Fundamentals of

Supply Chain Management

APICS Certified Supply Chain Professional (CSCP)

Learning System
Version 3.2, 2014 Edition
Confidential
andConfidential
Proprietary and Proprietary
1A
APICS
1
2014 APICS

Overview
Overview of fundamental
SCM concepts
Aligning resources with
organizational strategy
Design and continuous improvement
considerations
Inventory management and logistics
Understanding the market and demand
CRM and SRM

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Introduction
Key Concepts:
Supply chain entities, structures, flow, and processes
The SCOR model
Types and stages of supply chain management
SCM objectives, key terms, and benefits

Learning objectives found on textbook page 1-3

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Topic Preview
Topic 1: Basic Supply Chain
Topic 2: The SCOR Model: Linking
Processes, Metrics, Best Practices, and
Technologies
Topic 3: Vertical versus Horizontal Integration
Topic 4: Supply Chain Management Objectives
Topic 5: Supply Chain Management Benefits
Topic 6: Accounting and Financial Statement
Basics
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Supply Chain Management

Concepts

Topic 1: Basic Supply

Chain

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Basic Supply Chain for a Product

Three entities and four flows

Information flow

Supplier

Producer
Primary product flow
Primary cash flow
Reverse product flow

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Customer

Basic Supply Chain: Three Entities

Supplier
Supplier
Raw
materials
Energy
Services
Components

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Producer
Producer

Customer
Customer

Products
Power

Retailer
Wholesaler

Professional
services
Government
services
Educational
services

Distributor
End user

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Supply Chain Strategies

Topic 1: Basic Supply Chain

Three Main Types

Stable
supply chain

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Reactive
supply chain

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Efficient reactive
supply chain

Basic Supply Chain: Four Flows

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

Primary product flow

Material, components, supplies, services, energy, finished products.

Primary cash flow

Payments
for products,
supplies,
etc.
Material, components,
supplies,
services,
energy,
finished products

Reverse product flow

Returns for repair, replacement, recycling, disposal, etc.

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Supply Chain Example: Street Vendor

Suppliers
Suppliers

Wholesale food
distributor

Growers
Miners

Utilities

Utilities
Manufacturers

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Suppliers

Producer

Retailer

Street vendor:
cooking
operations

Street vendor:
the stand and
its employees

Builders
Other merchants

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Customer
Consumers

Manufacturing Supply Chain Model

Information flow
Tier 2 materials
supplier

Tier 1 materials
supplier

Customer
Distributor

Tier 2 materials
supplier

Customer
Tier 2 service
supplier

Tier 1 materials
supplier

Manufacturer
Customer

Tier 2 materials
supplier

Tier 2 service
supplier

Distributor
Tier 1 service
supplier

Primary
product
flow

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Customer

Primary
cash
flow

Services Also Have Supply Chains

Fuel supplies
Other
utilities

Electric backup
power
Electric
transformers

Electrical Power
Utility

Facility
maintenance
Programming
services
Janitorial
services

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Home
customers

Commercial
customers

Summing Up
Supply chains:
Stretch from raw materials to consumers
Include various entities and processes
Run in reverse as well as toward end user
Contain cash, product, and information flows
Connect to outside stakeholders.

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Section A:

Supply Chain Management

Concepts

Topic 2: The SCOR

Model

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SCOR SC Operations Reference Model

Plan

Plan

Deliver

Source

Return

Return

Make

Plan

Deliver

Source

Make

Deliver

Source

Return
Enable

Return

Return

Suppliers
Suppliers
Supplier
Supplier

Return
Enable

Supplier
Supplier

Deliver

Source

Return

Return

Enable

Customers
Customers
Customer
Customer

Customer
Customer
Internal
Internal or
or External
External

Internal
Internal or
or External
External

Your
Your Organization
Organization

Source: Adapted from Supply Chain Council, Inc.

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Make

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Supply Chain Management

Concepts

Topic 3: Vertical vs.

Horizontal Integration

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Two Types of Supply Chain

Management
Vertical
Integration
Degree to which a firm directly
controls multiple links in the
supply chain from raw material
extraction to retail sales
Retail sales
Distribution
Production
Components/products/services

Raw materials extraction

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Lateral (Horizontal)
Integration
Coordinated management of
separately owned links in the
supply chain; outsourcing
Raw
materials
extraction

Production
Components
Products
Services

Distribution

Retail
sales

Vertical Integration
Integrated
Integrated automotive
automotive company:
ownership,
management,
company: ownership,
marketing/sales,
finance
management, marketing
Showroom

Plant
Component
production

Enhanced visibility into operations

Primary
materials/
product flow

Raw materials

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No dealing with competitors for

supplies, etc.

Customer

Distribution
Control

Benefits of vertical integration

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Same ownership and

management for all activities in
supply chain

Lateral Integration
Information flow
Raw
materials

Components

Plant

Primary product flows

Distribution

Retail

Primary cash flows

Benefits of lateral integration

Economies of scale and scope
Improved business focus
Leveraging communication and
production competencies

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Customers

Stages of SCM Evolution

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Stage 3: Integrated Enterprise

ERP
Suppliers
Purchasing

Logistics

Production
control

R&D

Marketing/
sales

Distribution

Suppliers
Suppliers

Customers
Materials/products/services
Materials/products/services

Reverse product flow

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Customers

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Payments
Payments

Customers

Stage 4: Extended Enterprise

Networked information flow

Suppliers
suppliers

Suppliers

Internal
chain

Materials/products/services
Materials/products/services

Customers
customers

Payments
Payments

Reverse product flow

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Customers

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Discussion Question
If a firm uses a logistics supplier to integrate
with external members and internally combines
warehousing and transportation to optimize
costs, it has evolved to at least
a) Stage 1: dysfunctional enterprise.
b) Stage 2: semifunctional enterprise.
c) Stage 3: integrated enterprise.
d) Stage 4: extended enterprise.

Answer:

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Discussion Question
If a firm uses a logistics supplier to integrate
with external members and internally combines
warehousing and transportation to optimize
costs, it has evolved to at least
a) Stage 1: dysfunctional enterprise.
b) Stage 2: semifunctional enterprise.
c) Stage 3: integrated enterprise.
d) Stage 4: extended enterprise.

Answer: c

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Supply Chain Management

Concepts

Topic 4: Supply Chain

Management Objectives

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APICS Definition of Supply Chain

Management
The design, planning, execution, control, and
monitoring of supply chain activities with the
objective of:
Creating net value
Building a competitive infrastructure
Leveraging worldwide logistics
Synchronizing supply with demand, and
Measuring performance globally.

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Value Chain and Mapping

Value chain

Functions in a company that add value

to goods or services

Value stream

Processes that create, produce, and

deliver a product or service

Value stream
mapping

Drawing the existing and desired value

streams to aid process improvement

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Objective #1: Add Value for Customers

and Stakeholders

Financial
value

Supplier
Supplier

Producer
Producer

Customer

Customer
value
Social
value

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Balanced Varied Stakeholder Values

Firms in SC
End customers
Investors
Lenders

Profit, market share, image

Product and service quality, affordability,
availability
Return on investment, quality of communications
Interest, long-term stability, return of principal
Tax base, environment, jobs

Governments
Employees

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Laws, regulation, overall impact

Job security, compensation, opportunity,
working conditions

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Stakeholder Value: Sustainable SCM

Green supply chain:

A supply chain that considers environmental
impacts on its operations and takes action to
comply with environmental safety regulations and
communicate this to customers and partners.

Government and regulatory pressures

Good environmental management and sustainability concerns
Public opinion and the power of consumer choice
Potential for competitive advantage

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Increasing Financial Value

Cut costs that yield net gains at the bottom line.
It takes money to make money (such as
investments in upgrades).
Gains should be equitably
distributed (with all
stakeholders in mind).

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Enhancing Customer Value

Quality

Affordability

Availability

Service

Sustainability

Most resources are invested in creating the value

of greatest importance to the market.

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Social Values

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Discussion Question
Which of the following is most likely to increase
long-term net financial value for a supply chain
firm?
a) Reinvesting profits in research and infrastructure
upgrades
b) Channeling SC cost savings into end-user
discounts
c) Use of market leverage to force down supplier
costs
d) Large-scale layoffs and plant closings

Answer:
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Discussion Question
Which of the following is most likely to increase
long-term net financial value for a supply chain
firm?
a) Reinvesting profits in research and infrastructure
upgrades
b) Channeling SC cost savings into end-user
discounts
c) Use of market leverage to force down supplier
costs
d) Large-scale layoffs and plant closings

Answer:a
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Objective #2: Improve Customer

Service
Fundamental attributes:
Availability
Operational performance
Customer satisfaction

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Objective #3: Effectively Use

Systemwide Resources
Effectiveness:
Getting the right
product and the right
amount to the right
customer at the right
time.
Employees
Raw materials
Equipment

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High

Low
Low

High

Objective #4: Efficiently Use

Systemwide Resources
Efficiency:
A measurement of the
actual output compared
to the standard output
expected; measures
how well something is
performing relative to
existing standards.
Inward-focused
Capacity measure

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High

Low
Low

High

Objective #5: Leverage Partner

Strengths
Strong partnerships:
Add value to products
Improve market access
Build financial strength
Add technological strength
Strengthen operations
Enhance strategic growth
Improve organizational skills.

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Supply Chain Management

Concepts

Topic 5: Supply Chain

Management Benefits

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The Three Vs

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Bullwhip Effect

Supplier

Factory
Distributor
Retailer

Customer

Small demand uncertainty becomes more and more distorted.

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Supply Chain Management

Concepts

Topic 6: Accounting and

Financial Statement
Basics
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Accounting and Financial Statement

Basics
Flow of funds

Spend management

Goes upstream
(customer > producer > supplier)
Not linear

Consolidates internal demand

across the business and
partners to find areas for
discounts
Manages the outflow of funds
in order to buy goods and
services
Coordinates closely with
accounts payable

Advantages:
Reduces cash-to-cash cycle
time
Improves customer-supplier
relationships
Reduces imbalances between
larger and smaller supply chain
players

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Standard Costing

A cost accounting system that uses cost

units determined before production for
estimating the cost of an order or product.

COST = VOLUME x RATE

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Section 1A Review

Questions?

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