CPIM Exam – Basics of Supply Chain Management Practice Study Sheet Index

1. INTRODUCTION TO MATERIALS MANAGEMENT 1.1 INTRODUCTION 1.2 OPERATING ENVIRONMENT Most important factors affecting the operating environment 1 Government 2 Economy 3 Competition 4 Customers 5 Quality 1.3 MANUFACTURING STRATEGY Delivery time: Supplier perspective: from receipt of an order to the delivery of the product. Customer perspective: the same as supplier + order preparation and transmittal. 4 basics strategy: Engineer to Order; Make to Order; Assemble to Order; Make to Stock 1.4 THE SUPPLY CHAIN CONCEPT 3 phases to the flow of materials 1. Physical supply: 2. Manufacturing (production) 3. Distribution 5 important factors in supply chains; 1) The supply chain includes all activities and processes to supply a product or service to final customer 2) Any number of companies can be linked in the supply chain 3) A customer can be a supplier to another customer so the total chain can have number of supplier/customer relationships 4) While the distribution system can be direct from supplier to customer, depending on the products and markets, it can contain a number of intermediaries (distributors) such as wholesalers, warehouse and retailers. 5) Product or services usually flow from supplier to customer and design and demand information usually from customer to supplier Conflicts in traditional systems 4 main objectives to maximize company’s profit 1. Provide best customer service 2. Provide lowest production costs 3. Provide lowest inventory investment 4. Provide lowest distribution costs Marketing objectives: is to maintain and increase revenue. To achieve this;  Maintain high inventories  Interrupt production runs  Create an extensive and costly distribution system Finance objectives: is to keep investment and cost low. To achieve this;  Reduce inventory  Decrease the number of plants and warehouses  Produce large qty using long production runs  Manufacture only to customer order Production objectives: is to keep its operating costs low. To achieve this;  Make long production runs  Maintain high inventories of raw materials and WIP Accurate production forecast only contribute to low production costs 3 1.5 WHAT IS MATERIALS MANAGEMENT Materials management is a coordinating function responsible for planning and controlling materials flow. Its objectives are;  Maximize the use of firm’s resources  Provide the required level of customer service Manufacturing Planning and Control Is responsible for the planning and control of the flow of materials through the manufacturing process. Primary activities;  1. Production Planning: includes 1) forecasting 2) master planning 3) material requirements planning and 4) capacity planning  2. Implementation and control (responsible for production activity control and purchasing)  3. Inventory management Inputs to the manufacturing planning and control system Five basic inputs to the Manufacturing Input and Control system are; 1) Product description (engineering drawings and specifications are methods for describing product) bill of material is another method, this document does two things. 1. Describes the component used to make the product 2. Describes the subassemblies at various stages of manufacture 2) Process specifications (describe the steps necessary to make the end product = routing in SAP giving the information such as 1. Operations required to make the product 2. Sequence of operations 3. Equipment and accessories required 4. Standard time required to perform each operation 3) Time needed to perform operations, in standard time = routing in SAP 4) Available facilities are plant, equipment and labor available = stored in Work Center in SAP 5) Quantities required Physical supply and distribution It includes all the activities involved in moving goods, from the supplier to the beginning of the production process, and from the end of the production process to the consumer. Activities involved; 1) Transportation 2) Distribution inventory 3) Warehousing 4) Packaging 5) Materials handling 6) Order entry Why materials management is a balancing act? Because it must make trade offs between the level of customer service and the cost of providing that service. 1.6 SUPPLY CHAIN METRICS A metric is a verifiable measure stated in either quantitative of qualitative terms defined with respect to a reference point. Without metrics, no firm could expect to function effectively or efficiently on daily basis. Metrics give us; 1. control by superiors 2. Reporting of data to superiors and external groups 3. communication 4. learning 5. improvement