9/5/2016

WHAT IS A SUPPLY CHAIN ?

WHAT IS

APICS Certified Supply Chain Professional™ (CSCP)

Learning System

Version 3.2, 2014 Edition

© APICS Confidential and Proprietary

Game Plan SOME JARGON

 What is Supply Chain Management?
 Push, Pull
 Basic Entities and Flows in SCM
 Upstream, Downstream
 Vertical and Horizontal Supply Chains
 Tier 1, Tier 2
 Value Stream and Value Mapping
 Functional vs. Innovative Products
 Objectives of the Supply Chain
 Glocalization
 Functional vs. Innovative Products
 3PL, 4PL
 Inventory
 Engineered Flow
 Transportation
 Forecasting
 Risk management

SUPPLY CHAIN MANAGEMENT

= The SCM Network
MANAGEMENT OF THE CHAIN OF SUPPLIES

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Losing Sight of the Common 3 Entities, 4 Flows

Objective
I'm glad that the hole
is not on our side!

Basic Supply Chain: Three Entities Basic Supply Chain: Four Flows

Information flow
Supplier
Supplier Producer
Producer Customer
Customer Invoices, sales lit, specs, blueprints, receipts, orders, rules and regs, etc.

 Raw  Products  Retailer Primary product flow

materials
 Power  Wholesaler Material, components, supplies, services, energy, finished products.
 Energy
 Professional  Distributor
Primary cash flow
 Services services
 End user
Payments for products, supplies,
energy,etc.
 Components  Government Material, components, supplies, services, finished products

services
Reverse product flow
 Educational
services Returns for repair, replacement, recycling, disposal, etc.

Suppliers’
Suppliers Producer Retailer Customer
Suppliers

Growers Wholesale food Street vendor: Street vendor: Consumers

distributor cooking the stand and
Miners operations its employees
Utilities
Utilities
Builders
Manufacturers
Other merchants

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Manufacturing Supply Chain Model Services Also Have Supply Chains

Information flow
Tier 2 materials Fuel supplies
supplier
Tier 1 materials
Customer
supplier Other
Electric backup utilities
Tier 2 materials Distributor
power
supplier
Customer
Electric
Tier 2 service Tier 1 materials Electrical Power Home
Manufacturer transformers
supplier supplier customers
Utility
Customer Facility
Tier 2 materials maintenance
supplier Distributor Commercial
customers
Tier 1 service
supplier Customer Programming
Tier 2 service services
supplier
Primary Primary
product cash Janitorial
flow flow services

Summing Up Two Types of Supply Chain Management

 Supply Chains:
Vertical Lateral (Horizontal)
− Stretch from raw materials to consumers
Integration Integration
− Include various entities and processes Degree to which a firm directly Coordinated management of
− Run in reverse as well as toward end user controls multiple links in the separately owned links in the
supply chain from raw material supply chain; “outsourcing”
− Contain cash, product, and information flows extraction to retail sales
− Connect to outside stakeholders.
Retail sales Raw Production
Components Retail
materials Distribution
Products sales
extraction Services
Distribution

Production
Components/products/services

Raw materials extraction

Vertical Integration Lateral Integration

Integrated
Integrated automotive
automotive company: Benefits of vertical integration Information flow
ownership, management,
company: ownership,
marketing/sales, finance
management, marketing No dealing with competitors for
supplies, etc. Raw Components Plant Distribution Retail Customers
materials
Showroom Customer
Enhanced visibility into operations
Distribution Primary product flows Primary cash flows
Control
Plant Primary Same ownership and
materials/ management for all activities in
Component product flow supply chain Benefits of lateral integration
production Economies of scale and scope

Raw materials Improved business focus

Leveraging communication and
production competencies

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Objectives of the Supply Chain Management

 Creating net value

 Building a competitive infrastructure
 Leveraging worldwide logistics
 Synchronizing supply with demand, and
 Measuring performance globally.

Value Stream and its Mapping Objective #1: Add Value for Customers and
Stakeholders
• Financial
value
Supplie
Supplier Produc
Producer Customer • Customer
Processes that create, produce, and r er value
Value stream deliver a product or service
• Social
value
Value stream Drawing the existing and desired
mapping value streams to aid process
improvement

Balanced Varied Stakeholder Values Increasing Financial Value

Firms in SC Profit, market share, image  Cut costs that yield net gains at the bottom line.
Product and service quality, affordability,
End customers availability
 “It takes money to make money” (such as
Investors Return on investment, quality of communications investments in upgrades).
Lenders Interest, long-term stability, return of principal
Communities/ Tax base, environment, jobs
 Gains should be equitably
environment distributed (with all
Governments Laws, regulation, overall impact stakeholders in mind).
Job security, compensation, opportunity,
Employees working conditions

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Enhancing Customer Value Objective #2: Improve Customer Service

Fundamental attributes:
Quality Affordability Availability Service Sustainability
 Availability
 Operational performance
 Customer satisfaction

Most resources are invested in creating the value

of greatest importance to the market.

Objective #3: Effectively Use Systemwide Objective #4: Efficiently Use Systemwide
Resources Resources
High High
Effectiveness: Efficiency:
Getting the right Thrive A measurement of the Thrive
Effectiveness

Effectiveness
product and the right actual output compared
amount to the right to the standard output
customer at the right expected; measures
time. Low how well something is Low

Low High
performing relative to Low High

 Employees
existing standards.
 Raw materials Efficiency Efficiency

 Equipment

Objective #5: Leverage Partner Strengths Bullwhip Effect

Strong partnerships:
 Add value to products Supplier Factory
 Improve market access Distributor
Retailer
 Build financial strength Customer

 Add technological strength

 Strengthen operations
 Enhance strategic growth Small demand uncertainty becomes more and more distorted.

 Improve organizational skills.

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Causes of the Bullwhip Effect

Bullwhip Effect : Facial Tissue
Lack of collaboration and information sharing

Demand forecast errors

Lead times

Order batching

Price fluctuations and promotions

Rationing and shortage gaming

Time

The Three Vs Sources of Demand Variability

Competition

Distance Seasonal effects

Demand Economic and

Disasters other external
Variability trends

Life cycle trends

Promotions and customer
expectations

Internet

Sources of Supply Variability

Global
expansion and
complexity
Natural
cycles and raw
Supplier failures material
availability

Supply Economic and

System
other external
nervousness Variability trends

Supply planning Bullwhip effect

failures

Demand plan
error or bias

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Supply Chain Strategies Topic 1: Basic Supply Chain

Three Main Types

Stable Reactive Efficient reactive

supply chain supply chain supply chain

Strategic Impact vs. Supply Chain Difficulty

High
Direct/Core
Difficulty (Supply Risk)

Bottleneck
Competency
Materials
Materials

Commodity Leveragable
Materials Materials
Low
Low High
Strategic Importance (Profit Impact)

The Need for Inventory Inventory Management KPIs

Hit customer
Inventory service targets

Reduce Quality
inventory costs Availability
Production Customer Service On-time delivery
Holding
 Raw materials Supporting Activities  Finished goods Ordering
 Work-in-process  Spare parts Transporting
items  Maintenance
 Repair
 Operating supplies

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Types of Inventory

(1) Raw (2) Work-in- (3) Finished

materials process (WIP) goods (FG)

(4) MRO

Raw
Component End
materials Manufacturer Distributor
supplier customer
supplier

(5) In-transit