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

    Thank you for your helpful informations


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

    We were very pleased to happen across your website, but am unable to open the following sub titles. We were only able to view sub title “introduction to Supply Chain Management”. Do you have notes for any of the others?

    ØMaster Planning
    ØMaterial Requirements Planning
    ØCapacity Management and Production Activity Control
    ØInventory Fundamentals
    ØInventory Management
    ØPhysical Distribution
    ØQuality Management and Purchasing
    ØJust-in-Time Manufacturing


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

    This site has been very helpful


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


    I have started preparing for CPIM first module.
    I am in search of good study materials.
    Can you suggest which should be preferred by you??

    Thanks and Regards


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

      you must have got suggestions for your question.
      I have started preparation of CPIM first module now . Can you please suggest me for study material .

      Gaurav Vij


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