Introduction to Supply Chain Management

To increase in wealth, Value must be added to a product or service.

·         Customer Expectations:  characteristics that provide value to the customer

o   Quality

o   Price

o   Delivery

o   Pre- and post-sale service

o   Flexibility


·         Order Qualifiers:  Characteristics of a product or service that make you a competitor.  You can’t get in the game without these.


·         Order Winners:  Characteristics that set you a apart from competitors and cause the customer to choose your product/service over theirs.


·         Manufacturing Strategies

o   Engineer-to-order:  Hold no inventory.  Design product per customer specs, procure materials, then produce and ship product.

o   Make-to-order:  Hold raw material inventory then produce when customer order comes in.

o   Assemble-to-order:  Hold semi-finished inventory, then assemble and ship the final product per customer order.

o   Make-to-stock:  Hold a calculated level of finished goods inventory, ship customer orders as they  are placed, then replenish inventory level. 


·         Physical Distribution

o   Warehousing

o   Material handling

o   Transportation

o   Order entry

o   Packaging


·         Company Objectives

o   Best customer service

o   Lowest production costs

o   Lowest inventory investment

o   Lowest distribution costs


Traditional Supply Chain Conflicts





Traditional Focus

Reduce Manufacturing Costs

Increase Profit and Cash Flow, Reduce Investment

Increase Revenue

Production Efficiency




Inventory Investment




Customer Service





*Supply Chain professionals are expected to balance all of these focuses to achieve the most profitable outcome.


·         Customer Service

o   Provide the customer with a product or service at the

§  Right Quantity

§  Right Quality

§  Right Place

§  Right Time

§  Right Price


·         Manufacturing Planning and Control

o   Plan the production schedule to fulfill demand

o   Implements and controls the production plan

o   Optimize inventory levels (not too much and not too little)


·         Manufacturing Processes

o   Continuous Flow

o   Intermittent

o   Repetitive


Plant Layouts


·         Process Layout

o   Characteristics

§  General purpose machinery

§  Non-dedicated work stations (each one is able to produce many different parts)

§  Work moves only to required stations: 

·         Product A:  goes from work cent 1, to work center 4, to work center 3.

·         Product B:  work center 1, to work center 2, to work center 5.

o   Advantages

§  Long lead times

§  Complex/expensive production and inventory control

§  High work-in-process (WIP) inventory


·         Product Layout

o   Characteristics

§  Similar products

§  Dedicated workstations in sequence (product goes from work center 1 to work center 2, to 3, etc…)

§  Capital intensive

§  Sufficient demand

§  Work flows at a near constant rate

o   Advantages

§  Short lead times

§  Lower unit cost

§  Low work-in-process (WIP) inventory


·         Project Layout

o   Characteristics

§  Large, complex products:  Sea Ships, Large building construction projects, Aircraft, System implementations

§  Project remains in one location for assembly

§  Avoids costs of moving product


Planning and Control Hierarchy:


Priority Management Techniques

Capacity Management Techniques

Production Plan

Resource Planning (RP)

Master Production Schedule

Rough-Cut Capacity Planning (RCCP)

Material Requirements Planning (MRP)

Capacity Requirements Planning (CRP)

Production Activity Control (PAC)

Input/Output Control

Operation Sequencing



·         Manufacturing Resource Planning (MRP II)

o   Method for effective planning on all resources in a manufacturing company

o   Should include simulation capability to answer “what if” questions

o   Made up of the following linked functions:

§  Business planning

§  Sales and operations planning (S&OP)

§  Production planning

§  Master production scheduling

§  Material requirements planning

§  Capacity requirements planning

§  Execution support systems for capacity and material

o   Output from these systems is integrated with financial reports:

§  Business plan

§  Purchase commitment report

§  Shipping budget

§  Inventory projections

5 Comments (+add yours?)

    Mar 24, 2014 @ 13:26:03

  2. Amanda Arwood
    Apr 21, 2014 @ 20:23:30

  3. Tom Ford
    Jun 25, 2014 @ 19:58:42

  4. Chirag Patel
    Dec 27, 2014 @ 13:26:55

    • Gaurav
      Jul 16, 2016 @ 14:23:51

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