Advance Supply Chain Extensive Training 3 – ASCET 3

In This Course We are going to talk more about the information flow. We’re going to tie it into the physical flow for the design. So what we’re going to talk about is the aggregate planning process, and then also distribution channels. So the aggregate planning process, we will bring everything together we’ve talked about the last several modules , and what we’re going to do is really continue in the connection between your supplier and your customer. So the question is how do you plan for those activities? Now you also have some customer relationship management systems, helps you coordinate with your customer. And then, we talk about these integrated supply chain  management systems that help you plan your production, how you move things, and where you store things. So when we talked about this, we looked at, first, master planning schedule. And so when you do the master planning schedule you’re really coming up with your production plan, and for that you’re going to use the MRP. Now, where those fit in the planning cycle are appeared within three months. So what you’re doing here is planning up to three months out, and that’s a pretty typical, 12 weeks. And so you’re planning your production.

The next thing we’re going to look at though is what’s known as aggregate planning, and this aggregate planning is actually over a much longer time frame, And usually, it’s 3 to 18 months out. So you’re going further into the future. So your date is going to be a little less actual rates. It’s going to more predictive, or estimates, and you’re going to be looking at a wider swath of the company. You’re going to really be looking at everything here to try to plan. Looking at how your customer will react, the promotions you’ll run, how that affects production, how affects your sourcing. So we’re going to tie those all together with aggregate planning. And we’ll also talk about something called Sales and Operations Planning, S&OP. And so what S&P does, it ties together both sides of the company, the sales or the marketing side, with the operations, sourcing, and supply chain side. How do you get those things together so that your demand planning matches your capabilities of production? So we’ll continue on in this and focus heavily on S&OP and aggregate planning. And again, what’s happening here is, remember, the physical flow goes this way through your network, from supplier to your customer, and we’re seeing that the information flow really flows this way. Because the demand dictates what you manufacture, and what you procure, and so forth. So that’s the first part of the week that we’re going to go. And now, we’re going to cover distribution channels. And distribution channels fit with this, but it’s a slightly different perspective. It actually takes a marketing concept, your marketing channels, how you sell your product. And I want to look at the physical side of it and the information side of it, how it affects the supply chain. So we’re going to introduce the four major players in any distribution network. And when I say distribution, this is distribution of final product out. We’re not worried about the stuff coming in. So we’re really focused on this side down. Right? Customer facing. So we’ll have manufacturer, and everyone knows manufacturers. And you’re down here, the consumer, the person who actually consumes the product at the end. And we all know about retailers, where consumers usually go to buy. But a new term that you might not be familiar with are distributors and wholesalers, and they play a very important role in this whole process.  So when I look at the channels, there are many different ways the product can come to me. A manufacturer might make something, and it goes to a distributor or wholesaler. They, in turn, give it to the retailers, or sell it to the retailers, and then the consumers, we guys ,go to the stores and buy it. That’s a traditional channel.

Our objective with this particular module is to help supply chain practitioner, make a link between all the things that we do in the supply chain. For instance, make products, store, move products with trucks and make a link between that and the financial statements. This is critical because while we live in this world, senior executives live more often than not in this particular world, where they understand financial terms. Now, supply chain managers have an enormous amount of control over the assets of the firm. In particular, we’ll talk about working capital. And that’s one of the critical things, which we in the supply chain manage a big portion of. And the challenge that we have is that we have to be able to explain and understand how are the decisions that we make in the supply chain. We’re going to provide you with the basic understanding of how transactions– could be the purchase of raw material, could be the sale of a product, could be the transfer of a title– how those transactions find their way to both the income statement and the balance sheet, and what that means to the firm’s financial performance. If we are able to do that, then we’re actually able to take what we do in the supply chain and articulate the value in financial terms that we’re adding to the firm. Now, we’ve tried this in past years. All of us in the supply chain, we’ve tried to explain what it is that we do in terms of inventory turns and cycle times. Try to explain that to an executive, their eyes glaze over. You talk about impact on revenue, you talk about impact on working capital, their eyes are going to light up. And this is where we make the connection between, again, what we do in the supply chain world and what is reported in the financial reports. Now, there’s two particular lessons. The first lesson is really going to be focusing on two very critical financial reports– the income statement and then the balance sheet. The income statement, of course, where we report the revenues of the firm, the money we bring in– the recognize that we show the costs and then the net profit. The assets report at a snapshot in time, one point in time, though all the obligations that the firm has to pay out and the liabilities in shareholders’ equity, but also all the things that the firm owns that are all value. And so that’s the first particular lesson. The second lesson we’re going to be focusing on understanding cost systems and how costs are reported. And then we’ll talk about working capital. This is the capital we use to run and operate the business. And then that will lead us to understand and at least talk about the cash conversion cycle, where there are three components– the days of inventory outstanding, the days of sales outstanding, and the days of payables outstanding. Three really important measures that add up, tell us how long it is that we have to invest one unit of currency to get some currency back in the supply chain. That’s the cash conversion cycle.

So let’s get started.

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