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Basics of Supply Chain Management

Book Description

The practice of supply chain management has become widespread in most industries. It is now included in the curriculum of many business schools in the United States and in many countries around the world. A number of professional associations, such as the American Production and Inventory Control Society and the Supply Chain Management Society, offer certification programs in supply chain management for practicing professionals. This book covers the contents of the basic supply chain management course and helps you prepare for the certification examination in supply chain management.

Basics of Supply Chain Management covers all modules of a core supply chain management course, including:

  • Transformation process
  • Forecasting and managing demand
  • Planning and production scheduling
  • Inventory management
  • Purchasing management
  • Distribution management
  • Global supply chain issues

Authored by a practitioner with the highest level of industrial experience and recognition, this book presents each concept fully and in an accessible manner. To aid understanding, it includes many practice problems, self-study test questions, and case studies. The case studies of 20 different companies can be used to teach graduate courses in supply chain management using the case method.

National as well as global demand for supply chain management experts has been growing exponentially. Therefore, learning supply chain management can lead to a very rewarding professional career path. This book gives you the information you need to get started on that path.

Table of Contents

  1. Preface
  2. Author
  3. Chapter 1 - Introduction
    1. 1.1 Introduction
    2. 1.2 Elements of Supply Chain
    3. 1.3 Operating Environment of Supply Chain
    4. 1.4 Manufacturing Planning and Control System
    5. 1.5 Planning Hierarchy in a Manufacturing Planning and Control System
      1. 1.5.1 Business Plan
      2. 1.5.2 Production Plan
      3. 1.5.3 Master Production Schedule
      4. 1.5.4 Material Requirements Planning
      5. 1.5.5 Purchasing and Production Activity Control
    6. 1.6 Capacity Management
    7. 1.7 Computerized Manufacturing Resource Planning System
    8. 1.8 Enterprise Resource Planning Systems
    9. 1.9 Distribution Planning Systems
      1. 1.9.1 Pull System
      2. 1.9.2 Push System
      3. 1.9.3 Distribution Requirements Planning System
    10. 1.10 Basic Production Planning Strategies
      1. 1.10.1 Demand Matching
      2. 1.10.2 Production Leveling
      3. 1.10.3 Subcontracting
      4. 1.10.4 Hybrid (Mixed) Strategy
  4. Chapter 2 - Transformation of Demand into Supply: Designing Products to Meet Customer Expectations
    1. 2.1 Introduction
    2. 2.2 Designing Products to Meet Customer Needs and Expectations
    3. 2.3 Product Design Determines Product Quality
    4. 2.4 Total Quality Management and Product Design
    5. 2.5 Quality Function Deployment and Product Design
    6. 2.6 Taguchi’s Methodology for Product Design
    7. 2.7 Product Design Strategies
    8. 2.8 Distinctive Competence and Product Design
    9. 2.9 Order-Winning Criteria and Order Qualifiers and Product Design
  5. Chatper 3 - Transformation Process Choices for Making Products Conforming to Product Design Specifications and Tolerances
    1. 3.1 Introduction
    2. 3.2 Traditional Manufacturing Process Choices
      1. 3.2.1 Mass-Scale Production
      2. 3.2.2 Batch Production
      3. 3.2.3 Unit Production
    3. 3.3 Just-in-Time Manufacturing
    4. 3.4 Objectives of the JIT Approach to Manufacturing
      1. 3.4.1 Minimizing Defects
      2. 3.4.2 Minimizing Setup Time
      3. 3.4.3 Minimizing Level of Inventory
      4. 3.4.4 Minimizing Lead Time
      5. 3.4.5 Minimizing Material Handling Time
      6. 3.4.6 Minimizing Machine Breakdowns
      7. 3.4.7 Improving Flexibility of the Manufacturing System
    5. 3.5 The Key Elements of the JIT Concept
    6. 3.6 Principles of JIT Manufacturing
      1. 3.6.1 Elimination of Waste and Addition of Value to the Product
        1. 3.6.1.1 Waste Caused by Poor Product Specification and Design
        2. 3.6.1.2 Waste Caused in Manufacturing
      2. 3.6.2 Continuous Improvement and Total Quality Management
    7. 3.7 Manufacturing Process Design for JIT Production
      1. 3.7.1 Group Technology and Flexible Manufacturing Systems
      2. 3.7.2 Manufacturing Cell Design Using GT
      3. 3.7.3 Flexible Manufacturing System
    8. 3.8 Characteristics of a JIT Environment
      1. 3.8.1 Flow-Based Repetitive Manufacturing
      2. 3.8.2 Manufacturing in Work Cells
      3. 3.8.3 Process and Machine Flexibility
      4. 3.8.4 Quick-Change Setup
      5. 3.8.5 Uninterrupted Flow of Materials
    9. 3.9 Supplier Relations in JIT Environment
    10. 3.10 Employee Involvement and Empowerment in JIT Environment
    11. 3.11 Effects of JIT on Manufacturing Planning and Control System
    12. 3.12 Effects of JIT on Production Planning
    13. 3.13 Effects of JIT on Master Production Scheduling
    14. 3.14 Effects of JIT on Material Requirements Planning
    15. 3.15 Effects of JIT on Capacity Management
    16. 3.16 Effects of JIT on Inventory Management
    17. 3.17 Effects of JIT on Organization Design
    18. 3.18 Effects of JIT on Job Design
    19. 3.19 Total Quality Management and JIT
      1. 3.19.1 Strategic Role of Quality
      2. 3.19.2 Quality and Productivity
      3. 3.19.3 Cost of Quality
      4. 3.19.4 Quality and Market Share
      5. 3.19.5 Zero-Defect Quality
      6. 3.19.6 Continuous Improvement
      7. 3.19.7 Management Planning Tools for Quality Planning
    20. 3.20 Benchmarking
    21. 3.21 Taguchi’s Methodology for Quality Product Design
    22. 3.22 Mistake Proofing and Automatic On-Line Inspection
    23. 3.23 Statistical Concepts for Quality Management
      1. 3.23.1 Concept of Variations (Common versus Assignable Causes)
    24. 3.24 Statistical Quality Control Charts
    25. 3.25 Process Capability Analysis
  6. Chapter 4 - Demand Forecasting and Demand Management
    1. 4.1 Introduction
    2. 4.2 Understanding Target Customers
      1. 4.2.1 Understanding Customer Expectations and Values
      2. 4.2.2 Customer Relationships
    3. 4.3 Demand Management
    4. 4.4 Demand Forecasting
      1. 4.4.1 Characteristics and Patterns of Demand
      2. 4.4.2 Stable versus Dynamic Patterns of Demand
      3. 4.4.3 Dependent versus Independent Demand
    5. 4.5 Principles of Forecasting Demand
    6. 4.6 Collection and Preparation of Data for Forecasting
    7. 4.7 Forecasting Methods
      1. 4.7.1 Qualitative Methods
      2. 4.7.2 Causal Methods
      3. 4.7.3 Quantitative Methods of Forecasting Using Historical Data
    8. 4.8 Some Quantitative Forecasting Techniques for Forecasting Short-Range Demand
      1. 4.8.1 Simple Moving Average Method
      2. 4.8.2 Weighted Average Method
      3. 4.8.3 Exponential Smoothing Method
    9. 4.9 Forecasting Seasonal Demand
      1. 4.9.1 Forecasting Seasonal Demand Using the Seasonal Index Method
      2. 4.9.2 De-Seasonalization of Demand
    10. 4.10 Forecasting Long-Range Trend
      1. 4.10.1 Forecasting Long-Range Trends Using the Graphical Method
      2. 4.10.2 Forecasting Long-Range Trend Using Least Squares Regression Analysis
    11. 4.11 Tracking the Forecast for Error
      1. 4.11.1 Forecast Error
        1. 4.11.1.1 Bias
        2. 4.11.1.2 Random Variation
      2. 4.11.2 Mean Absolute Deviation and Tracking Signal
      3. 4.11.3 MAD and Normal Distribution
  7. Chapter 5 - Master Planning
    1. 5.1 Introduction
    2. 5.2 Manufacturing Planning and Control System
    3. 5.3 Priority and Capacity
      1. 5.3.1 Priority
      2. 5.3.2 Capacity
    4. 5.4 Planning Hierarchy
      1. 5.4.1 Business Plan
      2. 5.4.2 Production Plan
      3. 5.4.3 Master Production Schedule
      4. 5.4.4 Material Requirements Plan
      5. 5.4.5 Capacity Requirements Planning
      6. 5.4.6 Production and Purchasing Activity Control
    5. 5.5 Computerized Manufacturing Planning and Control System
    6. 5.6 Production Planning Strategies
    7. 5.7 Basic Production Planning Strategies
      1. 5.7.1 Demand Matching
      2. 5.7.2 Production Leveling
      3. 5.7.3 Subcontracting
      4. 5.7.4 Hybrid (Mixed) Strategy
    8. 5.8 Developing a Production Plan
      1. 5.8.1 Developing a Production Plan Using Level Production
      2. 5.8.2 Developing Production Plan Using Demand Matching
      3. 5.8.3 Developing a Production Plan Using Make-to-Order Plan
      4. 5.8.4 Developing an Assemble-to-Order Plan
      5. 5.8.5 Developing a Make-to-Order Plan Using Level Production
    9. 5.9 Resource Requirements Planning
  8. Chapter 6 - Master Production Scheduling
    1. 6.1 Introduction
    2. 6.2 Master Production Schedule
      1. 6.2.1 Master Production Schedule and Production Plan
    3. 6.3 Preparing a Master Production Schedule
      1. 6.3.1 Preparing a Preliminary Master Production Schedule
      2. 6.3.2 Rough-Cut Capacity Planning
        1. 6.3.2.1 Resource Bill
      3. 6.3.3 Resolution of Differences
    4. 6.4 Master Scheduling Decisions
    5. 6.5 MPS and Delivery Promises
      1. 6.5.1 Available to Promise
    6. 6.6 Planning Horizon for an MPS
    7. 6.7 Time Fences
      1. 6.7.1 Time Fence Zones
    8. 6.8 Summary and Conclusion
  9. Chapter 7 - Material Requirements Planning
    1. 7.1 Introduction
    2. 7.2 Material Requirements Planning
    3. 7.3 Objectives of MRP
    4. 7.4 MRP System
    5. 7.5 Inputs to the MRP System
      1. 7.5.1 Master Production Schedule
      2. 7.5.2 Bill of Materials
      3. 7.5.3 Where-Used Report and Pegging Report
      4. 7.5.4 Inventory Records
      5. 7.5.5 MRP Process
      6. 7.5.6 Exploding and Offsetting
      7. 7.5.7 Planned Order Receipt and Release
      8. 7.5.8 Gross and Net Requirements
    6. 7.6 Capacity Planning
      1. 7.6.1 Planning Levels
        1. 7.6.1.1 Resource Planning
        2. 7.6.1.2 Rough-Cut Capacity Planning
        3. 7.6.1.3 Capacity Requirements Planning
    7. 7.7 Available Capacity
      1. 7.7.1 Unit of Measurement
      2. 7.7.2 Levels of Capacity
      3. 7.7.3 Determining Available Capacity (Time)
    8. 7.8 Work Center Utilization Rate
    9. 7.9 Work Center Efficiency
    10. 7.10 Work Center Rated Capacity
    11. 7.11 Work Center Demonstrated Capacity
    12. 7.12 Work Center Required Capacity
    13. 7.13 Inputs to Capacity Requirements Planning
      1. 7.13.1 Open Shop Order File
      2. 7.13.2 Planned Order Releases from MRP
      3. 7.13.3 Routing File
      4. 7.13.4 Work Center Capacity File
    14. 7.14 Shop Calendar
    15. 7.15 Scheduling Orders
    16. 7.16 Load Profile
    17. 7.17 Production and Purchasing Activity Control
    18. 7.18 Planning Activities
      1. 7.18.1 Implementation Activities
      2. 7.18.2 Controlling Activities
    19. 7.19 PAC in Different Types of Manufacturing Systems
      1. 7.19.1 PAC in Line (Continuous-Flow) Manufacturing
      2. 7.19.2 PAC in Intermittent (Batch) Manufacturing
      3. 7.19.3 PAC in Project Manufacturing
    20. 7.20 Data Requirements for Processing PAC
      1. 7.20.1 Planning Files
      2. 7.20.2 Data Requirements for Intermittent Manufacturing
    21. 7.21 Order Preparation
    22. 7.22 Scheduling
    23. 7.23 Manufacturing Lead Time
    24. 7.24 Scheduling Techniques
  10. Chapter 8 - Inventory Management
    1. 8.1 Introduction
    2. 8.2 Aggregate Inventory Management
    3. 8.3 Physical Classification of Inventory
    4. 8.4 Supply and Demand Patterns of Inventory
    5. 8.5 Functions of Inventories in Batch Production Systems
    6. 8.6 Objectives of Inventory Management
      1. 8.6.1 Customer Service
      2. 8.6.2 Operating Efficiency
    7. 8.7 Inventory Costs
    8. 8.8 ABC Inventory Control
      1. 8.8.1 Steps in Making an ABC Analysis
      2. 8.8.2 Control Based on ABC Classification
    9. 8.9 Inventory Ordering System Models
      1. 8.9.1 Lot Size Decision Rules
    10. 8.10 Basic Economic Order Quantity Model
      1. 8.10.1 Development of the Basic EOQ Model (Formula)
        1. 8.10.1.1 Trial-and-Error Solution
      2. 8.10.2 Variations of the EOQ Model
        1. 8.10.2.1 Monetary Unit Lot Size Model
        2. 8.10.2.2 Noninstantaneous Receipt Model
      3. 8.10.3 Quantity Discount Model
      4. 8.10.4 EOQ Model When Costs Are Not Known
  11. Chapter 9 - Purchasing Management
    1. 9.1 Introduction
    2. 9.2 Purchasing Management
    3. 9.3 Purchasing Cycle
      1. 9.3.1 Purchase Requisition
      2. 9.3.2 Selecting the Vendor
      3. 9.3.3 Quotation
      4. 9.3.4 Purchase Order
      5. 9.3.5 Following Up on Delivery
      6. 9.3.6 Receiving and Accepting Goods
      7. 9.3.7 Approving Vendor’s Invoice for Payment
    4. 9.4 Developing Specification
      1. 9.4.1 Description of the Product
      2. 9.4.2 Quantity and Quality Requirements
      3. 9.4.3 Miscellaneous Other Specifications
    5. 9.5 Selecting Suppliers
      1. 9.5.1 Checking Technical and Manufacturing Capability of Suppliers
      2. 9.5.2 Ensuring Reliability of Supply
      3. 9.5.3 Supplier Location
      4. 9.5.4 Price
      5. 9.5.5 Price Determination
      6. 9.5.6 Final Selection of the Vendor
    6. 9.6 Supplier Development
    7. 9.7 Supplier Relationship Management
      1. 9.7.1 Supplier Relationship Management Software
  12. Chapter 10 - Physical Distribution Management
    1. 10.1 Introduction
    2. 10.2 Physical Supply Management
    3. 10.3 Physical Distribution Management
    4. 10.4 An Integrated Physical Distribution System
    5. 10.5 Modes of Transportation
    6. 10.6 Types of Carriers
    7. 10.7 Concept of Total System Cost
    8. 10.8 Example Problems
  13. Chapter 11 - Distribution Inventory Management
    1. 11.1 Introduction
    2. 11.2 Distribution Inventories
    3. 11.3 Distribution Inventory Management Systems
      1. 11.3.1 Pull System
      2. 11.3.2 Push System
      3. 11.3.3 Distribution Requirements Planning
    4. 11.4 Warehousing
      1. 11.4.1 Processing Activities in a Warehouse
      2. 11.4.2 Warehouse Management
      3. 11.4.3 Effective Use of Warehouse Space
      4. 11.4.4 Effective Stock Location in a Warehouse
      5. 11.4.5 Effective Order Picking and Assembly
      6. 11.4.6 Effective Packaging
    5. 11.5 Material Handling in a Warehouse
    6. 11.6 Multiwarehouse System
    7. 11.7 Cost Characteristics in a Multiwarehouse System
    8. 11.8 Total Cost Curve of a Multiwarehouse System
  14. Chapter 12 - Global and Other Issues in SCM
    1. 12.1 Introduction
    2. 12.2 Total Quality Management in the Global Supply Chain
      1. 12.2.1 Top Management Commitment to Quality
      2. 12.2.2 Total Customer Satisfaction in the Global Supply Chain
      3. 12.2.3 Quality Product Design in the Global Supply Chain
      4. 12.2.4 Quality Control for Ensuring Product Quality in a Global Supply Chain
    3. 12.3 Respecting Human Resources and Human Rights in the Global Supply Chain
    4. 12.4 Supplier Relationship Management in the Global Supply Chain
      1. 12.4.1 Supplier Development
      2. 12.4.2 Supplier Relationship Management Software
    5. 12.5 Customer Relationship Management in the Global Supply Chain
  15. Appendix A: Cases in Supply Chain Management
    1. Case 1: People’s Motor Company
    2. Case 2: BMW Dream Automobile Company
    3. Case 3: Amari Bazar
    4. Case 4: Mid-Michigan Robotics
    5. Case 5: Mohendra Tractor Company
    6. Case 6: Lara Corporation
    7. Case 7: Mondo Computer
    8. Case 8: Golkunda Gold
    9. Case 9: Taj Supply House
    10. Case 10: Hindustan Liver
    11. Case 11: Jabakusum Oil Company
    12. Case 12: Godavari.com
    13. Case 13: Murty Automotive Dealership
    14. Case 14: Maruti Motor Corporation
    15. Case 15: Joy Postal Services
    16. Case 16: Darbari Musicals
    17. Case 17: Urvasi Hairstyle Products
    18. Case 18: Groceries Logistics Solutions
    19. Case 19: Southern Systems Logistics
  16. Appendix B: Self-Study Practice Questions for Basic Supply Chain Management
    1. Elements of Supply Chain
    2. Operating Environment
    3. Process Choices
    4. Manufacturing Strategy
    5. Just-in-Time Production
    6. Total Quality Management
    7. Marketplace-Driven Demand
    8. Manufacturing Resource Planning
    9. Production Planning and Control
    10. Materials (Inventory) Management
    11. Forecast of Demand
    12. Physical Distribution Requirements Planning
  17. Bibliography