MODULE 2:

GLOBAL SUPPLY CHAIN NETWORKS

Section A: Supply Chain Design and Optimization

Module 2, Section A ■ 1 © 2023 APICS Confidential and Proprietary

Module 2, Section A

Section A Introduction
Section A Key Processes: Section A Topics:

▪ Define and manage the ▪ Topic 1: Supply Chain

supply chain network. Design and Management
– Design the supply chain ▪ Topic 2: Business and IT
network. Requirements
▪ Determine business ▪ Topic 3: Technology
requirements, IT Analysis and Optimization
strategy, and cyber
security.

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Topic 1: Supply Chain Design and Management

Supply Chain Design: Technology Decisions

▪ Visibility and velocity enabler
▪ Theory of constraints also true for IT
▪ How often data is transferred and analyzed
▪ Support needs of the infrastructure, internet, and
e-commerce
▪ Competitive strategy with IT and decision support
systems

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Topic 1: Supply Chain Design and Management

Network Configuration
▪ Number, location, and ▪ Inventory location and
capacity of warehouses levels
▪ Location of plants and – Optimal levels of right
production levels per kinds of inventory
product – Lowest inventory that
▪ Transportation (plant to meets customer service
warehouse, warehouse to goals
retailer)
▪ Country-specific
infrastructure assessment

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Topic 2: Business and IT Requirements

Efficiency with Responsiveness, plus Resilience

Efficient Supply Chain Responsive Supply Chain

▪ Least-cost ▪ Flexible in response to

manufacturing/supply chain changing demand
▪ Relatively stable demand ▪ More volatile demand
▪ Reasonably accurate ▪ Uncertain forecasts
forecasts ▪ Make-to-order or assemble-
▪ Make-to-stock strategy to-order strategy

Resilient Supply
Chain
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Topic 2: Business and IT Requirements

Fit Supply Chain Type to Product

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Topic 2: Business and IT Requirements

Supply Chain IT Requirements and Benefits

Efficient transfer of secure information SC velocity, agility, scalability
Massive data flow over internet Cost-effective global visibility
Gather, integrate, report data Avoid the bullwhip effect
Replace push with pull Lean, cost-effective SCs
Strategic/tactical capabilities Share knowledge with SC
Data entered only once Data accuracy and
straight-through processing
Throughout the
Remove “friction” New relationships
extended supply chain

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Topic 2: Business and IT Requirements

Sharing Information Helps Build Trust

Inventory Sharing information

builds trust and allows
coordinated planning Strategic
between partners.
Real-time information Tactical
Extended supply chain Operational
• Operational planning
• Operational execution

Ad hoc links
increase adaptability.

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Topic 3: Technology Analysis and Optimization

Supply Chain IT Cost-Benefit Analysis

▪ Not a computer project; a business decision.
▪ Recipient, not IT, develops business case.
▪ Strategic IT investments should
– Pay back in cost savings
– Increase market share
– Innovate product/service
– Make company more adaptive to change
– Match company’s goals.
▪ Technology audits for justifications and pre- and post-
implementation reviews.
– Audience is upper management.

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Topic 3: Technology Analysis and Optimization

Benefits and Costs

Benefits
Costs
Tangible Intangible
• Lower maintenance • Customer retention • Hardware/software
costs • Customer service • Maintenance fees
• Faster implementation • Order status visibility • Capital expenditures
• Increased sales volume • Workforce • Opportunity costs
• Improved scheduling redeployment • Staff/consultant time
• Greater financial • Employee satisfaction • Configuration and
returns and efficiency customization
• Lower overhead
• Reduced cash-to-cash
cycle

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Topic 3: Technology Analysis and Optimization

Benefit-Cost Analysis and ROI

Total Benefits
Benefit-Cost Analysis =
Total Costs
US$345,000
= = 1.33
US$259,000

Total Benefits − Total Costs

Return on Investment =
Total Costs
US$345,000 − US$259,000
= = 0.33 = 33%
US$259,000
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 Topic 3: Technology Analysis and Optimization

Stages of Supply Chain Network Technology Optimization

Stage 2: Semi- 5:
1: Multiple 3: Integrated 4: Extended Orchestrated
Functional
Capability Dysfunction Enterprise Enterprise Enterprise SC
Internet Static websites Online catalogs Intranets across E-commerce Responsive;
all functions cybersecurity
Integration None; no Batch Internal process SC networks; Closed gaps;
teamwork integration; process automation,
teams integration visibility
SC Little information Informal; no Formal/global; Integrated global Data driven
planning exchange initiative enhanced planning; SC vs. analytics; cross-
coordination logistics SC. competition functional teams
Production Basic MRP MRP II MRP—ERP Externally Automated
scheduling integrated ERP demand data
Integration Fax/phone EDI; seek low EDI with all VMI, online RFQ Category
with price large suppliers strategies drive
suppliers integration
Customer Research Local inventory ATP CTP Automated
delivery delivery quotes

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Topic 3: Technology Analysis and Optimization

Supply Chain Network Optimization Strategy

1. Determine goals and desired end state of
SC.
2. Create cross-functional/cross-business
teams.
3. Organize SC’s operational processes
and IT’s mission.
4. Design in change management and
training with stringent timetables.

5. Create conceptual model.

6. Establish technical infrastructure.

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Topic 3: Technology Analysis and Optimization

Role of Nucleus Firm/Cross-Functional Teams

Nucleus firm

Potential partners
Partners

Teams
Collaboration meetings
Executive
Team Technology audits
Technology
Team Technical foundations

Inventory Delivery Pilots

Team Team

Buying Team Making

Selling Team
Team
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SECTION B:
END-TO-END CONNECTIVITY
AND VISIBILITY

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Module 2, Section B

Section B Introduction

Section B Key Processes: Section B Topics:

▪ Design and manage end-to-end supply

chain connectivity and visibility.
▪ Topic 1: Supply Chain
– Supply chain technology applications Technology Applications
– Information sharing (e.g., data,
status, and documents) ▪ Topic 2: Connectivity,
– Legal requirements Visibility/Sharing, and Legal
▪ Manage customer, supplier,
product/item, engineering, and logistics ▪ Topic 3: Supply Chain
master data.
Master Data
– Create, update, cleanse, and retire
data

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Topic 1: Supply Chain Technology Applications

Comprehensive SC Management System

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Topic 1: Supply Chain Technology Applications

Comprehensive SC Management System (continued)

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Topic 1: Supply Chain Technology Applications

Enterprise Resources Planning (ERP) Systems

“Framework for organizing, defining, and standardizing the
business processes necessary to effectively plan and control
an organization so the organization can use its internal
knowledge to seek external advantage.” (APICS Dictionary,
16th edition)
▪ Modularized suite
▪ Automated interactions
▪ Common data source
▪ Challenge: linking supply chain partner ERP systems
▪ Need vision and direction for visibility and efficiency

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Topic 1: Supply Chain Technology Applications

ERP System Functionality

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Topic 1: Supply Chain Technology Applications

ERP System Evolution

Older ERP systems
Begin with the
end in mind.

Web-based
Implicit business models ERP
(former best practices) systems

Get full
executive
support.

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Topic 1: Supply Chain Technology Applications

ERP versus Best-of-Breed Systems

ERP Systems Best-of-Breed Systems

▪ Simpler, better integration ▪ Faster innovations

▪ Leveraged ownership of
enterprise data ▪ Industry expertise
▪ Shorter training ▪ Niche applications
▪ Fewer vendors ▪ Functional area expertise
▪ Support contracts (e.g., warehousing)
▪ Often lower total cost of
ownership
▪ Vast development resources
and staff
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Topic 1: Supply Chain Technology Applications

Upgrades, New Releases, New Modules

▪ Useful new upgrades, ERP releases, and modules:
– Support an organization’s top strategic issues
– Have better open architecture
– Provide speed and lower cost of future upgrades
– Ease supply chain communications
– Have better business information/metadata
– Provide faster learning curve
– Fully integrate currently disjointed systems
– Are less expensive than increasing cost of old version.
▪ New system should match ≥ 80% functionality goals.
– Customize only remaining 20% (or less), configuration for rest.

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Topic 1: Supply Chain Technology Applications

Advanced Planning and Scheduling (APS)

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Topic 1: Supply Chain Technology Applications

Supply Chain Event Management (SCEM)

▪ Flags SC events to trigger Active visibility:
alerts or actions in other ▪ Monitor
applications ▪ Measure
▪ Monitors SC business ▪ Notify
processes
▪ Simulate
▪ Exception reporting to
business intelligence ▪ Control
software

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Topic 1: Supply Chain Technology Applications

SCEM Benefits
▪ Faster response to supply/demand change
▪ Exception notices on portable devices
▪ Earlier marketing/sales demand reaction, better forecast
▪ Improved order accuracy, tracking, and cycle time
▪ Less management time on shipping/receiving
▪ Reduced inventories and total SC costs
▪ Greater labor efficiency and productivity
▪ Decentralized collaboration
▪ Increased customer responsiveness, fewer returns
▪ Real-time communications with ad hoc partners

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Topic 1: Supply Chain Technology Applications

WMS Functions

ERP and order entry WMS Daily operations

Directed picking Directed replenishment Directed put-away

▪ Receiving ▪ Order selection and task

▪ Storage location management
management and ▪ Automated replenishment
optimization
▪ Shipping
▪ Cross-docking
▪ Inventory control ▪ Security
▪ Quality control ▪ Returns

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Topic 1: Supply Chain Technology Applications

WMS Interfaces and Benefits

WMS Interfaces or Portals Benefits of WMS

▪ Web-based interfaces/portals. ▪ Productivity gains

▪ Visibility and control: ▪ Fewer errors
– Push and/or pull data and ▪ Competitive (e.g., cross-docking)
inventory. ▪ Retail/international handling
▪ Enables merge-in-transit, cross- ▪ Automated put-away and pick
company warehousing, etc. accuracy
▪ Capacity and distribution
efficiency (e.g., pallet discounts)
▪ Reduced cycle time/safety stocks
▪ Optimized use of space
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Topic 1: Supply Chain Technology Applications

TMS Functions
TMS must provide:
▪ Transportation planning and
order fulfillment integration • Private fleet
▪ Centralized control over management
shipment planning Transportation • Carrier
network design selection
▪ Execution control
▪ Visibility Shipment planning Routing
▪ Automation. Load matching and optimization
Freight rating Manifesting Visibility tools
Load tendering and delivery scheduling
Shipment tracking and settlement Post-shipment analysis

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Topic 1: Supply Chain Technology Applications

TMS Features
Web-Based Dynamic Global Track/Trace
Updates
• Shipment costs • Cellular GPS
• Fuel costs • AIDC (RFID)
• Maps and routes • Bills of lading
• Road conditions • Shipping labels
• Traffic • SKU information
• Weather • Waybills
• Carrier availability • Driver performance

Shipper and Carrier Transportation

Collaboration Marketplaces (e.g., SaaS)
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Topic 1: Supply Chain Technology Applications

Benefits of TMS
▪ Lower costs (less deadheading, demurrage, dwell time)
▪ Collaborative use of shipping
– Linked communications
– Aggregated volumes
– Capacity procurement
– Web-based visibility of information and planning
– Distributed data access to reduce bottlenecks
▪ Centralized operations that lower support costs
▪ Real-time, accurate costs (faster, better decisions)

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Information System Architecture Considerations

Information system should align Architecture of the
architecture with organization

1. Organizational functions 3. Data modeling needs

2. Communication of 4. Management and control
coordination requirements structures

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Database, Networks, Software, Configuration

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Databases and Database Management

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Software as a Service (SaaS)

Basic Criteria User Advantages

▪ Vendor ▪ Lower initial costs
▪ Logic and data stored in ▪ Immediate use
central location ▪ Smaller storage requirements
▪ End-user access to data and ▪ Fewer personnel
software, run and used over
the internet Supplier Advantages
▪ Continuous income
▪ Single version
▪ Reduced software piracy and
unlicensed use
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Topic 2: Connectivity, Visibility/Sharing, and Legal

Cloud Computing
▪ The “cloud” is a network of ▪ IaaS: Infrastructure
data centers enabling – PaaS: Platform
computing resources to be ▪ SaaS: Software
accessed and shared as
virtual resources. ▪ Hybrid solutions most
common.
▪ Secure and scalable.
▪ ISO/IEC 17788:2014
▪ Can interface with ERP or
cloud-only ERP exists.

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Organizational and Information System Architecture

Organizational and Information Strategy
▪ Align strategies at organizational and extended supply
chain levels.
▪ Translate organizational strategy into commitments to treat
information as strategic investment.
▪ Set guiding principles, priorities, and common goals for
network design.
▪ Envision high-level end-to-end IS structure for firm/SC.
▪ Do gap analysis.

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Organizational and Information System Architecture

Information Content Information Policies and

Definition Controls
▪ What data to collect and ▪ IS design, daily operations,
how to gather, keep and improvement policies
accurate, store, access, ▪ Governance and audit
control, and analyze ▪ SC communications and
▪ Business modeling for SC security

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Organizational and Information System Architecture

Information Infrastructure Databases, Networks,

Design Software, and Configuration
▪ Policies and controls ▪ Use of existing, adding, or
translated into cohesive and upgrading
cost-effective system ▪ Vendor search and
▪ Detailed decisions selection
▪ Critical DBMS decisions

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Organizational and Information System Architecture

Information Infrastructure Action Plan, Schedule, and
Change Prioritization
▪ Continual system change ▪ Regular strategy, tactical
and improvement update, and operational gap
analyses → IT action plans

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Front End, Middle End, and Back End

• Server and • User interface

database Middle end or client in
• Programmers: client-server
Fast access, • Programmers:
accuracy, • “Glue” data entry
organization, • Programmers: validity, user
and security Simplicity, experience
automated data
Back end request/provision Front end

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Middleware
▪ Sits in the “middle” between two Content-level
applications (internal or external) middleware:
▪ Why care about middleware? EDT and EDI
– Helps integrate SC
Data-oriented:
– Enables partners to share information custom
– Avoids duplicate or inconsistent data linkages
– Breaks down organizational silos
– Secure transactions
Process-oriented
(business process
▪ Authentication management [BPM])
▪ Authorization

Application A Middleware Application B

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Content-Level Middleware: EDT and EDI

▪ Electronic data transfer (EDT) is synonym; electronic
data interchange (EDI) is standardized version.
▪ Electronic version of document, e.g., purchase order,
ASN, or invoice.
▪ Batch-processed.
▪ Parties must agree on EDI data format.
Web-based or
Sender’s PO private network Receiver’s
EDI
native format native format
Extranet protocol

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Application Programming Interfaces (APIs)

▪ Middle end code residing nearer to front end than middleware
▪ Simple one-to-one interactions (not multiple systems at once)
▪ Other devices can query the database automatically and frequently.
▪ Lightweight, developer friendly, platform independent, scalable code.
▪ Software architecture: Web services
– Interchangeable “building blocks.”
– Open standards.
– For example, airline flight check-in:
▪ Get best available database search engine and best seat
assignment applications from different vendors.
▪ Develop own pricing application but all works together.

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Application Programming Interface Types

Service-Oriented Microservices
Architecture (SOA)

Cloud native

Loose Loose coupling

Universal
coupling
Modular
between
functionality within an application
design (has all data
applications
(a service) for
(easy re-
processing)
configure) Publish/subscribe
messaging

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 Topic 2: Connectivity, Visibility/Sharing, and Legal

Traditional vs. Electronic Business Supply Chain

Characteristic Traditional Supply Chain Electronic Business Supply Chain
Ownership Own vertical SC through mergers Own core capabilities in virtual SC

Competitive High market share/assets Agile firms with few assets dominate
advantage dominate
Nucleus firm Retailer/manufacturing (industrial) Brand equity or greatest efficiency

Trading Best deal at expense of other Share risks and rewards

Competitors No competitor interaction Interact if mutual gain can be found

Production Economies of scale and scope Engineering competitive SC

Collaboration Internal silos/costly networking Partner silos/open networking
Suppliers Limited by buyer relations (phone) Marketplaces and partner integration

Customer service Reactive, with little feedback used Proactive with better use of feedback

Intermediaries Fixed, vertically integrated Avoid some unless they add value
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Topic 2: Connectivity, Visibility/Sharing, and Legal

E-Business Considerations
Sourcing

Manufacturing
Push Pull

Business strategy Fulfillment

Vision
Channel
E-Business strategy management

Business
transformation

Collaboration

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Potential Costs and Challenges with e-Business

Increased outbound
Regular reinvestment transportation costs

Increased materials
handling costs
Hardware/software
Reliance on outside
suppliers
Implementation and
change management
Global localization

System security
Accessibility, ease of use

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Sell-Side E-Commerce Website

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 Topic 2: Connectivity, Visibility/Sharing, and Legal

Sharing Data Among Trading Partners

▪ Topic 5: Linking Demand Management Components
Distributor Quick Response Continuous Vendor-Managed
Integration Program Replenishment Inventory
Customer • N/A • Provide POS • Notify suppliers • Sell.
Role data to supplier. of actual daily • Do joint forecast.
• Submit individual sales or ware-
orders. house shipments. • Manage
relationship.
• Help logistics.
Supplier Integrate IS to • Synchronize • Replenish • Display, store,
Role share: supply with without receiving deliver, receive,
• Inventory data demand. orders. stock, and count.

• Expertise • Forecast. • Prevent • Schedule

stockouts. replenishment.
• Inventory-related
DI • Reduce • Keep inventory
inventory. records.
• Service-related
DI. • Improve turnover. • Represent
supplier at plant.

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Topic 2: Connectivity, Visibility/Sharing, and Legal

VMI and Consignment Combinations

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Topic 2: Connectivity, Visibility/Sharing, and Legal
Collaborative Planning, Forecasting, and Replenishment
(CPFR®)
Manufacturer Tasks Collaboration Tasks Retailer Tasks
Strategy & Planning
Account planning Collaboration arrangement Vendor management
Market planning Joint business plan Category management
Demand & Supply Management
Market data analysis Sales forecasting POS forecasting
Demand planning Order planning/forecasting Replenishment planning
Execution
Production & supply Order generation Buying/re-buying
planning Order fulfillment Logistics/distribution
Logistics/distribution
Analysis
Execution monitoring Exception management Store execution
Customer scorecard Performance assessment Supplier scorecard

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Legal and Privacy Requirements

Trade Disruption EU’s GDPR

disruptions insurance
Rights
Political risk: • Informed how
Disruption
IP
insurance used
expropriation
• Access
PII personal data
Data privacy
risk
policies, • Correct errors
controls
• Be forgotten
Cyber
• Get copy
Cybersecurity
insurance • Opt out

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Topic 2: Connectivity, Visibility/Sharing, and Legal

Cybersecurity Risks
NIST Cybersecurity MITRE ATT&CK Framework
Framework
Reconnaissance
• Cybersecurity
Resource development
road map per Initial access
Profile supply chain Execution
• As is, to be
Persistence
• Partial Privilege escalation
Tiers • Risk informed
Defense evasion
• Repeatable
(maturity) • Adaptive Credential access
• Identify Discovery
• Protect Lateral movement
Core • Detect Collection
• Respond
• Recover Command and control
Exfiltration
Impact
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Topic 3: Supply Chain Master Data

Master Data Management and Life Cycle

Master Data Management Master Data Life Cycle

Governance, methodologies,
policies, procedures, and
technologies
• Coordinates life cycle
• Stewardship
• Accuracy
• Consistency
• Completeness
• Timeliness

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Topic 3: Supply Chain Master Data

Types of Master Data Used

Customer data

Basic Customer order history POS data Customer master file

files

Analysis Sales by customer Sales by Sales by SKU

query customer location

by Pallets Cases Pieces bought Weight Volume

Product line Frequency of purchases
Static data Dynamic data
Plant locations Warehouses Forecasts DM/DL standard costs
SKU or part numbers Current deliveries

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Topic 3: Supply Chain Master Data

Creating Data: Data Capture

▪ Incremental data volume improvement.
▪ Partial data better than no data.
▪ Capture data at the source.
▪ Passive better than manual capture.
▪ Overcome fast-paced, hostile, or language barrier
areas.
▪ Capture ancillary data when possible.
▪ Real-time is best, but batch may suffice.

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Topic 3: Supply Chain Master Data

Automatic Identification Technologies

Automatic Identification Impact of AIS on SC
System (AIS) ▪ Paper-free, fewer errors
▪ Automatic classification ▪ Wireless and real-time inputs
– Optimize for storage/transport
and payments
▪ Automatic identification ▪ Reduces stockouts
– Devices communicate presence
▪ Enriches customer
Types of AIS
information/service
▪ Warehouse automation, bar
▪ Automated replenishment,
codes, RF devices, RFID,
inventory visibility
smart cards, magnetic stripes,
vision systems ▪ Track savings to offset huge
investment

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 Topic 3: Supply Chain Master Data

Bar Codes and Bar Code Scanners

ERP, etc.
Direct link RF link

UPC 2D: QR code

Width of bars and gaps

Identifies product
More information,
SKU and e.g., serial number
manufacturer
Start character Character Stop character
* A *
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Topic 3: Supply Chain Master Data

Radio Frequency Identification (RFID)

EPCglobal Network
1
Object naming service
New RFID chip Internet
Issues electronic
product code (EPC)
Detailed product
Internet information
3
Reader/ 2
EPC RFID chip with EPC
interrogator

Internet verification prevents counterfeiting and

stores extra product information.

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Topic 3: Supply Chain Master Data

RFID Tags, Errors, and Adjustments

Tag types Causes of read errors
Antenna size Reader power Frequency used

Active tags Liquids absorb Signals Metals reflect

Reading cases on conveyor more reliable than

whole pallet.
Passive tags
Adjustments
• Readers located for low interference
Reader • Buffers or shields
• Adjusting angle of antennae
• Changing reader/tag to suit facility

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Topic 3: Supply Chain Master Data

Capturing and Communicating POS Data

Point-of-sale Benefits

▪ Inventory and sales data ▪ Capture data on SKU,

adjusted at time and place of promotions, inventory.
sale (bar codes, etc.). ▪ Replace push with pull.
▪ Information collected about ▪ Inventory deductions to
customers at time of sale. finance.
▪ Mobile devices can collect ▪ Collect purchasing habits.
POS data too.
▪ Reduce bullwhip effect.
▪ Needed for VMI, etc.
▪ Reduce data entry errors.
▪ Low-cost updates.
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Topic 3: Supply Chain Master Data

Model and Data Validation

Test with historical data.

Test with current data.

Measure error related to

aggregation.

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Topic 3: Supply Chain Master Data

Data Aggregation

Smooths peaks and valleys: Pooling

random variables reduces variance of
aggregated variable.

Easier to interpret less data.

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Topic 3: Supply Chain Master Data

Decision Support Systems (DSS) and Big Data

▪ Topic 4: Data Accuracy and Analysis

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Topic 3: Supply Chain Master Data

Big Data and Data Analytics

▪ Big data
– Massive amount of structured and unstructured data
– Identify problem areas in supply chain early
– How best to collect, use, and leverage?
▪ Data acquisition and analytics goal: Seamless links among
processes and partners
– Collecting information
– Timely, controlled access
– Reducing visibility gaps
– Improving planning effectiveness
– Ensuring and maintaining data accuracy

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Topic 3: Supply Chain Master Data

Causes of Errors
Data manipulation
that introduces bugs

Redundant Data Transpositions,

databases errors typos, missing data

Conflicting/ duplicate
database records

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 Topic 3: Supply Chain Master Data

Ways to Improve Data Accuracy

▪ Sharing POS/transaction data across SC
▪ Real-time transfer when feasible
▪ Immediate data entry/automation if feasible

A Ltd 123 $225 Data cleansing A Ltd/Inc 123 $5/ea. $225

A Inc 123 $5/ea. A Inc 123 $5/ea.
Normalization
B Mfg $7/ea. $400 B Mfg 234 $7/ea. $400
C Inc 453 $6/pc. C Inc 453 $6/ea. $300

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Topic 3: Supply Chain Master Data

Maintaining Data Accuracy

Role-based
policies, procedures

Software limits for adding,

deleting, modifying

Data maintenance and

continuous user training

Module 2, Section B ■ 55 © 2023 APICS Confidential and Proprietary

SECTION C:
SUPPLY CHAIN METRICS
AND REPORTS

Module 2, Section C ■ 1 © 2023 APICS Confidential and Proprietary

Module 2, Section C

Section C Introduction
Section C Key Processes: Section C Topics:

▪ Develop and maintain reports, ▪ Topic 1: Supply Chain Metrics,

analytics, and metrics. Reports, and SCOR
– Incorporate supply chain
operations reference (SCOR) ▪ Topic 2: Financial and
metrics. Operational Metrics and Reports
– Utilize dashboards and
balanced scorecards.
– Define financial metrics and
reports.
– Define operational metrics and
reports.

Module 2, Section C ■ 2 © 2023 APICS Confidential and Proprietary

Topic 1: Supply Chain Metrics, Reports, and SCOR

Measuring Performance

Performance Measures Internal Measurement

Benefits
▪ You get what you measure
▪ Objective, consistent, and Reporting to
quantified Control of
managers
processes and
and external
▪ Measure at least 2 parameters employees
sources
(e.g., quality, time)
Communication Learning and
▪ Set targets to gauge relative
of expectations continuous
success and problems improvement
▪ Customize

Module 2, Section C ■ 3 © 2023 APICS Confidential and Proprietary

Topic 1: Supply Chain Metrics, Reports, and SCOR

Metric Selection Framework

Responsive
Efficient
Strategic
Operational
Diagnostic
Monitoring

Module 2, Section C ■ 4 © 2023 APICS Confidential and Proprietary

Topic 1: Supply Chain Metrics, Reports, and SCOR

Balanced Scorecard (BSC)

Customer Perspective Innovation & Learning Perspective
Goal Measure Target Actual Goal Measure Target Actual

Present performance, future prospects Training and product development

Business Process Perspective Financial Perspective

Goal Measure Target Actual Goal Measure Target Actual

Productivity, prospecting, flexibility, etc. Traditional, historical only, necessary

Module 2, Section C ■ 5 © 2023 APICS Confidential and Proprietary

Topic 1: Supply Chain Metrics, Reports, and SCOR

Key Elements in Balanced Scorecard (BSC) Initiative

Communicate strategic purpose of

scorecard to partners.

Develop goals and measures consistent

with internal and SC strategies.

Create schedules and assign

responsibilities.

Module 2, Section C ■ 6 © 2023 APICS Confidential and Proprietary

Topic 1: Supply Chain Metrics, Reports, and SCOR

Custom Scorecard for 3PL (Service Quality)

Category Target Jan Feb
ASN Compliance
% Shipments Received Without ASN: Supplier A 0% 100% 100%
% Shipments Received Without ASN: Supplier B 0% 50% 50%
Inventory Count
# of Parts Physically Counted — 28 28
Inventory Accuracy Based on Physical Count 100% 80% 85%

Module 2, Section C ■ 7 © 2023 APICS Confidential and Proprietary

Topic 1: Supply Chain Metrics, Reports, and SCOR

Performance Metrics

Average actual is
about 50%, target
is 5%, so:
• Review
measurement
and target to see
if accurate and
feasible
• Mandate
supplier process
correction and/or
set more realistic
target.

Module 2, Section C ■ 8 © 2023 APICS Confidential and Proprietary

Topic 1: Supply Chain Metrics, Reports, and SCOR

SCOR® Digital Standard’s Process Model

Module 2, Section C ■ 9 © 2023 APICS Confidential and Proprietary

Topic 1: Supply Chain Metrics, Reports, and SCOR

Level 1 SCOR Management Processes

Plan Demand/supply plans for operating SC: gather requirements, collect
resource data, and balance requirements and resources to find
capabilities and gaps
Source Ordering (scheduling) and receipt of incoming goods and services:
POs, schedule, receive, validate, store, and accept invoice
Make Conversion of materials/creation of services: assembly, maintenance,
repair, etc. (1+ items go in → 1+ different items come out)
Deliver Creation, maintenance, and fulfillment of customer orders: validate
receipt; create order; schedule delivery; pick, pack, ship; and invoice
Return Reverse flow of goods: identify need, ship, and return (does not
include repair, recycling, or refurbishment)
Enable Establish, maintain/monitor information, relationships, resources,
assets, business rules, compliance, and contracts

Module 2, Section C ■ 10 © 2023 APICS Confidential and Proprietary

Topic 1: Supply Chain Metrics, Reports, and SCOR

SCOR Level 2 Process Types

Process Type Description
Planning • Balance aggregated demand and supply
Aligns expected resources • Occurs at regular, periodic intervals
to meet expected demand • Consider consistent planning horizon
requirements • Can contribute to SC response time
Execution • Involves:
Process triggered by
Scheduling/ Transforming Moving product
planned or actual demand sequencing product to next process
that changes state of
• Can contribute to order fulfillment cycle
materials
time

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Topic 1: Supply Chain Metrics, Reports, and SCOR

Possible Capabilities in Execution Process

Driven by Driven by Driven by

inventory customer customer
(plan) orders requirements

Make-to-order

Engineer-to-order
Make-to-stock

Standard Configurable Sourcing new

material orders materials materials
High fill rate, Longer turn- Longest lead
short turn- around times times, low fill
around rates

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Topic 1: Supply Chain Metrics, Reports, and SCOR

Levels of Process Details in SCOR

Level 1
• Scope, high-level configuration
• Plan, source, make, deliver, return,
enable

Level 2 • Differentiates Level 1 strategies

• Make-to-stock, make-to-order…

Level 3
• Steps to execute Level 2, sequence
influences process performance
• Schedule production, issue product…

Level 4
• Organizations and industries develop
own Level 4 processes
• Print pick list, pick items (bin)…

*Use of bold text indicates a running example per level.

Module 2, Section C ■ 13 © 2023 APICS Confidential and Proprietary
 Topic 1: Supply Chain Metrics, Reports, and SCOR

SCOR Performance Attributes and Metrics

▪ Topic 2: SCOR Performance
Performance
Attribute Definition
Measures
Performance Attribute Level 1
Metric
Supply chain Correct product, place, time, condition, Perfect order fulfillment
reliability packaging, quantity, documentation, and
customer
Supply chain Speed at which SC provides products to Order fulfillment cycle
responsiveness customer time
Supply chain Ability of SC to respond to marketplace Upside SC adaptability
agility changes to gain or maintain competitive Downside SC adaptability
advantage Overall value at risk
Supply chain Costs associated with operating supply chain Total supply chain
costs management cost
Cost of goods sold
Supply chain Effectiveness in managing assets to support Cash-to-cash cycle time
asset demand satisfaction; includes fixed assets and Return on SC fixed assets
management working capital Return on working capital

Module 2, Section C ■ 14 © 2023 APICS Confidential and Proprietary

Topic 1: Supply Chain Metrics, Reports, and SCOR

Supply Chain Reliability and Responsiveness

Area SCOR Definition Calculation
Level 1
Metric
Reliability Perfect Percentage of orders Total Perfect Orders
order with complete and
fulfillment accurate items and Total Number of Orders
documentation and no
delivery damage.

Responsiveness Order Average speed of Order Fulfillment

fulfillment delivery. Process Time + Order
cycle Fulfillment Dwell Time
time

Module 2, Section C ■ 15 © 2023 APICS Confidential and Proprietary

Topic 1: Supply Chain Metrics, Reports, and SCOR

Supply Chain Agility

SCOR Level 1 Metric Definition Calculation
Upside SC adaptability Amount of increased Largest sustainable
production an quantity increase
organization can achieve considering source,
and sustain in 30 days make, and deliver
components
Downside SC Amount of decreased Least reduction
adaptability production an sustainable when
organization can achieve considering source,
and sustain in 30 days make, deliver, and return
components
Overall value at risk Evaluation of SC agility Sum of the SC’s values
(VaR) based on at risk
selected performance
measures
Module 2, Section C ■ 16 © 2023 APICS Confidential and Proprietary
Topic 1: Supply Chain Metrics, Reports, and SCOR

Supply Chain Costs (Financial Metrics)

SCOR Level 1 Metric Definition Calculation
Total supply chain Costs to plan, source, TSCMC = Sales − Profits
management cost make, deliver, return, − Cost to Serve
(TSCMC) and mitigate.

Cost of goods sold Costs associated with Direct Materials + Direct

(COGS) buying raw materials and Labor + Overhead
producing finished
goods.

Module 2, Section C ■ 17 © 2023 APICS Confidential and Proprietary

Topic 1: Supply Chain Metrics, Reports, and SCOR

Supply Chain Asset Management

SCOR Definition Calculation
Level 1
Metric
Cash-to- Time for inventory Days of Sales Outstanding + Inventory Days
cash investment to flow of Supply − Days of Payables Outstanding
cycle back as cash
time receipts.
Return Return on capital (SC Revenue − COGS − SC Management Costs)
on SC invested in fixed
fixed assets for plan, SC Fixed Assets
assets source…
Return An organization’s (SC Revenue − COGS − SC Management Costs)
on working capital
working position versus SC (Inventory + A/R − A/P)
capital revenue.
Module 2, Section C ■ 18 © 2023 APICS Confidential and Proprietary
Topic 1: Supply Chain Metrics, Reports, and SCOR

Digital Capabilities Model for Supply Networks

Capability Description SCOR Linkages
Connected Inspire at start of customer life Enable
customer cycle; service at the end.
Product Do proactive product life-cycle Enable
development management.
Synchronized Leverage human and process Plan, enable
planning capabilities for planning efficiency.
Intelligent supply Leverage technologies to reduce Source, enable
costs.
Smart operations Digital transformation for Make, enable
connectivity, agility, and proactivity.
Dynamic fulfillment Add order fulfillment speed and Deliver, return,
agility. enable

Module 2, Section C ■ 19 © 2023 APICS Confidential and Proprietary

Topic 2: Financial and Operational Metrics and Reports

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

Module 2, Section C ■ 20 © 2023 APICS Confidential and Proprietary

Topic 2: Financial and Operational Metrics and Reports

Balance Sheet for Two Years

Module 2, Section C ■ 21 © 2023 APICS Confidential and Proprietary

Topic 2: Financial and Operational Metrics and Reports

Income Statement for Two Years

Module 2, Section C ■ 22 © 2023 APICS Confidential and Proprietary

Topic 2: Financial and Operational Metrics and Reports

Statement of Cash Flows for Two Years

Module 2, Section C ■ 23 © 2023 APICS Confidential and Proprietary

Topic 2: Financial and Operational Metrics and Reports

Supply Chain Financial Metrics

Supply chain Supply chain management cost reduction and efficiency efforts
profit impact profit, e.g., Contribution Margin = Sales − Variable Costs.

Supply chain Cost areas include order processing, inventory, transportation,

cost warehousing and materials handling, and network integration.

Supply chain An aggregation of the costs of all organizations that participate in

total cost a given supply chain.

Altman A combination of four or five weighted ratios to measure

Z-score bankruptcy risk.

Customer The goal of monitoring customer creditworthiness is to ensure

creditworthiness that invoices are paid on time.

Module 2, Section C ■ 24 © 2023 APICS Confidential and Proprietary

 Topic 2: Financial and Operational Metrics and Reports

Operational Metrics
How well are day-to-day
operations functioning?

PRODUCTIVITY

ASSET MGMT
QUALITY

• Accuracy • Output of • Ability of

• Manufacturing production organization to
goods to • Resource maximize its
quality inputs used as operational
standards efficiently and assets
• Avoidance of effectively as • Primary
damage to possible concerns are
goods inventory and
facility capacity

Module 2, Section C ■ 25 © 2023 APICS Confidential and Proprietary