Basics of Supply Chain Management

Introduction to Supply Chain Management

Session 1

APICS Certified in Production and Inventory Management (CPIM)

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Basics of Supply Chain Management

Demand Management
Session 2

APICS Certified in Production and Inventory Management (CPIM)

22 APICS CONFIDENTIAL AND PROPRIETARY

Problem 2.4 (Solution)

Month Demand Next-Month Forecast

1 102
2 91
3 95 96
4 105 97
5 94 98
6 101 100
7 108 101
8 91 100
9 101 100
10 99 97

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Basics of Supply Chain Management

Master Planning
Session 3

APICS Certified in Production and Inventory Management (CPIM)

3 3 44 APICS CONFIDENTIAL AND PROPRIETARY

Problem 3.9 Solution
Complete the projected available balance and the MPS
scheduled receipts for the five periods

Week 1 2 3 4 5

Forecast 80 150 300 120 100

Projected available balance 100 20 70 170 50 150

Master production schedule 200 400 200

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Problem 3.10 Solution
Calculate the available-to-promise.
There is no opening inventory.

Week 1 2 3 4 5

Customer orders 15 5 25 5

MPS scheduled receipts 30 30 30

ATP 10 0 30

36 APICS CONFIDENTIAL AND PROPRIETARY

Basics of Supply Chain Management

Material Requirements Planning (MRP)

Session 4

APICS Certified in Production and Inventory Management (CPIM)

47 APICS CONFIDENTIAL AND PROPRIETARY

Problem 4.7 Solution
Week
Item
Number 1 2 3 4 5

Gross requirements 100

Scheduled receipts

B Projected available
Net requirements 100
Planned order receipt 100
Planned order release 100
Gross requirements 200
Scheduled receipts 100

C Projected available
Net requirements
100 0
100
Planned order receipt 100
Planned order release 100
Gross requirements 100
Scheduled receipts

D Projected available
Net requirements 100
Planned order receipt 100
Planned order release 100
Gross requirements 300
Scheduled receipts

E Projected available
Net requirements
0
300
Planned order receipt 300
Planned order release 300
Gross requirements 100
Scheduled receipts

F Projected available
Net requirements
0
100
Planned order receipt 100
Planned order release 100
Gross requirements 100
Scheduled receipts

G Projected available
Net requirements
200 200 200 100
0
100 100

Planned order receipt APICS CONFIDENTIAL AND PROPRIETARY

48
Planned order release
 Basics of Supply Chain Management

Capacity Management and

Production Activity Control
Session 5

APICS Certified in Production and Inventory Management (CPIM)

59 APICS CONFIDENTIAL AND PROPRIETARY

Problem 5.13 Solution
Calculate the utilization, efficiency, and rated weekly capacity

Available hours = 12,000

Hours actually worked = 10,400
Standard hours produced = 11,480

Utilization = x10,440
100% = 87%
12,000

Efficiency = x11,480
100% = 110%
10,440

Weekly available time = 3 x 16 x 5 = 240 hours

Rated capacity = 240 x .87 x 1.10 = 229.7

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Problem 5.14 Solution
Complete input/output report. What corrective action should
be taken?
Work center: 20
Capacity per period: 40 standard hours
Period 1 2 3 4 Total
Planned input 36 38 35 40 149
Actual input 34 32 32 42 140
Cumulative variance -2 -8 -11 -9 -9

Planned output 40 40 40 40 160

Actual output 38 36 40 38 152
Cumulative variance -2 -6 -6 -8 -8

Planned backlog 32 28 26 21 21
Actual backlog
5 11 32 28 24
APICS CONFIDENTIAL AND PROPRIETARY 16 20
Basics of Supply Chain Management

Aggregate Inventory Management

Session 6

APICS Certified in Production and Inventory Management (CPIM)

6 12 APICS CONFIDENTIAL AND PROPRIETARY

Problem 6.8 Solution

Annual ordering costs

$80,000 + $70,000 + ($45 10,000) = $600,000
Annual carrying cost
27% $500,000 =$135,000
Total annual cost
= $735,000
Average ordering cost
= $600,000 10,000 = $60
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Problem 6.9 Solution

Revenue $2,000,000
Cost of goods sold
Direct labor $200,000
Direct material $800,000
Overhead $600,000
Total cost of goods sold $1,600,000
Gross margin (gross profit) $ 400,000
G&A expenses $ 200,000
Net income (profit) $ 200,000

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Problem 6.10 Solution

$48,000,000
a. Inventory turns = = 4 times per year
$12,000,000

$48,000,000
b. Average Inventory = = $8,000,000
6

c. Reduction in inventory = $12,000,000 $8,000,000 = $4,000,000

d. Annual Savings = 25% $4,000,000 = $1,000,000

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 Basics of Supply Chain Management

Item Inventory Management

Session 7

APICS Certified in Production and Inventory Management (CPIM)

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Problem 7.8 Solution

A = 12,000 boxes
S = $20
i = 25% = 0.25
c = $7.50
2AS 2 x 12,000 units x $20
EOQ = =
ic .25 x $7.50
= 506 boxes

Annual demand 12,000

Orders per year = =
Order quantity 506
= 23.7

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Problem 7.9 Solution
Solve for target level of inventory and determine the order
quantity

Target level
= D (R + L) + SS
= 200 (2+1) + 400 = 1,000

Order quantity
= 1000 600 = 400

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Problem 7.10 Solution

Number Count Number of

Classification
of Items Frequency Counts
A 1,900 24 45,600

B 3,000 4 12,000

C 5,100 1 5,100

Total counts 62,700

Workdays per year 250

Counts per day 251

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 Basics of Supply Chain Management

Purchasing and Physical Distribution

Session 8

APICS Certified in Production and Inventory Management (CPIM)

8 20 APICS CONFIDENTIAL AND PROPRIETARY

Problem 8.5 Solution

Present line-haul cost per unit =

500 x $4 = $2.00 per unit
1,000
Proposed line-haul cost per unit =
500 x $4 = $1.11 per unit
1,800

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