Essentials of supply chain management

TE AM FL Y ESSENTIALS of Supply Chain Management Essentials Series The Essentials Series was created for busy business advisory and corporate professionals.The books in this series were designed so that these busy professionals can quickly acquire knowledge and skills in core business areas Each book provides need-to-have fundamentals for those professionals who must: Get up to speed quickly, because they have been promoted to a new position or have broadened their responsibility scope Manage a new functional area Brush up on new developments in their area of responsibility Add more value to their company or clients • • • • Other books in this series include: Essentials of Accounts Payable, by Mary S Schaeffer Essentials of Capacity Management, by Reginald Tomas Yu-Lee Essentials of Cash Flow, by H.A Schaeffer, Jr Essentials of Corporate Performance Measurement, by George T Friedlob, Lydia L.F Schleifer, and Franklin J Plewa, Jr Essentials of Cost Management, by Joe and Catherine Stenzel Essentials of CRM: A Guide to Customer Relationship Management, by Bryan Bergeron Essentials of Credit, Collections, and Accounts Receivable, by Mary S Schaeffer Essentials of Financial Analysis, by George T Friedlob and Lydia L.F Schleifer Essentials of Intellectual Property, by Paul J Lerner and Alexander I Poltorak Essentials of Shared Services, by Bryan Bergeron Essentials of Trademarks and Unfair Competition, by Dana Shilling Essentials of XBRL: Financial Reporting in the 21st Century, by Miklos A.Vasarhelyi, Liv A.Watson, Brian L McGuire, and Rajendra P Srivastava For more information on any of the above titles, please visit www.wiley.com ESSENTIALS of Supply Chain Management Michael Hugos John Wiley & Sons, Inc This book is printed on acid-free paper Ơ Copyright â 2003 by John Wiley & Sons, Inc All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-750-4470, or on the web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, e-mail: permcoordinator@wiley.com Limit of Liability/Disclaimer of Warranty:While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services, or technical support, please contact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993, or fax 317-572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books For more information about Wiley products, visit our web site at www.wiley.com ISBN 0-471-23517-2 Printed in the United States of America 10 To my wife,Venetia Contents Preface viii Acknowledgments x Basic Concepts of Supply Chain Management Supply Chain Operations: Planning and Sourcing 43 Supply Chain Operations: Making and Delivering 77 Supply Chain Coordination and Use of Technology 103 Measuring Performance: Supply Chain Metrics 137 Defining Supply Chain Opportunities 173 Developing Supply Chain Systems 207 The Promise of the Real-Time Supply Chain 235 Additional Resources 249 Index 251 Preface ll around us the networking and inter-networking of our economy is taking place Companies that business together are linking up electronically They are doing this to better coordinate their actions and drive costs out of their business operations Business in this emerging networked world is as much about process as it is about product This is because market forces, driven by the speed of communications that electronic networks now make possible, are making product life cycles shorter and shorter Customer tastes and requirements change quickly Product inventories are always in danger of becoming obsolete To counter this trend, companies are building up their expertise and efficiencies in the process of designing and building new products and in the process of delivering and servicing existing products Companies that develop higher skill levels in these areas are clearly better able to ride the waves of change and profit from developments in the markets they serve The processes involved in the designing, building, and delivering of products to the customers that need them have come to be collectively referred to as supply chain management No one company can develop high skill levels in all areas of supply chain management so companies are focusing on developing and building their particular strengths, their core competencies Companies are defining the roles they want to play in the markets they serve and linking up with other companies that have complementary skill sets This is the dynamic that is driving the formation of modern supply chains A viii Preface This book is written especially for two groups of readers It is written for the senior executive who must decide what kind of supply chain their organization needs and how much to spend to get it It is also written for the manager who is or soon will be responsible for building and operating some part of his/her company’s supply chain The concepts and techniques presented here serve to create a common frame of reference that both senior executives and line managers can use when communicating with each other about supply chain management issues Chapters 1–3 provide an executive overview of the basic principles and the business operations that drive supply chain performance Chapters 4–5 present techniques, technologies, and metrics to use in coordinating your operations with those of your supply chain partners In Chapters and there is a pragmatic approach to use for defining supply chain opportunities and for designing and building the systems needed to effectively respond to those opportunities The last chapter, Chapter 8, outlines the profit potential now available to companies that learn to harness the power of the real-time supply chain ix ... 2001, “Defining Supply Chain Management, ” Journal of Business Logistics,Vol 22, No 2, p 18) • ESSENTIALS of Supply Chain Management • ? ?Supply chain management is the coordination of production,... what a supply chain is then we can define supply chain management as the things we to influence the behavior of the supply chain and get the results we want Some definitions of supply chain management. .. and be the most profitable 36 Basic Concepts of Supply Chain Management TIPS & TECHNIQUES Three Steps to Align Supply Chain & Business Strategy 37 ESSENTIALS of Supply Chain Management EXECUTIVE