting Techniques........................................................................................

2-25

Qualitative Techniques................................................................................................................

2-25
2-25

Quantitative Techniques: Extrinsic..............................................................................................

Exponential Smoothing...............................................................................................................

2-27
2-27
2-35

Seasonal Forecast......................................................................................................................

2-39

Tracking the Forecast............................................................................................

2-43

Bias.............................................................................................................................................

2-43

Random Variation (Error)............................................................................................................

2-43
2-45

Quantitative Techniques: Intrinsic...............................................................................................

Moving Average Forecast...........................................................................................................

Measuring Forecast Error............................................................................................................

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Session 3Master Planning

Purpose and Scope of Master Planning.............................................................

3-7

Priority Planning.........................................................................................................................
Planning Horizon and Level of Detail.........................................................................................

3-7
3-7

S&OP and Production Planning ..........................................................................

3-9

Sales and Operations Planning.................................................................................................

Production Planning...................................................................................................................

3-9
3-11

Master Scheduling and Master Production Schedule.......................................

3-37

Purpose.....................................................................................................................................

Resolving Differences and Publishing the MPS.........................................................................

3-37
3-37
3-39
3-39
3-41
3-41
3-43
3-47
3-49
3-49
3-51
3-51

Master Scheduling and Sales..............................................................................

3-53

MPS and Delivery Promises......................................................................................................

3-53

Objectives..................................................................................................................................
Inputs.........................................................................................................................................
Relationship to the Production Plan...........................................................................................
Developing a Master Schedule..................................................................................................
Projected Available Balance......................................................................................................
Preliminary MPS........................................................................................................................
Planning Horizon........................................................................................................................
Time Fences and Zones............................................................................................................
Aggregating the Master Schedules............................................................................................
Rough-Cut Capacity Planning....................................................................................................

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Session 4Material 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 5Capacity Management and Production Activity Control

Introduction.........................................................................................................

5-7

Manufacturing Planning and Control Hierarchy.......................................................................

Transition from MRP to CRP and PAC...................... ............................................................

5-7
5-7

Capacity Management........................................................................................

5-9

Phases of Capacity Management...........................................................................................

Definition of Capacity..............................................................................................................
Capacity Planning Process.....................................................................................................
Determining Capacity Available..............................................................................................
Rated Capacity........................................................................................................................
Demonstrated Capacity...........................................................................................................

5-9
5-11
5-11
5-13
5-21
5-25

Capacity Requirements Planning.....................................................................

5-27

Introduction..............................................................................................................................
Key Inputs...............................................................................................................................
CRP Process...........................................................................................................................

5-27
5-27
5-33

Production Activity Control...............................................................................

5-41

Objectives................................................................................................................................
Functions.................................................................................................................................
Information Requirements.......................................................................................................
Data Requirements.................................................................................................................

5-41
5-43
5-45
5-47

Scheduling..........................................................................................................

5-49

Introduction..............................................................................................................................
Scheduling and Loading Techniques......................................................................................
Bottleneck Scheduling.............................................................................................................

5-49
5-49
5-53

Implementation...................................................................................................

5-55

Shop Order Packet..................................................................................................................

Order Release Process...........................................................................................................

5-55
5-55

Control.................................................................................................................

5-57

Goals, Objectives, and Control Levers....................................................................................

5-57
5-59
5-61
5-67

Priority Control.........................................................................................................................
Input/Output Control................................................................................................................
Flow Control.................................................................................................................

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Session 6Aggregate Inventory Management

Introduction to Inventory...................................................................................

6-7

What is Inventory?...................................................................................................................

6-7
6-9

Aggregate and Item Inventory Management...........................................................................

Aggregate Inventory Management....................................................................

6-11

Inventory and the Flow of Materials........................................................................................

Reasons for Carrying Inventory...............................................................................................

6-11
6-13

Functions of Inventory.............................................................................................................

6-15

Inventory Objectives................................................................................................................

6-17

Inventory Costs..................................................................................................

6-21

Item Costs...............................................................................................................................
Carrying Costs.........................................................................................................................

6-21
6-23

Ordering Costs........................................................................................................................

6-25

Stockout Costs........................................................................................................................
Capacity-Related Costs...........................................................................................................

6-29
6-29

Financial Statements and Inventory.................................................................

6-33

Balance Sheet and Income Statement Accounts....................................................................

6-33
6-35
6-37

Balance Sheet.........................................................................................................................
Income Statement...................................................................................................................

Inventory Valuation..................................................................................................................

6-39
6-43
6-45

Financial Inventory Performance Measures............................................................................

6-47

Aggregate Inventory Management and Financial Statements................................................

Cash Flow Analysis.................................................................................................................

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Session 7Item Inventory Management

Order Quantities.................................................................................................

7-7

How Much to Order.................................................................................................................

7-7

Lot-Size Decision Rules..........................................................................................................

7-9

Economic Order Quantity (EOQ).............................................................................................

Economic Order Quantity Formula..........................................................................................

7-13
7-21

Validity of EOQ Assumptions..................................................................................................

7-25

Independent Demand Ordering Systems.........................................................

7-27

Order Point System.................................................................................................................

Determining When the Order Point is Reached......................................................................

7-29
7-35
7-43

Periodic Review System..........................................................................................................

7-47

ABC Inventory Control.......................................................................................

7-55

ABC Principles........................................................................................................................

7-55
7-57

Safety Stock............................................................................................................................

ABC Classification...................................................................................................................

Control Based on ABC Classification......................................................................................

7-57
7-59
7-63

Auditing Inventory Records..............................................................................

7-65

Periodic Inventory Audit..........................................................................................................

7-65
7-67

ABC Process...........................................................................................................................
Sample Calculation.................................................................................................................

Cycle Counting........................................................................................................................

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Session 8Purchasing and Physical Distribution

Purchasing..........................................................................................................

8-7

Types of Purchased Items.....................................................................................................

8-7
8-9

Purchasing Objectives...........................................................................................................

Purchasing Activities and Participants............................................................

8-11

Purchasing Activities..............................................................................................................

8-11

Physical Distribution..........................................................................................

8-29

Scope and Value.....................................................................................................................

Scope of Physical Distribution Factors....................................................................................

8-29
8-29
8-31
8-33
8-37
8-37

Distribution Inventory ........................................................................................

8-39

Purpose of Distribution Inventory............................................................................................

Distribution Requirements Planning (DRP).............................................................................

8-39
8-41
8-43
8-45
8-45

Transportation....................................................................................................

8-49

Introduction..............................................................................................................................

Costs of Moving Goods...........................................................................................................

8-49
8-55
8-55
8-65

Warehousing.......................................................................................................

8-71

Purpose of Warehousing.........................................................................................................

8-71
8-71
8-73
8-75

Global Distribution...................................................................................................................
Influence of Marketing.............................................................................................................
Interface with Production and Finance....................................................................................
Other Factors: Distribution Channels ......................................................................................

Objectives................................................................................................................................
Distribution Inventory Planning Systems.................................................................................
Push System...........................................................................................................................

Reverse Logistics......................................................................................................
Basic Transportation Modes....................................................................................................

Warehousing Process and Activities.......................................................................................

Stock Location Systems..........................................................................................................
Public Versus Private Warehousing........................................................................................

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Session 9Lean and Quality Systems

Product and Quality Systems............................................................................

9-7

Product and Quality Cycle.......................................................................................................

9-7

Objectives................................................................................................................................

9-7

Systems and Methodologies...................................................................................................

Principles, Practices, and Tools..............................................................................................

9-9
9-11

Focus on the Customer......................................................................................

9-13

Value of a Product to the Customer........................................................................................

Quality Functional Deployment...............................................................................................

9-15
9-15

Lean................................................................................................

9-17

House of Toyota......................................................................................................................

9-17
9-17

Why Implement Lean?............................................................................................................

Waste......................................................................................................................................
Continuous Flow Production...................................................................................................
Pull Systems............................................................................................................................
Work Layouts..........................................................................................................................
Process Flexibility....................................................................................................................
Total Productive Maintenance.................................................................................................
Process and Continuous Improvement...................................................................................
Employee Involvement and Empowerment.............................................................................
Lean Tools and Techniques....................................................................................................
Supplier Partnerships..............................................................................................................

Total Quality Management...........................................................................

9-19
9-21
9-21
9-23
9-25
9-27
9-29
9-31
9-33
9-35

9-37

Quality-Related Costs.............................................................................................................

9-37
9-41

Quality Control Tools...............................................................................................................

9-43

Six Sigma................................................................................................................................

9-57
9-63

Product Quality........................................................................................................................

Summary.................................................................................................................................

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Session 10Theory of Constraints

Introduction to Theory of Constraints..............................................................

10-7

Philosophy and Basic Principles.............................................................................................

Types of Constraints...............................................................................................................

10-7
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
10-33

Distribution..............................................................................................................................

Appendix
Progress Check Answer Sheet.........................................................................
Bibliography..............................................................................
Course Evaluation..............................................................................................

Instructor Guide Version 4.0

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2012 APICS