Apics CSCP - 1a Sccdi

APICS Certified Supply Chain Professional
DEVELOP THE SUPPLY CHAIN

STRATRGY
Version 4.0. 2016 Edition
SCCDI SUPPLY CHAIN CAPACITY DEVELOPMENT INITIATIVE. Version 4.0, 2016 Edition 1-1
Module 1 Contents
• Section A: Supply Chain Management Concepts

• Section B: Supply Chain Alignment with Business Strategy
• Section C: Supply Chain Design and
Improvement Considerations
• Section D: Inventory Management
• Section E: Logistics Fundamentals
• Section F: Market Segmentation
• Section G: Demand Planning
• Section H: CRM Concepts
• Section I: Supply Management Concepts
SCCDI SUPPLY CHAIN CAPACITY DEVELOPMENT INITIATIVE. Version 1.0. 2015 Edition 1-2
Section A Learning Objectives
• Define and illustrate the supply chain in terms of entities, structures, and
flows.
• Identify and describe key supply chain processes.
• Describe the SCOR® model and its use for improving supply chains.
• Differentiate between vertical and horizontal integration.
• Define supply chain management and its objectives and benefits.
• Describe the stages of supply chain evolution globally and within
companies.
• Identify specific ways in which supply chain management creates value for
all stakeholders.
• Define key financial terms.
• Explain key financial statements that are commonly used in supply chain
management.
Basic Supply Chain for a Product
Three entities and four flows
Information flow
Reverse product flow
Supplier Producer Customer
Primary Primary
product product
flow flow
Primary cash flow
Basic Supply Chain: Three Entities
Supplier
Supplier Producer
Producer Customer
Customer
• Raw materials • Products • Retailer

• Energy • Power • Wholesaler
• Services • Professional • Distributor
services
• Components • End user
• Government
services
• Educational
services
Supply Chain Strategies
Three Main Types

Stable Reactive Efficient Reactive
Supply Chain Supply Chain Supply Chain
Has significant history of Fulfills demand from trade Serves as efficient, low-cost,
stability partners’ sales and integrated unit
Focuses on execution, marketing strategies Focuses efficiency and cost
efficiencies, cost Is perceived as a cost center management on total
performance Needs minimal connectivity delivered cost of finished
Uses simple connectivity technologies and capital goods
technologies assets Places greater importance on
Ensures throughput at any cost connectivity technology and
(primary goal) new equipment
Basic Supply Chain: Four Flows
Information flow
Invoices, sales lit, specs, blueprints, receipts, orders, rules and regs, etc.
Primary cash flow
Payments for products, supplies, etc.
Primary product flow
Material, components, supplies, services, energy, finished products
Returns for repair, replacement, recycling, disposal, etc.
Supply Chain Example: Street Vendor
Suppliers’
Suppliers Producer Retailer Customer
Suppliers
Growers Wholesale food Street vendor: Street vendor: Consumers

distributor cooking the stand and its
Miners operations employees
Utilities
Utilities
Builders
Manufacturers
Other merchants
Manufacturing Supply Chain Model
Information flow
Tier 2 materials
supplier
Tier 1 materials
Customer
supplier
Tier 2 materials Distributor
supplier
Customer
Tier 2 service Tier 1 materials
supplier supplier
Manufacturer
Customer
Tier 2 materials
supplier Distributor
Tier 1 service
supplier Customer
Tier 2 service
supplier
Primary Primary
product cash
flow flow
Services Also Have Supply Chains
Fuel supplies
Other
Electric backup utilities
power
Electric
Electrical Power Home
transformers
customers
Utility
Facility
maintenance
Commercial
customers
Programming
services
Janitorial
services
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.
Discussion Question
An auto manufacturer that buys directly from a utility

company, carburetor builder, textile company, and
sheet metal producer would have how many tiers of
suppliers?
a)One
b)Two
c)Three
d)Four
•Answer: a
SCOR® SC Operations Reference Model
Plan
Plan Plan
Deliver Source Make Deliver Source Make Deliver Source

Source Make Deliver
Return Return Return Return Return Return
Return Return
Suppliers’ Customer’s
Supplier Supplier— Customer— Customer
Internal or External Internal or External

Your Organization
Source: Adapted from Supply Chain Council, Inc.
Two Types of Supply Chain Management
Vertical Integration Lateral (Horizontal) Integration

Degree to which a firm directly controls Coordinated management of separately
multiple links in the supply chain from raw owned links in the supply chain;
material extraction to retail sales “outsourcing”
Retail sales Raw Production

Components Retail
materials Distribution
Products sales
extraction Services
Distribution
Production
Components/products/services
Raw materials extraction
Vertical Integration
Integrated automotive company: Benefits of vertical integration

ownership, management,
marketing/sales, finance No dealing with competitors for
supplies, etc.
Showroom Customer
Enhanced visibility into operations
Distribution
Control
Plant Primary Same ownership and management
materials/ for all activities in supply chain
Component product flow
production
Raw materials
Lateral Integration
Information flow
Raw materials Components Plant Distribution Retail Customers
Primary product flows Primary cash flows
Benefits of lateral integration

Economies of scale and scope
Improved business focus
Leveraging communication and
production competencies
Stages of SCM Evolution
1: Multiple 2: Semifunctional 3: Integrated 4: Extended

Dysfunction Enterprise Enterprise Enterprise
• Impulsive activity • Mostly manual ops • New focus on • Process integration
• Pep talks, threats • Inventory reduction process across entity
• No teamwork in owned facilities • Internal process boundaries
• Little information • New low-price integration • Eventual electronic
exchange purchasing • MRP II/ERP information
strategies • Intranets, etc., connections among
• Some hard skills across functions multiple partners
training, job • Design teams • ERP-to-ERP links
enhancement • Enhanced • E-commerce
• Enhanced warehousing, • Supply chain vs.
marketing and logistics, supply chain
forecasting forecasting, etc. competition
• No coordination of
initiatives
Stage 3: Integrated Enterprise
ERP
Suppliers Customers
Production Marketing/
Purchasing Logistics R&D Distribution
control sales
Suppliers Customers
Suppliers Materials/products/services Payments

Customers
Stage 4: Extended Enterprise
Networked information flow
Suppliers’ Internal Customers’

Suppliers Customers
suppliers chain customers
Materials/products/services Payments
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
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.
Value Chain and Mapping
Functions in a company that add value to

Value chain
goods or services
Processes that create, produce, and

Value stream
deliver a product or service
Value stream Drawing the existing and desired value

mapping streams to aid process improvement
OBJECTIVES
Objective #1:
Add Value for Customers and
Stakeholders
Financial value
Supplier
Supplier Producer
Producer Customer
Customer Customer value
Social value
Balancing Varied Stakeholder Values
Firms in SC Profit, market share, image
Product and service quality, affordability,

End customers availability
Investors Return on investment, quality of communications
Lenders Interest, long-term stability, return of principal
Communities/
Tax base, environment, jobs
environment
Governments Laws, regulation, overall impact
Job security, compensation, opportunity, working

Employees conditions
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
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).
Enhancing Customer Value
Quality Affordability Availability Service Sustainability
Most resources are invested in creating the value

of greatest importance to the market.
Social Values
Deliver socially desirable Avoid negative Integrate sustainability in

goods. side effects. supply chain.
Social/cultural implications Environmental impact of Plan: Energy use, hazards

Public and military impact extraction, processing, Source: Minimize transport
and construction and handling
Effects on jobs, taxes,
economy Laws and regulatory Make: Efficient processes
agencies
Deliver: Less packaging
Reduce, reuse, recycle
(reverse supply chain) Return: Easy recycling
Discussion Question
Which of the following is most likely to increase long-term net financial value for a supply chain firm?
•Reinvesting profits in research and infrastructure upgrades

•Channeling SC cost savings into end-user discounts
•Use of market leverage to force down supplier costs
•Large-scale layoffs and plant closings
•Answer: a
OBJECTIVES
Objective #2:
Improve Customer Service
Fundamental attributes:
• Availability
• Operational performance
• Customer satisfaction
OBJECTIVES
Objective #3:
Effectively Use Systemwide Resources
High
Effectiveness:
Getting the right product and Thrive
the right amount to the right
Effectiveness
customer at the right time.
► Employees
► Raw materials
Low
► Equipment
Low High
Efficiency
OBJECTIVES
Objective #4:
Efficiently Use Systemwide Resources
High
Efficiency:
A measurement of the actual Thrive
output compared to the
Effectiveness
standard output expected;
measures how well something
is performing relative to
existing standards.
Low
Low High
► Inward-focused
► Capacity measure
Efficiency
OBJECTIVES
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.
The Three Vs
Vis
Vel
Var
ibil
oci
iab
+ =
ity
ty
ility
Bullwhip Effect
Supplier Factory
Distributor
Retailer
Customer
Small demand uncertainty becomes more and more distorted.
Bullwhip Effect (VIDEO CLIP)
Accounting and Financial Statement Basics
Flow of funds Spend management
• Goes upstream • Consolidates internal

(customer > producer > supplier)
demand across the
• Not linear
business and partners to
find areas for discounts
Advantages:
• Reduces cash-to-cash cycle • Manages the outflow of
time funds in order to buy goods
• Improves customer-supplier and services
relationships
• Reduces imbalances between
• Coordinates closely with
larger and smaller supply chain accounts payable
players
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
Balance Sheet for Two Years
Financial value at What organization Expect to convert to What organization Portion owed
point in time owns cash within one year owes this year
In Thousands (000) In Thousands (000)
December 31, 2010 2011 December 31, 2010 2011
ASSETS LIABILITIES
CURRENT ASSETS CURRENT LIABILITIES
CASH AND CASH EQUIVALENTS $ 783 $ 908 ACCOUNTS PAYABLE 604 660
INVENTORY 400 437 SHORT-TERM NOTES PAYABLE 60 75
PREPAID EXPENSES Not easily — — TOTAL CURRENT LIABILITIES 664 735
ACCOUNTS RECEIVABLE 514 562
converted
TOTAL CURRENT ASSETS 1,697 1,907 LONG-TERM
- LIABILITIES Owed
to cash LONG-TERM DEBT 600 600
TOTAL LIABILITIES
beyond 1,264 1,335
FIXED ASSETS
GROSS PROPERTY, PLANT, AND EQUIPMENT 600 700 one year
LESS ACCUMULATED DEPRECIATION 75 121 OWNERS’ EQUITY
NET PROPERTY, PLANT, AND EQUIPMENT 525 579 COMMON STOCK (PAR VALUE) 10 10
ADDITIONAL PAID-IN CAPITAL 440 440
TOTAL ASSETS $ 2,222 $ 2,486 RETAINED EARNINGS 508 701
TOTAL OWNERS’ EQUITY 958 1,151
TOTAL LIABILITIES AND

OWNERS’ EQUITY $ 2,222 $ 2,486
Assets = Liabilities +
Owners’ Equity
Funds from owners (what remains after
deducting liabilities)
Income Statement for Two Years
Profit or loss over In Thousands (000)

period of time For the Years Ending 2010 2011
REVENUE (SALES) 2,769 3,026
Expenses from LESS: COST OF GOODS SOLD (COGS)
2010 2011
providing goods/
DIRECT LABOR 380 410
services that generate
DIRECT MATERIALS 990 1,120
revenue
FACTORY OVERHEAD 311 300
TOTAL COGS –1,681 –1,830
Revenue − COGS =
GROSS PROFIT 1,088 1,197
Gross Profit LESS: OPERATING EXPENSES 2010 2011
SELLING EXPENSES 249 272
Expenses not directly
linked to specific units GENERAL AND ADMINISTRATIVE 166 182
sold LEASE EXPENSE 83 91
TOTAL OPERATING EXPENSES –498 –545
Gross Profit LESS: DEPRECIATION –40 –46 The

− Operating Exp. LESS: INTEREST EXPENSE –39 –39 “bottom
− Depreciation NET INCOME (PROFIT) BEFORE TAXES 512 567 line”
− Interest Exp. INCOME TAXES –169 –300
− Income Taxes NET INCOME (PROFIT) $ 343 $ 267
= Net Income
NET INCOME (AS A PERCENTAGE OF REVENUE) 12% 9%
Statement of Cash Flows for Two Years
Viable firm needs positive cash In Thousands (000)

Year
Change in cash 2010 2011
flow from operations in most balance over
OPERATING SECTION
years. period
AFTER-TAX NET INCOME $ 343 $ 267
DEPRECIATION ADD - BACK 40 46
Depreciation added back (INCREASE)/DECREASE IN INVENTORY (68) (37)
(doesn’t reduce cash). (INCREASE)/DECREASE IN ACCOUNTS RECEIVABLE (87) (48)
INCREASE/(DECREASE) IN ACCOUNTS PAYABLE 102 56
CASH FLOW FROM OPERATIONS 330 285
Increase in inventory or
accounts receivable reduces INVESTING SECTION
cash. CAPEX SPEND (CAPITAL EXPENDITURES) (100) (100)
CASH FLOW FROM OPERATIONS AND INVESTMENT 230 185
Increase in business investment New debt
decreases cash. FINANCING SECTION or equity
ADDITIONAL EQUITY CAPITAL — — provides
LESS DIVIDENDS PAID (50) (75) cash
Net Income INCREASE/(DECREASE) IN LONG-TERM DEBT — —
+/− Change in (Δ) Operating INCREASE/(DECREASE) IN SHORT-TERM NOTES (15) 15
+/ − Δ Investing CASH FLOW FROM OPERATIONS, INVESTMENTS,
AND FINANCING 165 125
+/ − Δ Financing
+ Beginning Cash BEGINNING CASH BALANCE 618 783
= Ending Cash ENDING CASH BALANCE $ 783 $ 908
Taxes and the Supply Chain
• Tax savings
• Procurement
• Logistics networks
• Information technology
• Competing values
Section A Topic Review
• 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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APICS Certified Supply Chain Professional

DEVELOP THE SUPPLY CHAIN

Version 4.0. 2016 Edition

• Section A: Supply Chain Management Concepts

Three entities and four flows

Reverse product flow

Supplier Producer Customer

• Raw materials • Products • Retailer

Three Main Types

Primary cash flow

Payments for products, supplies, etc.

Primary product flow

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

Reverse product flow

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

Growers Wholesale food Street vendor: Street vendor: Consumers

An auto manufacturer that buys directly from a utility

Deliver Source Make Deliver Source Make Deliver Source

Internal or External Internal or External

Source: Adapted from Supply Chain Council, Inc.

Vertical Integration Lateral (Horizontal) Integration

Retail sales Raw Production

Raw materials extraction

Integrated automotive company: Benefits of vertical integration

Raw materials Components Plant Distribution Retail Customers

Primary product flows Primary cash flows

Benefits of lateral integration

1: Multiple 2: Semifunctional 3: Integrated 4: Extended

Suppliers Materials/products/services Payments

Reverse product flow

Networked information flow

Suppliers’ Internal Customers’

Reverse product flow

If a firm uses a logistics supplier to integrate with

The design, planning, execution, control and

Functions in a company that add value to

Processes that create, produce, and

Value stream Drawing the existing and desired value

Firms in SC Profit, market share, image

Product and service quality, affordability,

Investors Return on investment, quality of communications

Lenders Interest, long-term stability, return of principal

Governments Laws, regulation, overall impact

Job security, compensation, opportunity, working

Green supply chain:

► Government and regulatory pressures

• Cut costs that yield net gains at the bottom

• “It takes money to make money” (such as

• Gains should be equitably

Quality Affordability Availability Service Sustainability

Most resources are invested in creating the value

Deliver socially desirable Avoid negative Integrate sustainability in

Social/cultural implications Environmental impact of Plan: Energy use, hazards

•Reinvesting profits in research and infrastructure upgrades

Small demand uncertainty becomes more and more distorted.

Flow of funds Spend management

• Goes upstream • Consolidates internal

A cost accounting system that uses cost units determined before

COST = VOLUME x RATE

TOTAL LIABILITIES AND

Profit or loss over In Thousands (000)

Gross Profit LESS: DEPRECIATION –40 –46 The

Viable firm needs positive cash In Thousands (000)