Manufacturing Handbook of Best Practices 2011 Part 16 pot

345 16 Supply Chain Management Douglas Burke 16.1 INTRODUCTION Supply chain management has a quaint ring to it. It conjures images of an industrial economy with warehouses, transportation systems, suppliers, and assembly lines. In the world of manufacturing, this bricks-and-mortar vision is still fairly accurate despite all the click-and-order hype associated with cyberspace. Manufacturing enterprises around the world living in this traditional vision are experiencing change at a rapidly increasing pace. Some of the changes they face are fiercely competitive markets, shorter and shorter product life cycles, heightened customer expectations, and a diminished ability to raise prices even on high-demand products. With these changes come enormous business pressures. Pressure to find more effective ways to shorten the concept-to-delivery cycle. Pressure to drive out ineffi- ciencies in all their processes. Pressure to develop and execute a strategic plan that will anticipate and address these changes. Only by aggressively seeking process improvements and enhancements to cost, quality, productivity, and customer satis- faction can companies hope to survive these changes. As manufacturers seek the mechanisms for survival, they turn their attention to the supply chain, seeking to capture improved efficiency. Currently, considerable activity in manufacturing is focused on eliminating inefficiencies through supply chain management. Abramson (1999) reports that inventory being held across the retail supply chain at any one time amounts to $1 trillion. Of those inventories, 15 to 20% ($150 to 200 billion worldwide; $40 to 50 billion in the United States) could be eliminated through improved supply chain management in the form of planning, forecasting, and replenishment. Anderson, Britt, and Donavon (1997) report that companies now recognize the importance of meeting customer needs. By using supply chain management, companies can tailor products and services to specific customers and win customer loyalty. This loyalty translates into profits. Xerox has found satisfied customers six times as likely to buy additional Xerox products over a period of 18 months than dissatisfied customers. Other benefits that can be gained through supply chain management are improved cash utilization (how soon after delivery do you get paid?), flexible schedules, shortened schedules, delivery of product or services at the time of need, and price advantages. How can a business gain all those advantages through supply chain management? It is first necessary to have an extremely effective Six Sigma process to protect against losing customers due to product nonperformance. Next, a mature and effective lean SL3003Ch16Frame Page 345 Tuesday, November 6, 2001 6:02 PM © 2002 by CRC Press LLC 346 The Manufacturing Handbook of Best Practices manufacturing program must be in place to ensure the maintenance of minimum inventory levels while the manufacturing processes are still consistently delivering product to the customer on time. Finally, the company needs to integrate Six Sigma and lean manufacturing across the entire supply chain by including supply chain management in its strategic planning process. Strategic planning, lean manufactur- ing, and Six Sigma are covered in separate sections of this book. The remainder of this chapter focuses on contemporary issues that exist in supply chain management, the more traditional topics of inventory management and control, and the importance of synchronizing supply to demand. 16.2 DEFINING THE MANUFACTURING SUPPLY CHAIN There are probably as many definitions of a supply chain as there are practitioners of supply chain management (SCM). Poirier and Reiter (1996) define the supply chain as a system of organizations that delivers products and services to its customers. This supply chain model can be illustrated as a network of linked organizations that has a common purpose of delivering product and services through the best possible means. Another supply chain definition, developed by Kearney (1994), shows linked groups of enterprises that work synchronously to acquire, convert, and distribute goods and services to the customer. Kearney also captures the need to distribute new designs through the network, ensuring a rapid response to the dynamic requirements of the market. Though Copacino (1997) never presents a concise definition of the supply chain, he alludes to it as all the players and activities necessary to convert raw materials into product and deliver them to consumers on time and at the right location in the most efficient manner. In this supply chain model, the major business processes of a manufacturing company are composed of suppliers, manufacturing, distribution retailing, and consumers. He extends this model by showing the demand-and-supply chain as integrating functions to the major business processes. Walker and Alber (1999) define the manufacturing supply chain as the global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash. Mohrman (1999) defines the supply chain as the business, capital, material, and information associated with the flow of goods. The total supply-and-demand chain extends from natural resources through a network of value-added steps and transport links until it reaches the ultimate consumer. Different practitioners developed these definitions for different reasons. Although it would seem that they are completely different, closer examination of these definitions reveals common key themes that can be used to develop our own definition. This definition will be generic enough to be applicable to any manufacturing supply chain. One key concept is that the supply chain is a network of linked companies and organizations. This network has a broad span that starts with obtaining natural resources and ends when the product or service reaches the ultimate customer. Finally, the dynamics of a supply chain involve the conversion of natural resources into a product or service that is delivered to a customer. With this, we can develop our definition of a generic manufacturing supply chain: SL3003Ch16Frame Page 346 Tuesday, November 6, 2001 6:02 PM © 2002 by CRC Press LLC Supply Chain Management 347 A supply chain is a dynamic network of interlinked organizations that converts natural resources into products or services that are delivered to the consumer at the right place and at the right time. A simple graphical model of this supply chain is shown in Figure 16.1. From this illustration, we see that the supply chain starts when a supplier (or suppliers) converts natural resources into usable materials for the manufacturing company. Usable materials can be raw material, such as steel bar stock, if the manufacturing company is a machine shop or subassemblies if the manufacturing company is a personal computer-manufacturing firm. After all the necessary resources are supplied to the manufacturing firm, they are converted into the end product for which the customer ultimately pays. A logistics organization, not depicted in Figure 16.1, is necessary to ensure the proper delivery of the end product to the consumer. To better illustrate this supply chain model, let’s look at it in the context of the aerospace industry. In the aerospace industry, a jet engine manufacturing supply chain can be a very complicated group of companies. Suppliers would start by purchasing raw aluminum and steel stock and converting it into castings and forgings. Other suppliers may take those castings and forgings and machine them, adding gears, splines, shafts, and motors to create mechanical subassemblies. These sub- assemblies are then delivered to the engine-manufacturing firm where they are assembled into complete and functional jet engines. These engines are tested, pack- aged, and shipped to the consumer through the logistics network. Inventory of all types can be found at all stages of the supply chain. As illustrated, raw material inventories are typically accumulated at the beginning. Work-in-process inventory in the form of subassemblies and partially assembled jet engines will accumulate at the manufacturing stage. Finished goods inventory in the form of completed jet engines can accumulate in the logistics network, at the distribution centers, and at the customer’s site. Another interesting aspect of the manufacturing supply chain is that information flows in the opposite direction of the product. Products and services typically flow from suppliers to the manufacturing firm. From there the products and services are transported to the customer through a logistics network. Conversely, information about consumption patterns, points of sales, and demand forecasts flows from the customer to the manufacturing firm. From there the manufacturing firm disseminates the information and flows it down to the appropriate suppliers. From this we can conclude that a supply chain is a very complex group of suppliers, manufacturing firms, and logistics organizations that must work together FIGURE 16.1 Generic manufacturing supply chain model. Raw Material Inventory Work-In-Process Inventory Finished Goods Inventory Supply Resources Produce Product or Service Distribute Product or Service Consume Product or Service SL3003Ch16Frame Page 347 Tuesday, November 6, 2001 6:02 PM © 2002 by CRC Press LLC 348 The Manufacturing Handbook of Best Practices to accomplish a common goal. The manufacturing supply chain also needs an efficient information technology organization that can quickly and accurately move information down the supply chain. Finally, it is apparent that the only way to deal with the complexity of the supply chain is to have an effective supply chain man- agement philosophy. Without a common management philosophy among the ele- ments of the supply chain, it is very difficult to define and accomplish the supply chain goal(s). In the next section we define supply chain management and how it should be used to synchronize all the elements of the supply chain. 16.3 DEFINING SUPPLY CHAIN MANAGEMENT Have you ever tried to define supply chain management (SCM) to someone? About the time you compare SCM to logistics management or materials management, you notice that your audience has lost interest. It is readily apparent that SCM is not easy to define. The fact is, there are many practitioners’ definitions of SCM. Let’s look at some of them to see if we can come up with one of our own. One practitioner defines SCM as the driving force that oversees the relationships across the entire supply chain. In this definition, SCM is responsible for obtaining the necessary information to run the business, to get product delivered through the business, and to get the revenue that generates profits for the business. This definition also mentions the need for SCM to consider the entire supply chain. Another SCM practitioner provides a much broader definition. He or she sees SCM as coordinating, scheduling, and controlling procurement, production, inven- tories, and deliveries of products and services to customers. It includes the everyday administration, operations, logistics departments, and processing information from customers to suppliers. Yet another definition positions SCM as the organization responsible for making, selling, and delivering products to the customer. This definition goes further by requiring collaboration among all members of the supply chain to manage sensitive strategic planning as well as the flow of information. A more detailed definition of SCM starts by calling SCM a set of approaches that must be utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores. This is necessary to ensure that product is manufactured and distributed at the right quantities, to the right location, and at the right time. The results can be measured in minimized systemwide costs and satisfied customers. A manufacturing-specific definition goes as follows: SCM is the driving force in ensuring that the manufacturer and its suppliers work together to make a product or service available to the marketplace for which the customer will pay. This con- volution of companies, functioning as one extended enterprise, makes optimum use of shared resources to achieve operating productivity. The result is a product or service that is high quality and low cost, and is delivered on time to the marketplace. Our last definition is probably the simplest and most concise. SCM is the mechanism that links all the players and activities involved in converting raw materials into products. These players and activities are responsible for delivering those products to customers at the right time, at the right place, and in the most efficient way. SL3003Ch16Frame Page 348 Tuesday, November 6, 2001 6:02 PM © 2002 by CRC Press LLC Supply Chain Management 349 By looking at all these definitions, we can develop some common themes. First, we see that each definition emphasizes management across the entire supply chain. In other words, SCM should be pervasive from suppliers to customers. Second, the definitions use words such as coordinate, link, oversee, collaborate, and integrate . This implies that management across the supply chain must be used to synchronize each of the individual elements of the supply chain. Finally, each element of the supply chain must have a common goal. What is the goal? In every definition, the concept of manufacturing a high-quality, low-cost product or service and delivering it on time to the right customer is mentioned. Additionally, each definition has the customer central to SCM, so customer satisfaction should be a goal. Now, putting all these elements together we develop the following definition of SCM: SCM is the mechanism that synchronizes all the individual elements of the supply chain. SCM must ensure that the supply, production, and delivery of a product or service always meets the customer’s requirements for cost, quality, and performance. This means that the product must be low cost and high quality, and be delivered to the right customer at the right time. From this definition, we see that there are some important topics that require more discussion, such as supply chain synchronization, inventory management, logistics network configuration, strategic partnering, and information technology’s role in SCM. These topics are all central to our definition of SCM, and we discuss them in the sections that follow. 16.4 CRITICAL ISSUES IN SUPPLY CHAIN MANAGEMENT Recent developments in SCM have spawned numerous books, articles, and academic publications addressing the current issues facing SCM. One issue that appears in almost every publication on the topic of SCM is the need to integrate the entire supply chain. Many managers recognize that integrating the supply chain can improve both cost and customer satisfaction. Supply chain integration is necessary simply because it allows a firm to match the supply of a product to the product’s consumption pattern. Synchronization of supply to demand has many cost benefits. We discuss the details of synchronizing supply to demand in a later section but first, the issues of supply chain integration are discussed. Integration of every link in the supply chain has proven to be very difficult for many reasons. One reason is that the supply chain system for any firm is in a state of constant change and evolution. Another difficulty with integration is related to the complexity of the supply chain. There are so many organizations and facilities in a supply chain that there will always be conflicting objectives and a lack of communication. Two common approaches for addressing integration issues exist. The first is for a firm to take advantage of information technology, which helps to simplify the supply chain and improve communication. The second approach is for firms to form strategic alliances among all partners in the supply chain. SL3003Ch16Frame Page 349 Tuesday, November 6, 2001 6:02 PM © 2002 by CRC Press LLC 350 The Manufacturing Handbook of Best Practices The use of information technology is always identified as the enabling force for accomplishing supply-to-demand synchronization. With the proper information, all the links in the supply chain can maintain minimum costs and still meet customer demand. With this information, a firm can also develop accurate forecasts, which are imperative when matching the demand for a product with the supply of materials in the overall supply chain. Another SCM issue that is related to supply chain integration is the need for a company to develop strategic partners throughout the supply chain. If a firm has suc- cessfully established a product demand-to-supply synchronization through its supply chain, then there must be some level of coordination and partnering within each com- ponent of the supply chain. Later in this chapter we present some of the most common strategic partnering approaches used by modern manufacturing firms. Finally, the more commonly discussed issue of SCM is configuring the logistics network. Let’s assume that a typical manufacturing firm produces a product from several plants and distributes the product to a set of geographically dispersed cus- tomers through a network of warehouses. The issue here is that the firm needs to determine the optimal number and location of warehouses. Optimization in this area means determining the appropriate number, size, location, and inventory of each warehouse. This, of course, assumes the manufacturing plants and customers remain geographically fixed. An analytical approach to address network configuration and inventory management are presented later in this chapter. The remainder of this chapter is dedicated to summarizing what critical issues face SCM and what has been proposed to address those issues. 16.4.1 S UPPLY C HAIN I NTEGRATION Integration of the supply chain is difficult because of its dynamic nature and con- flicting objectives, but not impossible, as major companies in the semiconductor, consumer retail, and chemicals industries have demonstrated. How do companies successfully integrate their supply chains? Research on hundreds of manufacturing companies shows that the most common approach is to first establish lines of communication across the entire supply chain, then to establish strategic partner- ships among all partners in the supply chain. A firm’s information technology (IT) department is the key functional area for providing the ability to communicate across the supply chain. Strategic partnering has been a common practice for many years; however, it is typically only practiced in the procurement department and used in isolation. Later in this chapter we summarize some of the common types of partnerships and how partnerships should be formed across the entire supply chain. Before a supply chain can be integrated, there must be open sharing of infor- mation for coordinated operational planning. The sheer magnitude of data and information that can be shared is enough to clog the flow of products through a supply chain. So, what are the roles of IT in SCM? One role is to provide access to information through a seamless link from the beginning to the end of the supply chain. Another is to provide a centralized hub of all available information. SL3003Ch16Frame Page 350 Tuesday, November 6, 2001 6:02 PM © 2002 by CRC Press LLC Supply Chain Management 351 16.4.1.1 Information Technology Effective use of information to integrate the supply chain has been recognized as an important focus of SCM since the early 1990s (Copacino, 1997). Much of the current interest in information technology is motivated by the ability to apply sophisticated analytical methods to supply chain data to glean savings. Also, much interest is developing from opportunities provided by electronic commerce, espe- cially through the Internet. Information linkages among all partners in a supply chain must be developed and implemented. Supply chain managers also need analytic capabilities for logistics network modeling, routing and scheduling, production scheduling, and logistics simulations. Information systems must be multifunctional so they can handle the complexity of the supply chain. Speed and accuracy of transaction handling are also important. All functional areas such as manufacturing, warehousing, transportation, and logistics must use real-time systems and accurate data-capture technologies. Decision support systems are also needed to make strategic, tactical, and operational decisions. Considering these needs, information technology is the most important enabling function for developing an integrated supply chain. Because the supply chain spans the entire network from supplier to customer, our discussion of infor- mation technology will encompass systems internal to an individual company as well as external systems that transfer information between companies. 16.4.1.2 Information Access One goal of information technology in any supply chain is to provide access to information through a seamless link from suppliers of raw materials through man- ufacturing and ultimately to the customer. Figure 16.2 illustrates the flow of infor- mation through the supply chain. Note that the flow of information is opposite to the flow of products through the supply chain. This link provides access to information concerning the location or status of a product anywhere in the supply chain. With this link a firm can plan, track, and accurately estimate lead times based on actual data. Of course, this necessitates access to data that reside in systems physically located at different companies as FIGURE 16.2 Information and product flow through the supply chain. Raw Material Inventory Work-In-Process Inventory Finished Goods Inventory Supply Resources Produce Product or Service Distribute Product or Service Consume Product or Service Design Information, Goods and Services Order Information, Point of Sales Information, Forecast data, Revenue SL3003Ch16Frame Page 351 Tuesday, November 6, 2001 6:02 PM © 2002 by CRC Press LLC 352 The Manufacturing Handbook of Best Practices well as at geographically separated systems within the same company. Another key aspect of this link is to assure the availability of information so rational, timely decisions can be made. Information systems also need to be proactive. For example, if the delivery of an order is delayed, a mechanism must be in place that will automatically notify interested parties so they can adjust schedules or seek alternative sources of the product. Companies in the personal computer manufacturing industry have made the most advances in developing this information access link. Take a look at the IT infrastruc- ture within any major personal computer manufacturer today and you will find an order-tracking system that provides real-time information on the whereabouts of an order. This information is available to all internal organizations, all external suppliers, and to the customer. It is this type of information access that every manufacturing company must strive to obtain. 16.4.1.3 Centralized Information Another information technology goal of SCM is to provide a centralized hub of all available information. In most companies, each information system is isolated from other information systems within that company. Manufacturing, logistics, and customer service work with a shop-floor control system, accounting works with another system, quality has a separate system, sales and marketing use yet another system, and customer service has their own system. Figure 16.3 illustrates a typical IT systems configuration. Occasionally, some crucial bits of information will cross the lines between systems, but it usually takes a lot of effort and it is rarely accomplished in a timely manner. In an ideal world, all information requested by anyone in the supply chain would be accessible at one location with a robust mode of access (e.g., fax, phone, or Internet). There hasn’t been a single manufacturing company researched that has achieved this goal. Some industries, such as banking, are close (Bramel and Simchi- Levi, 1997) but none of them has a centralized hub for information access. FIGURE 16.3 Typical IT systems configuration. Shop Floor Control System Manufacturing Logistics Finance Computer System Accounting Sales and Marketing Computer System Sales Force Forecasting Customer Service Quality Control Computer System Manufacturing Quality SL3003Ch16Frame Page 352 Tuesday, November 6, 2001 6:02 PM © 2002 by CRC Press LLC Supply Chain Management 353 16.4.1.4 IT Development and Strategic Planning Now that we know the importance of IT in integrating the supply chain, how can a company access its current stage of development and plan for the future? The very complexity of the supply chain implies that there is no simple and inexpensive answer to this question. Most companies do not introduce IT innovations because it is not obvious if there will be a return on the investment. This is truly shortsighted. Every company should take two simple steps in IT relative to SCM: assess its current level of IT development, then create a corporate-wide vision to get to the next level of development and beyond. This chapter provides a simple way to assess your company’s current level of development, and you can use the strategic planning topics in this book to develop and achieve your corporate-wide vision. 16.4.2 S TRATEGIC P ARTNERING It may not always be effective for one firm to perform all key business functions internally. Even if a firm has the resources available to perform a particular manufac- turing task, another firm in the supply chain may be better suited to perform that task. Sometimes a combination of physical location in the supply chain, resources, and core competency determines the most appropriate firm in the supply chain to perform a manufacturing function. Once the appropriate firm to perform a task has been identified, steps must be taken to ensure that the function is actually performed by that firm. From our research, firms typically rely on one, or a combination, of three basic approaches to ensure that a manufacturing-related function is completed: • Committing internal resources. If a company does not have the resources or core competency internally, then it must acquire a firm that does. In either case, this gives the manufacturing concern total control over all aspects of the way that particular business function is performed. On the other hand, acquisitions can be very difficult, lengthy, and expensive. • Developing short-term external arrangements. Most business transactions are accomplished through this type of arrangement. If a firm needs a specific part, resource, or service, it will either purchase or lease it. This is typically the most effective arrangement for all parties involved. How- ever, this kind of arrangement is only short term and it rarely, if ever, leads to long-term strategic advantages. • Developing strategic partners. This approach, if done properly, results in long-term partnerships between two companies. In most cases, the prob- lems of committing internal resources or acquiring those resources can be avoided by developing strategic partners. Additionally, developing strategic partners can lead to the commitment of more resources than can be freed up with short-term external arrangements. Ultimately, this approach allows risks and rewards to be shared by all partners, along with the benefits of a stronger, healthier business. For the remainder of this section, we focus on two of the most common strategic partnering agreements used in SCM. SL3003Ch16Frame Page 353 Tuesday, November 6, 2001 6:02 PM © 2002 by CRC Press LLC 354 The Manufacturing Handbook of Best Practices 16.4.2.1 Supplier Partnerships Supplier partnerships are the most common form of strategic partnerships used by today’s manufacturing companies. This type of partnership is formed between the suppliers of resources and the manufacturing firm. The simplest type of supplier partnership is one in which the manufacturing firm shares customer demand infor- mation to assist the supplier in production planning. The most complicated partner- ship is one wherein the supplier has complete ownership and management respon- sibility of the inventory until it is sold to the customer. In a basic supplier partnership, the supplier receives customer demand data from the manufacturing firm. The supplier uses these data to synchronize its production rates and inventory levels to the customer’s requirements. In this partnership, the manufacturer is responsible for individual customer orders. However, the customer demand information is used by the supplier to improve forecasting and scheduling. In a more advanced partnership, the supplier receives customer demand data to prepare shipments at previously agreed-upon intervals to maintain specific levels of inventory. As this partnership matures, suppliers gradually decrease inventory levels at the manufacturing firm, resulting in predictable inventory reductions. Finally, in the most advanced partnership, the supplier decides on the appropriate inventory levels and inventory policies to maintain those levels. In the early stages, the manufacturer approves supplier decisions, but eventually this form of oversight should be eliminated. This type of partnership has been used successfully in retail, department store, and discount department store industries. Clearly, a supplier–manufacturer partnership requires a certain level of trust; without this trust the affiliation will fail. In some cases, the partnering supplier must be trusted to manage a large segment of the supply chain. In other cases, the supplier must be trusted to manage the manufacturer’s inventory as well as its own. Finally, in every partnership, confidential information, which could serve competing manu- facturers or suppliers, must pass between all firms safely. 16.4.2.2 Logistics Partnerships Another type of partnership used in SCM is logistics partnerships. These involve the use of a firm outside the manufacturing company to perform all or a portion of the manufacturing firm’s materials management and product distribution func- tion. These partnerships involve commitments that are generally longer term than supplier partnerships. A good provider of logistics services must be able to perform multiple functions, because it will be required to manage across many stages of the supply chain. Because of the complexity and multifunctional nature of this type of partnering, it is used mostly by large firms. A logistics partnership contract is usually a major, complicated business decision. Many considerations are critical in deciding whether a company should enter into a logistics partnership. The two most important considerations are knowledge of its own costs and ownership of assets. The most basic issue in selecting a logistics provider is to know your own costs so they can be compared with the cost of using an external provider. In many cases SL3003Ch16Frame Page 354 Tuesday, November 6, 2001 6:02 PM © 2002 by CRC Press LLC [...]... beginning of this section © 2002 by CRC Press LLC SL3003Ch16Frame Page 356 Tuesday, November 6, 2001 6:02 PM 356 The Manufacturing Handbook of Best Practices 16. 4.3.1 Data Gathering A typical logistics network configuration problem involves large amounts of data, including information on customers, existing warehouses, distributors’ facilities, manufacturing facilities, and transportation Each of these... expertise Loss of control is the most commonly cited disadvantage of using this type of strategic partner Other types of partnerships can be developed However, for manufacturing firms, logistics and supplier partnerships are the most commonly used choices to manage the supply chain more efficiently and effectively 16. 4.3 LOGISTICS CONFIGURATION Issues typically discussed on the topic of logistics configuration,... Manufacturing Handbook of Best Practices truckload from Los Angeles to Reno This type of transportation cost structure is very common in the manufacturing industry However, other types of cost structures are employed by external fleet providers Another type of transportation cost structure is based on basic freight rates The fleet service provider develops a set of freight rates based on the characteristics of. .. 2002 by CRC Press LLC (16. 5) SL3003Ch16Frame Page 364 Tuesday, November 6, 2001 6:02 PM 364 The Manufacturing Handbook of Best Practices Cfixed is the fixed cost of one unit of product Ch is the inventory holding cost for Icum units z is a constant based on the standard normal distribution, representing the probability that the customer demand will be met (no stockouts) Table 16. 3 shows these constants... the range of 15 to 20% (Copacino, 1997) These best- in-class” companies typically follow one or more of the following best practices in demand forecasting: • Long-term and short-term forecasting — the tools used, the planning, and the level of detail must be different for each type of forecast • Mandatory communication among sales, marketing, and manufacturing • • • • through the mechanism of regular,... operations research © 2002 by CRC Press LLC SL3003Ch16Frame Page 360 Tuesday, November 6, 2001 6:02 PM 360 The Manufacturing Handbook of Best Practices are available that will guide the reader to a solution and ultimately an optimized logistics model 16. 5 INVENTORY MANAGEMENT Inventory management has been important in manufacturing for a long time Poor management of inventory will have a significant impact on... Unfortunately, most © 2002 by CRC Press LLC SL3003Ch16Frame Page 366 Tuesday, November 6, 2001 6:02 PM 366 The Manufacturing Handbook of Best Practices organizations are so locked into the traditional forecasting system that change to a pull system is very difficult, if not impossible, to achieve In a pull system, manufacturing is driven by customer demand This means that manufacturing is matched with actual customer... database of cost per mile per truckload from one zone to another An important aspect of this type of transportation cost is that the costs are not linear In other words, it is typically less expensive to transport a truckload of material from Reno, NV to Los Angeles, CA than it is to transport that same © 2002 by CRC Press LLC SL3003Ch16Frame Page 358 Tuesday, November 6, 2001 6:02 PM 358 The Manufacturing. .. forecasts This field of SCM is new and so dynamic that it is too difficult to list the best in show.” Many of the references listed at the end of this chapter have information on demand-forecasting software Additionally, several world-class companies have leveraged electronic linkages with their customers to improve their forecasting performances These companies © 2002 by CRC Press LLC SL3003Ch16Frame Page... performances These companies © 2002 by CRC Press LLC SL3003Ch16Frame Page 362 Tuesday, November 6, 2001 6:02 PM 362 The Manufacturing Handbook of Best Practices are linked electronically with their customers to obtain data on current sales rates and inventory levels This information assists the manufacturing firms and their suppliers in understanding the real demand for their products A good forecasting system . SL3003Ch16Frame Page 353 Tuesday, November 6, 2001 6:02 PM © 2002 by CRC Press LLC 354 The Manufacturing Handbook of Best Practices 16. 4.2.1 Supplier Partnerships Supplier partnerships. among all partners in the supply chain. SL3003Ch16Frame Page 349 Tuesday, November 6, 2001 6:02 PM © 2002 by CRC Press LLC 350 The Manufacturing Handbook of Best Practices The use of information. form of strategic partnerships used by today’s manufacturing companies. This type of partnership is formed between the suppliers of resources and the manufacturing firm. The simplest type of supplier partnership