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15 Supply Chain Concepts You Should Know to

Get Ready for the CSCP Exam

from the team at

REAL WORLD SUPPLY CHAIN

WWW.REALWORLDSUPPLYCHAIN.COM
http://www.realworldsupplychain.com/http://www.realworldsupplychain.com/


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Copyright 2012 Real World Supply Chain LLC! 2

Thank you for downloading this free guide. You may share this

with others as long as it is shared without changes and it is

accompanied by attribution to Real World Supply Chain.

Copyright 2012 Real World Supply Chain LLC
http://www.realworldsupplychain.com/http://www.realworldsupplychain.com/http://www.realworldsupplychain.com/


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Disclaimer

Please bear with us as we take care of some admin stuff. You probably already

understand these, but we put together this page just to make sure.

The Partners of Real World Supply Chain LLC are not affiliated in any way with its past

or present employers. It is also not affiliated with any industry association.

The content provided here was independently developed by our team. It represents our

own interpretation and teaching of the material. This may differ from the interpretation

and intent of other groups.

Each persons experience, dedication and motivation will be different. So, as you can

assume, we cannot guarantee any specific results based on preparing with this guide.

You should use this guide only to supplement the official CSCP preparation materials.

We worked very hard to ensure that this report is free of errors. But were a small team.

So some details can and do get missed. We do not assume any responsibility for errors,

omissions and varied individual interpretations of the content. Though if you do spot an

error, wed appreciate it if you could let us know so we can make the required

corrections.

Heres the great part. We are committed to helping you grow and succeed. And we dont

say those words lightly. Wed love to hear about your own challenges. Well try our best

to help where we can.

Please contact us for anything.




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01 Increasing Importance of Supply Chain Management

The market place is more demanding than ever. Competition is stiff. Frequent product

introductions are often required to survive.

The product offerings available to customers are practically limitless. And customer

expectations for quality, features, availability and price are just as demanding.

This leads to shorter product life cycles and greater demand volatility. At the same time,

for many products, the developing markets represent an increasingly large portion of the

total revenue. So companies cant focus on just supplying North America, developed

Europe and developed Asia.

These developing markets typically require customized versions of a base product in

order to satisfy customer needs. A supply chain that quickly and efficiently delivers

products to just about every country around the world is often required to compete.

The ability to introduce new products quickly is critical. Equally important is the ability to

effectively phase out products without incurring significant inventory write-offs.

To make things worse, the challenging market place is coming at a time of increasing

financial pressure. Companies face slowing growth rates, margin pressure, reduced

access to capital and demanding shareholders.

As such, companies are looking to reduce spending in supply chain operations and

optimize working capital.



15 Supply Chain Concepts You Should Know to

Get Ready for the CSCP Exam


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02 Supply Chain Design & Management Linked to Business Strategy

It makes sense that a companys supply chain strategy be aligned with its business

strategy. Three typical strategies are low cost, differentiation and focus.

A low cost strategy might be utilized for a high volume product that is considered a

commodity. In this case, the supply chain might focus on large batch sizes, minimal

manufacturing changeovers and low total supply chain inventory.

A differentiation strategy might require a supply chain that can consistently delivery high

quality products with short product life cycles and maintain high customer service levels.

Distribution centers might be established close to the customer. Postponementinventory strategies might be implemented to enable late stage customization or rapid

finished product changes.

A focused strategy is similar to a differentiation strategy, but its goal is to service a niche

market. This may require a supply chain that nears 100% customer service levels. It

may even, for example, air freight orders to meet customers with demanding

expectations.

There are a variety supply chain design decisions like manufacturing locations, number

of distribution centers and transportation modes that can be made to align the supply

chain with corporate strategy.




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03 Supply Chain Collaboration

Supply chains are expanding geographically. Customer demands are increasing and

rapidly changing. As a result, more and more players are getting involved in getting

products to customers.

Information sharing across the organization becomes more critical to successful

management of operations to ensure customer service, supply chain spending and

inventory turn targets are met.

Within the company, this requires open sharing of real time or near real time supply

chain information. Moreover, collaboration extends beyond the company walls to keysuppliers and customers. Collaboration across all nodes of the supply chain leads to

one version of the truth.

A robust S&OP process (and the actual periodic meeting) plays a critical role in

achieving this.




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04 Inventory Management

Inventory is one of the largest assets that supply chain managers can directly influence.

Understand that you keep inventory to manage supply/demand variability and manage

constraints in the supply chain.

There are five basic types of inventory:

1. finished goods inventory

2. work-in-process inventory

3. raw material inventory

4. in-transit inventory

5. maintenance inventory

Note that safety stock, cycle stock, buffer inventory, anticipatory inventory, hedge

inventory are all examples of different functionsof inventory.

Inventory can be viewed under Current Assets on the balance sheet. This means that

inventory is an asset with a reasonable expectation to be converted to cash within one

year.

The cost of goods sold on the Income Statement includes the direct labor and material

costs for the inventory sold as well as the fixed overhead allocated to that inventory.

The Changes in Inventories line on the Statement of Cash Flow shows the change in

inventory value for the period reported. Increases in inventory negatively affect cash

flow. And decreases in inventory positively effect cash flow.

Inventory management should be performed at a high level where target inventory

levels are set for each node of the supply chain. It should also be performed at a

detailed SKU level where rules such as individual safety stock levels, minimum order

quantities, order frequency are established.




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05 Demand Planning

Forecast has two main types: independent and dependent demand.

Independent demand is best described as customer demand for finished goods. Its

important to note that forecasts for independent demand rarely are 100% accurate,

particularly when a forecast lag for comparison is used to calculate forecast error.

Dependent demand is then the requirements from the downstream node in the supply

chain that are passed to the upstream node. For example the projected bulk material

requirements for finished good manufacture would be considered dependent demand.

Qualitative and quantitative forecast methods exist and are valuable methods for

estimating future demand. For quantitative forecasting, methods based on extrinsic and

intrinsic data exist.

Extrinsic data like housing starts might be used to estimate demand for lumber.

Examples of intrinsic forecasting algorithms include nave forecast method, moving

average, weighted moving average and exponential smoothing.

A couple of important parting notes. Define the time bucket, time horizon and frequency

of forecasting. Also, aggregate forecasts typically are more accurate than SKU level

forecasts.




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06 Customer Relationship Management

The general philosophy of Customer Relationship Management is to design your supply

chain in a customer-driven method. Basically, this means that customer needs drive

strategy and operations.

Developing a close relationship with key customers benefits you in the long term.

Nurturing current customers so they become lifetime customers is one of the main goals

of customer relationship management.

Lifetime customers tend to require lower marketing expense, are easier to satisfy and

are more profitable. There are a number of functions associated with customerrelationship management including customer segmentation, customer relationship

building and customer collaboration.




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07 Supplier Relationship Management

Practically all companies will utilize some external suppliers of materials and services to

support business operations. This can be a simple as utility providers of electricity to

microchip suppliers to make computers.

Supplier Relationship Management is a shift from transaction focused management to

collaborative management. Suppliers are seen as strategic partners. The basic idea is

that the long term success of your suppliers impact your own long term success.

Supplier Relationship Management aims to improve product development, reduce costs

to both organizations, improve supply reliability and reduce risk.




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08 Logistics

Generally speaking logistics is aimed at supplying the appropriate product in the correct

quantity and at the correct time to meet each customer demand.

Traditional logistics includes transportation and warehousing. The common

transportation modes are air, water, road, rail and pipeline. Each of these has an

appropriate application. Warehousing activities including receiving, storing, picking and

shipping product.

And in some ways, for better or for worse, when people here supply chain, they think

logistics.

Understanding the mechanics of logistics are still as important as ever. But as supply

chain leaders, its viewed simply as one of the many technical processes you need to

learn.




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09 Supply Chain Planning Process

Supply chain planning is a large topic. Below are the high level steps that can be

followed to plan a supply chain end-to-end.

Define planning parameters and static data to define the supply chain structure:

1. Define the planning horizon (eg, 24 months)

2. Define the planning time bucket (eg, months, weeks, days)

3. Define target inventory levels for all materials at all nodes in the supply chain

4. Define transportation lanes and lead times for all materials and nodes in the

supply chain

5. Define manufacturing operations including input materials, output materials,

yields, batch sizes and lead times

Refresh dynamic data:

1. Collect latest customer forecast data

2. Collect starting inventory levels for all materials at all nodes of the supply chain

3. Collect fixed manufacturing schedules

4. Collect fixed procurement plans

5. Collect latest capacity data for all constrained resources

Plan the supply chain:

1. Calculate the finished good in-market replenishment requirements and pass

requirements upstream while offsetting the requirements to factor in

transportation lead time

2. Calculate manufacturing operations required to supply finished good

replenishment requirements and pass raw material requirements upstream




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