Supply chain management a global perspective sanders

FFIRS 08/09/2011 10:3:13 Page FFIRS 08/09/2011 10:3:13 Page SUPPLY CHAIN MANAGEMENT FFIRS 08/09/2011 10:3:13 Page FFIRS 08/09/2011 10:3:13 Page SUPPLY CHAIN MANAGEMENT A GLOBAL PERSPECTIVE Nada R Sanders Lehigh University John Wiley & Sons, Inc FFIRS 08/09/2011 10:3:13 Page Vice-President & Publisher: Executive Editor: Associate Editor: Project Editor: Editorial Assistant: Marketing Manager: Media Editor: Media Associate Editor: Media Specialist: Senior Production Manager: Associate Production Manager: Assistant Production Editor: Designer: Cover Photo: George Hoffmann Lise Johnson Sarah Vernon Brian Baker Melissa Solarz Kelly Simmons Allison Morris Elena Santa Maria Thomas Caruso Janis Soo Joyce Poh Annabelle Ang-Bok Jeof Vita # Thomas Vogel/iStockphoto This book was set in 11/13 AGaramond-Regular by Thomson Digital and printed and bound by RR Donnelly (Von Hoffman) This book is printed on acid free paper Founded in 1807, John Wiley & Sons, Inc has been a valued source of knowledge and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations Our company is built on a foundation of principles that include responsibility to the communities we serve and where we live and work In 2008, we launched a Corporate Citizenship Initiative, a global effort to address the environmental, social, economic, and ethical challenges we face in our business Among the issues we are addressing are carbon impact, paper specifications and procurement, ethical conduct within our business and among our vendors, and community and charitable support For more information, please visit our website: www.wiley.com/go/citizenship Copyright # 2012 John Wiley & Sons, Inc All rights reserved 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 Sections 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, website 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 07030-5774, (201)748-6011, fax (201)748-6008, website http://www.wiley.com/go/permissions Evaluation copies are provided to qualified academics and professionals for review purposes only, for use in their courses during the next academic year These copies are licensed and may not be sold or transferred to a third party Upon completion of the review period, please return the evaluation copy to Wiley Return instructions and a free of charge return mailing label are available at www.wiley.com/go/returnlabel If you have chosen to adopt this textbook for use in your course, please accept this book as your complimentary desk copy Outside of the United States, please contact your local sales representative Library of Congress Cataloging-in-Publication Data Sanders, Nada R Supply chain management : a global perspective / Nada R Sanders p cm Includes bibliographical references and index ISBN 978-0-470-14117-5 (acid-free paper) Business logistics I Title HD38.5.S26 2012 658.7—dc23 2011024075 Printed in the United States of America 10 FTOC01 08/11/2011 12:39:47 Page BRIEF CONTENTS CHAPTER CHAPTER Introduction to Supply Chain Management Supply Chain Strategy CHAPTER CHAPTER CHAPTER Network & System Design Marketing Operations Management 63 91 121 CHAPTER CHAPTER CHAPTER CHAPTER Sourcing Logistics Forecasting & Demand Planning Inventory Management 151 177 203 241 CHAPTER 10 CHAPTER 11 CHAPTER 12 Lean Systems & Six-Sigma Quality Supply Chain Relationship Management Global Supply Chain Management 273 311 343 CHAPTER 13 Sustainable Supply Chain Management 373 33 v FTOC01 08/11/2011 12:39:47 Page FTOC02 08/11/2011 12:41:20 Page CONTENTS PREFACE CHAPTER XV Introduction to Supply Chain Management What is Supply Chain Management (SCM)? Supply Chain Leader’s Box: Amazon.com 11 The Boundary-Spanning Nature of SCM The Rise of SCM Supply Chain Leader’s Box: Dell Computer Corporation Characteristics of a Competitive Supply Chain Global Insights Box: Zara Trends in SCM Supply Chain Leader’s Box: Wal-Mart Managerial Insights Box—Outsourcing Innovation: Goldcorp Inc Careers in SCM and Professional Organizations Chapter Highlights Key Terms Discussion Questions Case Study: McNulty’s Muscular Materials (MMM) Case Questions References CHAPTER Supply Chain Strategy What is Supply Chain Strategy? Achieving a Competitive Advantage Supply Chain Leader’s Box: Wal-Mart Global Insights Box: Toyota Motor Corporation Building Blocks of Supply Chain Strategy Managerial Insights Box—Outsourcing Alliances: Li & Fung Ltd Supply Chain Strategic Design Supply Chain Leader’s Box: Barlean’s Organic Oils 12 15 17 18 19 20 21 26 27 28 29 29 29 30 30 33 35 36 38 40 40 48 49 53 vii FTOC02 08/11/2011 viii 12:41:20 Page Contents Strategic Considerations Productivity as a Measure of Competitiveness Chapter Highlights Key Terms Discussion Questions Problems Case Study: Surplus Styles Case Questions References CHAPTER Network & System Design The Supply Chain System Supply Chain Leader’s Box—Moving to Process Thinking: LG Electronics Understanding Processes: Theory of Constraints (TOC) Integration of Supply Chain Processes Designing Supply Chain Networks Managerial Insights Box—Outsourcing Versus In-House: Sony Versus Samsung 60 61 62 63 65 69 70 75 77 78 Enterprise Resource Planning (ERP) Chapter Highlights Key Terms Discussion Questions Problems 82 85 86 86 87 Case Study: Boca Electronics, LLC Case Questions 87 88 References CHAPTER 55 56 58 59 59 60 Marketing What is Marketing? Supply Chain Leader’s Box: Gap Inc Supply Chain Leader’s Box—Accommodating Changing Customer Preferences: PepsiCo Customer-Driven Supply Chains Managerial Insights Box—Understanding the Customer: Keurig Versus Flavia Delivering Value to Customers Global Insights Box—Global Customer Service: Coca-Cola Channels of Distribution Managerial Insights Box—Changing the Distribution Channel: Steinway Pianos 88 91 93 94 97 98 101 103 110 110 113 BGLOSS 08/09/2011 18:51:5 Page 414 www.freebookslides.com 414 Glossary Reverse Logistics The process of moving products upstream from the customer back toward manufacturers and suppliers Safety Stock Also called buffer stock, is extra inventory carried to serve as a cushion for uncertainties in supply and demand Sales and Operations Planning (S&OP) An organizational process intended to match supply and demand through functional collaboration between marketing, operations, and finance, in order to ensure that supply can meet demand requirements Setup Cost Costs involved in preparing a production run when items are made in-house Statistical Quality Control (SQC) Statistical tools used to measure quality and identify quality problems in both the product and process Shortage costs Costs that occur when a company runs out of stock Six Sigma A quality management process that uses rigorous measurement to reduce process variation and eliminate defects Six Sigma defines quality as no more than 3.4 parts per million defective (ppm) Sourcing The business function responsible for all activities and processes required to purchase goods and services from suppliers Supply Chain A network of all entities involved in producing and delivering a finished product to the final customer Supply Chain Management (SCM) The management of flows of products, information, and funds throughout the supply chain Supply Chain Network Design The physical structure and business processes included in the system Supply Chain Strategy A long-range plan for the design and ongoing management of all supply chain decisions that support the business strategy Sustainability The meeting of present needs without compromising the ability of future generations to meet their own needs Takt time Also called cycle time, the maximum amount of time each station on the assembly line has to complete its assigned tasks Time Series Models Models that generate a forecast by identifying and analysing patterns in a time series of the data Third-Party Logistics (3PL) An entity that provides some combinations of logistics services to their customers Total cost of ownership (TCO) The purchase price plus all other costs associated with acquiring the item Trade Agreements Pacts between countries that encourage trade in a region by eliminating or lowering tariffs, quotas, and other trade barriers Transactional View The view of supply chains with a focus on making supply chain processes more efficient and effective based on quantitative metrics Transportation The primary function of logistics that enables logistics to provide place utility There are five primary modes of transportation: truck, water, air, rail, and pipeline BGLOSS 08/09/2011 18:51:5 Page 415 www.freebookslides.com Glossary 415 Value Stream Mapping A specific application of process mapping, based on lean manufacturing principles Vendor Managed Inventory (VMI) An arrangement where the vendor is responsible for managing the inventory located at a customer’s facility Vertical Integration Ownership of upstream suppliers and downstream customers Voice of the customer (VOC) The process of capturing customer needs and preferences Waste In Lean systems waste is defined as anything that does not add value Weeks of Supply The length of time demand can be met with on-hand inventory BGLOSS 08/09/2011 18:51:5 Page 416 www.freebookslides.com BINDEX 08/09/2011 18:52:2 Page 417 www.freebookslides.com INDEX A Acceptance sampling, 290 Activity-based costing, 393 Additive layer manufacturing (ALM), 138 Adversarial negotiation, 332 Adversarial tactics, 333–335 anchoring, 333 manipulating commitments, 334 reciprocity, 333 rejection-then-retreat trick, 334 withholding information, 334 Air, as mode of transportation, 191 Alliances, 318 Amazon.com, 11 Anchoring, 333 Anticipation inventory, 247 Apple Computer Corp., 163 Appraisal costs, 286 Arbitration, 327–328 Asia-Pacific Economic Cooperation Forum (APEC), 362 Assemble-to-order strategy, 42 Auctions, 166–169 e-auctions, 166–169 open auction, 168 reverse auction, 168 sealed bid auction, 168 Automated storage and retrieval systems (ASRS), 188 Automation in services, 148 B Barlean’s Organic Oils, 53 Batch processes, 136 Bidding, 159–160 competitive bidding, 160 Bill of materials (BOM), 264 BMW, 360–361 Bottleneck, 70–71 Boundary-spanning nature of SCM, 12–15 cross-enterprise coordination, 12, 14–15 intra-organizational coordination, 12–14 Break-bulk, 194 Break-even analysis, 131–133 Buckeye Technologies, 307–308 Bucklin, Louis P., 111 Buffer stock, 257 Buffer uncertainty, 246 Bullwhip effect, 8–9 Business logistics, 182 Business process, 66–68 order fulfillment process, 67 process improvement, 67 well-coordinated activities, 67 Business strategy, 35 Business-to-business (B2B), 17, 23 Business-to-consumer (B2C), 17, 23 C Capacity design capacity, 74 effective capacity, 74 implications, 73–75 Carbon footprint, 391 Careers in SCM, 27–28 entry-level positions, 28 Causal forecasting models, 224–227 linear regression analysis, 224–227 multiple regression, 227 Causal models, 216–217 Cellular layout, 141 Channels of distribution, 110–116 description, 110 designing, 111–112 customer service objectives in, 112 factors influencing, 112 market coverage objectives in, 112 product characteristics in, 112 direct, 110 e-commerce impact, 114–116 exclusive distribution, 112 indirect, 110 intensive distribution, 112 selective distribution, 112 versus logistics channel, 112–114 Checklists, 287–288 Collaboration activity, SCM, 417 BINDEX 08/09/2011 18:52:2 Page 418 www.freebookslides.com 418 Index Collaborative Planning and Forecasting for Replenishment (CPFR), 230–233, 322 Sales and Operations Planning (S & OP), 232–233 VICS process for adoption of, 230 Commercial sourcing, 154–155 Commodity swapping, 330–340 Common variation, 291 Competitive advantage, achieving, 36–37 competitive advantage matrix, 39 cost productivity advantage, 37 value advantage, 37 Competitive bidding, 160 Competitive priorities, 50 competing on all dimensions, 54–55 cost, 50 innovation, 50, 52 quality, 50, 52–53 service, 50, 54 time, 50–52 Competitive supply chain, 18–19 characteristics, 18–19 relationship management, 18–19 reliability, 18 responsiveness, 18 Competitiveness measure, productivity as, 56–58 total productivity, 57 Component parts, 243 Computing target inventory, 262–263 Concurrent engineering, 134 Conflict management, 326–327 data conflicts, 326 interest conflict, 326 relationship conflicts, 326 sources of conflict, 326–327 structural conflicts, 326 value conflicts, 326 Consumer sourcing, 154–155 Container Security Initiative (CSI), 24 Continuous improvement, 277 Continuous processes, 136 Continuous review system, 251 Continuum of process types, 137 Contractual relationships, 316–317 Control charts, 287–288 for attributes, 297–298 Coordination activity, SCM, vertical integration versus, 76–77 Core competencies, 20 Cost competing on, 50 considerations, 358–361 hidden costs, 358–359 non-cost considerations, 359–360 costing systems, 393 cost-productivity advantage, 37 versus price, 158–159 Cost assessment, sustainable SCM, 392–394 activity-based costing, 393 costing systems, 393 cost-of-control, 392–393 damage costing, 393 full cost accounting, 393 life-cycle costing, 393 Criticality, of outsourced activity 165–166, 314–316 Cross-docking, 194–195 break-bulk, 194 Cross-enterprise coordination, 12, 14–15 Cultural challenges, 352–353 Coca Cola’s China branding challenge, 353–355 high vs low context cultures, 355 individualism vs collectivism, 354 masculinity vs femininity, 354 small vs large power distance, 354 weak vs strong uncertainty avoidance, 355 Customer(s) role in SCM customer-driven supply chains, 98–103 customer-oriented standards, 109 definition, 98–100 delivering value to, 103–110 end consumer, 99 focus on, 9–10 global customer service issues, 109–110 ‘house of quality’, 105 organizational end user, 99 payoffs, customer related, 377 preference changes of, accommodating, 97 traditional view of, 99 voice of the customer (VOC), 103–105 Customer relationship management (CRM), 102 managing customers using, 103 Customer relationships, 100–103 customized strategy, 102 Keurig Versus Flavia, 101 micro-marketing, 102 niche strategy, 102 standardized strategy, 101 types of, 100–103 Customer service, 106–107 activity, 106 definition, 106 impact on supply chain, 107–108 communication, 108 convenience, 108 dependability, 107 time, 107 measuring, 108–109 customer-oriented standards, 109 supplier-oriented standards, 109 BINDEX 08/09/2011 18:52:2 Page 419 www.freebookslides.com Index philosophy, 106 set of performance measures, 106 strategy, 41, 47–49 Customized strategy, 102 Customs-Trade Partnership Against Terrorism (CTAT), 24 Cycle counting, 188 Cycle stock, 247 Cycle time, 142 Cycles, 211 D Damage costing, 393 Data conflicts, 326 Degree of product standardization, 135 Dell Computer Corporation, 17 Delphi method, 216 Demand management, 206 Demand planning, 203–204, 230–233 Demand versus supply uncertainty, 162 Dependency risk, 47 Dependent demand, 263–265 Descriptive statistics, 290 Design capacity, 74 Design for manufacture (DFM), 133 Design standard, 382 Designing supply chain networks, 65, 77–81 customized end-to-end operational blueprint, 81 differentiated supply chain segments, 81 drivers of operational complexity, identifying, 80 ‘one-size-fits-all’ supply chain structure, 80 performance metrics, 81 segmented structures, 79–81 structure, 77 Dimensions, supply chain relationships, 314–316 Direct channel of distribution, 110 Dispute resolution, 325–330 differences in, 327 arbitration, 327–328 litigation, 327–328 mediation, 327, 329 negotiation, 327, 329 Distribution channel, See Channels of distribution Distribution strategy, 41, 44–45 Distributive opportunities, 332 Dollar value, 248 Domestic sourcing, 164–165 E Early supplier involvement (ESI), 14, 130 E-Auction Development Program (EDP), 173 Ecological footprint, 391 E-commerce impact on distribution channel, 114–116 Economic order quantity (EOQ) model, 251, 253–256 Economic production quantity (EPQ), 258–261 Economic purchase orders, 246 Economies of distance, 189 Economies of scale, 189 Effective capacity, 74 Efficiency-focused supply chains, 162 Elcoteq, 280 Electronic auctions (e-auctions), 166–169 stages, 168 auction event, 168 follow-up, 168 preparation, 168 End consumer, 99 Enterprise resource planning (ERP), 22, 82–85, 103 advantages of, 84 configuration, 83–85 by customized software, 83 standardized ’off-the-shelf’ software modules use, 83 description, 83 implementation, 85 ‘out-of-the-box’ system, 84 Environmental risks, 396 Environmental sustainability, 377–378 Event logistics, 182 Evolving supply process, 162 Exchange rate fluctuations impact, 361–362 Exclusive distribution, 112 Executive opinion, 215 Experience curve, 37 Exponential smoothing, 219–221 External context of SCM, 385 External failure costs, 286 F Facility layouts, 139–142 planning, 139 types, 139–142 cellular layouts, 141 fixed position layout, 139 process layout, 140 product layout, 140–141 Facility location, 189 Factor Rating, 195 steps in, 196 Fair price, 159 Fat tails, 395 Feedback, 388 feedback loops, 388 Finance, logistics impact on, 184 Financial impact of sourcing, 156 Financial payoffs, 377 Financial performance, 388 Financial supply chain, 27 419 BINDEX 08/09/2011 18:52:2 Page 420 www.freebookslides.com 420 Index Finished goods, 243 Fishbone diagrams, 286 Fixed-order quantity system, 250–251, 253–261 economic order quantity (EOQ) model, 253–256 economic production quantity (EPQ), 258–261 production rate model, 258 reorder point (ROP), 256 safety stock, 257–258 Fixed position layout, 139–140 Fixed-time period system, 251–252, 261–263 computing target inventory, 262–263 versus fixed-time period systems, 252–253 Flexibility, 277 Flow shops, 137 Flowcharts, 287–288 Food mile, 391 Forecasting, 203–210, See also Causal forecasting models; Time series forecasting models collaborative forecasting, 230–233 Delphi method, 216 demand planning, 230–233 forecasting beyond widgets, 207 impact on organization, 208 impact on SCM, 208–210 impacting planning, 207 climate change, 207 crime forecasting, 207 forecasting decisions in conflicts, 207 health forecasting, 207 political forecasting, 207 tourism forecasting, 207 information transforming, 213 measuring forecast accuracy, 227–229 method selection, factors in, 212–213 principles of, 210–211 qualitative, 214–215 quantitative, 214–215 steps in, 211–212 appropriate data, analyzing, 211 cycles, 211 data patterns, 211 deciding what to forecast, 211 forecasting model, selecting, 212 generating forecast, 212 level or horizontal, 211 monitoring accuracy, 212 seasonality, 211 trend, 211 types of, 214–217 versus planning, 205–208 Full cost accounting, 393 Function, marketing, 93–94 Functional products, 161 versus innovative products, 160–163 Funds flow, Fuzzy logic, 395 G Gap Inc., 94 General Agreement on Tariffs and Trade (GATT), 363 Global customer service issues, 109–110 Global marketing approach, 351–352 Global positioning systems (GPS), 22, 82 Global SCM, 343–372 barriers, 348–349 challenges of global culture, 347 cultural challenge, 352–353, See also individual entry factors impacting, 349–350 competition, 349 cost, 350 culture, 350 economy, 350 infrastructure, 350 market, 349 politics, 350 technology, 350 global environment, 345–347 cultural, 347 demographic, 347 economic, 347 political, 347 global market challenges, 350–355 global consumer, 351 global versus local marketing, 351–352 infrastructure design, 356–358, See also Infrastructural challenges labor, 344–345 non-tariff barriers impact, 363–364 import quotas, 363 local content requirements, 363 technical standards and health regulations, 363 trigger price mechanism, 363 opportunities, 348–349 political and economic factors influencing, 361–364 exchange rate fluctuations, 361–362 regional trade agreements, 361–363 trade protection mechanisms, 361 transportation, 345 Wal-Mart, 347–348 warehousing, 344 Wu´’s Brew works, 365–371 Global sourcing, 164–165 Globalization trend in SCM, 20 Goldratt, Eliyahu M., 70 BINDEX 08/09/2011 18:52:2 Page 421 www.freebookslides.com Index Good works ethic views, 384 Great pacific garbage patch, 375–377 ‘Green’ supply chain, 25 H Heuristics, 145 Hidden costs, 358–359 Histograms, 287–288 Holding cost, 248 I Import quotas, 363 Independent demand, 263–265 Indirect channel of distribution, 110–111 Information flow, Information impact of sourcing, 156 Information sharing activity, SCM, Information technology (IT), 357 design, 65 as SCM enabler, 82 Infrastructural challenges, 356–357 labor, 356 suppliers, 357 transportation, 356 Infrastructure design, 356–358 Innovation, 25–26 competing on, 50, 52 outsourcing innovation, 26 Goldcorp Inc., 26–27 Innovative products, 161 versus functional products, 160–163 Integration of processes, 75–77, See also under Supply chain processes Integrative opportunities, 332 Intel Corporation, 264, 291 Intensive distribution, 112 Interest, 331–332 conflict, 326 Intermittent processes, 135–136 batch processes, 136 project processes, 136 Internal context of SCM, 386 Internal failure costs, 286 International Organization for Standards (ISO) 9000, 288–290 Interpreting productivity, 58 Intra-organizational integration, 12–14 marketing, 13 operations, 13 sourcing, 13 Inventory control, 188 Inventory costs, 247–250 holding cost, 247–248 ordering cost, 247–248 421 shortage costs, 247, 249 Inventory management, 241–272, See also Supply chain inventory, managing basics of, 243–250 inventory systems, 250–253 economic order quantity (EOQ) model, 251 fixed-order quantity system, 250–251 fixed-order quantity versus fixed-time period systems, 252–253 fixed-time period system, 251–252 reasons for carrying, 245–246 balance supply and demand, 245–246 buffer uncertainty, 246 economic purchase orders, 246 maintain independence of operations, 245 protect against lead time demand, 245 service inventory, 244 types of inventory, 246–247 anticipation inventory, 247 cycle stock, 247 maintenance, repair and operating items (MRO), 247 pipeline inventory, 247 safety stock, 247 Inventory turnover, 169 J Job shops, 137 John Deere & Company, 249–250 Just-in-time (JIT), 317 K Kanban square, 281 Keiretsu supplier-partnering model, 337–338 KUKA Robotics Corp., 147 L Labor, 344–345, 356 Leadership, 386 Lean six sigma supply chain, 300–303 developing, 301–302 conduct supply chain capability analysis (Step 2), 302 develop key financial and operational metrics (Step 3), 302 identify and implement system improvements (Step 4), 302 jointly define value (Step 1), 301 impact on supply chain activities, 302–303 logistics, 303 operations, 303 suppliers, 303 Sales and Operations Planning (S&OP), 301 Lean supply chain, 23–24 BINDEX 08/09/2011 18:52:2 Page 422 www.freebookslides.com 422 Index Lean systems, 273–309, See also Six sigma quality elements of lean, 277–279 lean production, 277 respect for people, 277, 283–285, See also individual entry total quality management (TQM), 277, 285–290 lean production, 279–283 pull system, 279–281 small lot production, 282–283 uniform plant loading, 283 visual signals, 281–282 lean six sigma, 275–279 broad view, 276 continuous improvement., 277 elimination of waste, 276 flexibility, 277 lean philosophy, 275–277 simplicity, 277 tenets of lean philosophy, 276 visibility, 277 lean tools in the popular press, 289 U.S Army, 278 Legal compliance, 382 Less-than-truck-load (LTL) shipment, 189 Li & Fung, 231 Life-cycle assessment (LCA), 390 Life-cycle costing, 393 Line balancing in product layouts, 142–146 computing efficiency 145–146 determining cycle time 142–144 identifying task times and precedence relationships, 142 tasks to workstations, assigning, 144–145 theoretical minimum number of workstations, determining, 144 Line processes, 136 Linear regression analysis, 224–227 Litigation, 327–328 Local content requirements, 363 Local marketing approach, 351–352 Logistics, 15, 177–202, 303 business logistics, 182 event logistics, 182 evolution of, 181–182 physical distribution, 181 facility location, 195–196 function, 179–181 impact on organization, 182–185 finance, 184 marketing, 183 operations, 182 packaging, 184 impact on supply chain, 185 logistics tasks, 187–189 cycle counting, 188 facility location, 189 inventory control, 188 material handling, 187–188 order fulfillment, 189 packaging, 188 storage, 187 transportation, 187, See also individual entry military logistics, 182 reverse logistics, 185–187 SCM versus, 15 versus distribution channel, 112–114 Longest task time rule, 144 Long-term supply chain relationships, 321 design phase, 321 management phase, 321 M Maintenance, repair and operating items (MRO), 247, 315 Make-to-order strategy, 42 Make-to-stock strategy, 42 Manufacturing operations, 125 Market research, 215 Marketing, 13, 91–119 channels of distribution, 110–116, See also individual entry customer preference changes, accommodating, 97 PepsiCo, 97 definition, 93–98 evolution of, 94–96 1930s, 95 1970s, 95 early 20th century, 95 function, 93–94 Gap Inc., 94 logistics impact on, 183 mass marketing, 94 organization impacted by, 96–97 relational marketing, 95–96 segmentation, 94 supply chain impacted by, 98 place, 98 price, 98 product, 98 promotion, 98 sustainability, 400–401 target marketing, 94 transactional marketing, 95 Material requirements planning (MRP), 264 Matrix, supply chain relationship, 316–318 Mean, as a forecasting method, 217–218 Mediation, 327, 329 Method selection in forecasting, factors in, 212–213 available data, 212 degree of accuracy, 212 BINDEX 08/09/2011 18:52:2 Page 423 www.freebookslides.com Index length of forecast horizon, 212–213 patterns in data, 213 Micro-marketing, 102 Military logistics, 182 Minimalist ethic views, 384 Monte Carlo simulations, 395 Moving averages, 218–219 simple, 218 weighted, 219 Multimode, transport using, 192–193 Multiple regression, 227 Multiple sourcing, 164 N Negotiation, 159–160, 327, 329–337 concepts, 330–337 distributive opportunities, 332 integrative opportunities, 332 leverage, 331 negotiator’s dilemma, 332 position versus interest, 331–332 styles, 332–333 adversarial negotiators, 332 problem-solving negotiators, 333 tactics, 333–337, See also Adversarial tactics; Problem-solving tactics Network design, 63–89, See also Designing supply chain networks Niche strategy, 102 Non-cost considerations, 359–360 Non-strategic transactions, 316 Non-tariff barriers impact, 363–364 Norm of reciprocity, 333 Number of followers rule, 144 O Off-shoring, 164 ‘One-size-fits-all’ supply chain structure, 80 One-to-one marketing, 102 Open auction, 168 Operational impact, 155 Operational payoffs, 377 Operations, 13, 303 logistics impact on, 182 Operations management (OM), 121–150 automation in services, 148 decisions, 124–125 facility layout, 139–142, See also individual entry function, 123–124 impact on organization, 126–127 impact on SCM, 127–128 line balancing in product layouts, 142–146 manufacturing versus service operations, 125 operations function, evolution, 125–126 process automation, 146–148 process design, 134–139 intermittent processes, 135–136 repetitive processes, 135–136 product design, 128–134, See also Product design, OM in transformation role of, 124 Operations strategy, 41–44 Assemble-to-order option, 42 Make-to-order option, 42 Make-to-stock option, 42 Option value, sustainable SCM, 392 Order fulfillment, 189 Order picking, 193 Order qualifiers, 54 Order winners, 54 Ordering cost, 248 Organization OM impact on, 126–127 sourcing impact on, 155–157 financial, 156 information impact, 156 risk mitigation, 156 strategic, 156 Organizational end user, 99 Organizational payoffs, 377 Outsourcing, 46–47, 77, 165–166 advantages, 46–47 criticality, 165–166 outsourcing alliances, 48, 167 Li & Fung Ltd., 48–49 risks in, 47 Roots, 167 scope, 165 trend in SCM, 20–21 versus in-house, 78–86 Sony Versus Samsung, 78 P Packaging, 188, 398 logistics impact on, 184 Parallel process, 72 Pareto analysis, 287–288 Partnership agreements, 337–339 Partnerships, 317 Percentage of item cost, 248 Performance standard, 382 Periodic order quantity (POQ), 266 Periodic review system, 252 Peters, Tom, 46 Philips Lighting, 157 Physical distribution, 181 Pipeline inventory, 247 Pipeline, transport using, 191 423 BINDEX 08/09/2011 18:52:2 Page 424 www.freebookslides.com 424 Index Place, 98 utility, 189 Planning decisions involved, 206 existing resource, scheduling, 206 future resource needs, determining, 206 new resources, acquiring, 206 forecasting versus, 205–208 Political risks, 396 Position, in negotiation 331–332 Postponement, 23, 162 Power-based versus trust-based relationships, 319–321 Prevention cost, 286 Price, 98 cost versus, 158–159 Problem-solving negotiators, 333 Problem-solving tactics, 335–337 asking, 335 listening, 335 referencing, 335 Process automation, 146–148 advantages, 146–147 disadvantages, 146–147 Process capability, 291–296 process variation versus product specifications, 293 product design specifications, 292 Process control charts, 296–297 attributes, 297 control charts for attributes, 297–298 variables, 297 Processes, 387 design, 400 layout, 140 managing, 68–69, See also Supply chain processes variation, 73 Proctor & Gamble, 319–324 Product(s), 7, 98, 161 functional, 161 innovative, 161 layout, 140–141 line balancing in, 142–146 Product Life Cycle, 134 specifications, 292 volume, 135 Product design, OM in, 128–134 break-even analysis, 131–133 design decisions, factors impacting, 133–134 concurrent engineering, 134 design for manufacture (DFM), 133 product life cycle, 134 remanufacturing, 134 design of services, 129 physical element of service, 129 psychological benefits, 129 sensual elements, 129 functional concerns at product screening stage, 130 finance, 130 marketing, 130 operations, 130 sourcing, 130 process of, 129–131 final design, 130 idea development, 129 preliminary design and testing, 130 product screening, 130 Production rate model, 258 Productivity as competitiveness measure, 56–58 interpreting, 58 Professional organizations, SCM 27–28 Project processes, 136 Promotion, 98 Pull system, 279–281 Purchasing, 153–154 Q Q-model, 251 Qualitative forecasting methods, 214–215 executive opinion, 215 market research, 215 Quality circle, 284 Quality function deployment (QFD), 104 Quality, competing on, 50, 52–53 Quantitative forecasting methods, 214–217 causal models, 216–217 time series models, 216 R Radio frequency identification (RFID), 22, 53, 82 Rail, transport using, 191 Random variation, 291 Rapid manufacturing, 138 Raw materials, 243 Real option analysis, 395 Reciprocal interdependence, 322–323 Reciprocity, 333 norm of reciprocity, 333 Referencing, 335 Regional trade agreements, 361–363 Rejection-then-retreat trick, 334 Relational marketing, 95–96 Relational relationship, 316 Relationship conflicts, 326 Relationship management, 18–19 Relationship view, 68 Reliability, 18 Remanufacturing, 134 BINDEX 08/09/2011 18:52:2 Page 425 www.freebookslides.com Index Reorder point (ROP), 256 Repetitive processes, 135–136 continuous processes, 136–137 line processes, 136–137 Request for proposal (RFP), 157 Request for quotation (RFQ), 157 Request or invitation for bid (RFB), 157 Respect for people, 277, 283–285 role of management, 284 role of suppliers, 284–285 role of workers, 283–284 Responsive supply chains, 162 Responsiveness, 18 Return on assets (ROA), 184 Return on investment (ROI), 184 Reverse auction, 168 Reverse engineering, 130 Reverse logistics, 7, 185–187 returns to a 3PL provider for repairs, 186 with returns to manufacturer, 186 Rise of SCM, 15–18 information technology changes in, 17 need for, 16 order processing, 16 Risk assessment, sustainable SCM, 394–396 environmental risks, 396 fat tails, 395 Fuzzy logic, 395 Monte Carlo simulations, 395 political risks, 396 real option analysis, 395 scenario-based analysis, 395 social risks, 396 Risk-hedging supply chains, 162 Risk mitigation, 156 impacting sourcing, 156 S Safety stock, 247, 257–258 Sales and Operations Planning (S & OP), 232–233, 301 Sales force composite, 214 Sawtooth model, 251 Scatter diagrams, 287–288 Scenario-based analysis, 395 Scope, of outsourced activity, 165, 314–315 Sealed bid auction, 168 Seasonal index, 223 Seasonality, 211 adjustment, 222–224 Segmentation, market, 94 Segmented structures, designing, 79–81 Selective distribution, 112 Sequential interdependence, 322–323 Serial process, 71 425 Service, competing on, 50, 54 Service inventory, 244 Zoots, 244 Service operations, 125 Service supply chain, 10–11 Setup cost, 248 Setup time, 282 Shortage costs, 249 Shortage inventory cost, 247 ‘Silo’ mentality, 13, 75 Simple moving average, 218 Simplicity, 277 Single sourcing, 164 Six sigma quality, 11, 298–300, See also Lean systems methodology, 299–300 Small lot production, 282–283 Small versus large firms, 55–56 Smartcup, 131 Snedeker Global Cruises, 173–174 Social risks, 396 Social sustainability, 377–378 Sourcing, 13, 151–175, 399–400, See also Outsourcing bidding or negotiation, question of, 159–160 commercial versus consumer sourcing, 154–155 cost versus price, 158–159 demand versus supply uncertainty, 162 domestic versus global sourcing, 164–165 financial impact on organization, 156 function, 153, 157–160 evolution of, 154 impact on organization, 155–157 impact on supply chain, 155–157 operational impact, 155 performance, measuring, 169–170 process, 157–160 and SCM, 160–169 single versus multiple sourcing, 164 strategic sourcing, 153 strategy, 41, 45–47 outsourcing, 46 Speedy Automotive, case study 238–239 Stable supply process, 162 Stakeholder’s reaction, 388 Statistical process control (SPC), 290 Statistical quality control (SQC), 290–298, See also Process capability acceptance sampling, 290 descriptive statistics, 290 sources of variation, 290–291 statistical process control (SPC), 290 Steinway Pianos, 113 Strategic alignment, 36 Strategic considerations, 55–56 Strategic impact of sourcing, 156 BINDEX 08/09/2011 18:52:2 Page 426 www.freebookslides.com 426 Index Strategic Solutions Inc., 200–201 Strategic sourcing, 153 Structural conflicts, 326 Supplier-oriented standards, 109 Suppliers, 4, 303, 357 first-tier, second-tier, Supply chain/Supply chain system, 3, 65–69, See also Competitive supply chain; Customer-driven Supply chains activities lean six sigma supply chain impact on, 302–303 customer service impact on, 107 disruptions, managing, 24 downstream part, logistics impact on, 185 managing flows through, 7–8 funds flow, information flow, products flow, marketing impact on, 98 processes across, 65–66 products ‘pulled’ through, sourcing impact on, 155–157 upstream part, warehousing in, 193–194 Supply chain inventory, managing, 265–269 ABC inventory classification, 265–266 measuring inventory performance, 267–268 practical considerations of EOQ, 266–267 capacity constraints, 267 EOQ adjustments, 267 lumpy demand, 266 vendor managed inventory (VMI), 268–269 Supply chain management (SCM), 1–31, See also individual entries activities, 6–7 coordination, information sharing, collaboration, description, 3–11 forecasting impact on, 208–210 stages, 4–5 customers, producers, retailers, suppliers, wholesalers/distributors, Supply chain network, 4–5 design, 65, 77–81, See also Designing supply chain networks shapes, Supply chain processes integration of, 75–77 functions integration across supply chain stage, 76 internal functions integration stage, 76 organizational functions independence stage, 75–76 stages of, 75–76 vertical integration versus coordination, 76–77 managing, 68–69, See also Theory of constraints (TOC) advantages, 68 LG Electronics, 69 relationship view, 68 transactional view, 68 Supply chain relationships, 313–319, See also Trust-based relationship, developing contractual, 316–317 dimensions, 314–316 criticality, 314–316 scope, 314–315 importance of, 313–314 long-term, 321 management, 311–342 diluting power, 339 keiretsu supplier-partnering model, 337–338 partnership agreements, 337–339 in practice, 337–339 managing conflict and dispute resolution, 325–330, See also Conflict management; Dispute resolution matrix, 316–318 alliances, 318 non-strategic transactions, 316 partnerships, 317 relational, 316 trust-based versus power-based, 319–321 trust, role of, 319–325 contractual-based view, 321 relationship-based view, 321 Supply chain security, 24–25 Supply chain strategy, 33–62, See also Customer service: strategy; Distribution strategy; Operations strategy; Sourcing: strategy building blocks of, 40–49 business strategy and, 35 competitive advantage, achieving, 36–37 description, 35–40 design, 49–55 strategic alignment, 36 strategic considerations, 55–56 small versus large firms, 55–56 supply chain adaptability, 55–56 Surplus Styles (case study), 60–61 Supply chain sustainability model, 385–388 business context, 386 external context, 385 feedback, 388 financial performance, 388 human and financial resources, 386 BINDEX 08/09/2011 18:52:2 Page 427 www.freebookslides.com Index internal context, 386 leadership, 386 model inputs, 385 processes, 387 stakeholder’s reaction, 388 sustainability performance, 387 Supply management, 153–154 Supply uncertainty, 162 Sustainability, 375–384 and ‘green’ supply chain, 25 performance, 387 reason for, 382–384 community relations, 383 design standard, 382 ethical responsibility, 383 good works ethic views, 384 legal compliance, 382 minimalist ethic views, 384 performance standard, 382 revenue, 383 Sustainable SCM, 373–406 Aracruz Celulose, 378–380 Carbon Fiber Auto Parts, 397–398 compliance, 388–389 cost assessment, 392–394 customer related payoffs, 377 defining sustainability, 375–377 enforcement, 388–389 environmental sustainability, 377–378 evaluating, 384–396 financial payoffs, 377 Great Pacific Garbage Patch, 375–377 Haitian Oil, case study, 404–406 innovation, 388–390 marketing sustainability, 400–401 operational payoffs, 377 organizational payoffs, 377 packaging, 398 in practice, 396–397 product design, 397 principles, 380–382 business relationships, 380 community involvement and economic development, 381 ethics, 380 financial return, 380 governance, 380 transparency, 380 value of products and services, 381 process design, 400 risk assessment, 394–396, See also Risk assessment, sustainable SCM SCM decisions and related environmental effects, 379 facility location, 379 inventory control, 379 material flow, 379 product packaging, 379 social sustainability, 377–378 sourcing, 399–400 sustainability in SCM, measures of, 390–391 carbon footprint, 391 ecological footprint, 391 food mile, 391 life-cycle assessment (LCA), 390 total cost of ownership (TCO), 390 unintended consequences, 401–402 values in, 391–392 option value, 392 Sysco, 190 System constraints, 70–72 System design, 63–89, See also Supply chain system System variation, 72–73 T Takt time, 142 Target marketing, 94 Technology role, global SCM, 357–358 information technology, 357 Technology trend in SCM, 21–23 Theory of constraints (TOC), 70–75 capacity implications, 73–75 parallel process, 72 serial process, 71 system constraints, 70–72 system variation, 72–73 Third-party logistics (3PL) providers, 197, 315 Time series forecasting models, 217–224 exponential smoothing, 219–221 mean, 217–218 moving averages, 218–219 simple, 218 weighted, 219 seasonality adjustment, 222–224 trend adjusted exponential smoothing, 221–222 Time series models, 216 Time, competing on, 50–52 FedEx, 51 Total cost of ownership (TCO), 159, 390 Total quality management (TQM), 11, 53, 277–279, 285–290, 360 appraisal costs, 286 cause and effect diagrams, 286 checklists, 287–288 control charts, 287–288 costs of quality, 286 external failure costs, 286 flowcharts, 287–288 histograms, 287–288 427 BINDEX 08/09/2011 18:52:2 Page 428 www.freebookslides.com 428 Index Total quality management (TQM) (Continued ) internal failure costs, 286 Pareto analysis, 287–288 prevention cost, 286 quality tools, 286–288 scatter diagrams, 287–288 seven tools of quality, 287 voice of the customer (VOC), 285–286 Toyota Motor Corporation, 40, 172–173 Trade protection mechanisms, 361 Transactional marketing, 95 Transactional view, 68 Transformation role of OM, 124 Transportation, 345, 356 Transportation, logistics task, 189–193 air, 191 economies of distance, 189 economies of scale, 189 less-than-truck-load (LTL) shipment, 189 multimode, 192–193 Northeast Passage, 192–193 pipeline, 191 place utility, 189 rail, 191 truck, 191 water, 191 Trends in SCM, 20–27, 211 globalization, 20 outsourcing, 20–21 postponement, 23 technology, 21–23 trend adjusted exponential smoothing, 221–222 Trigger price mechanism, 363 Truck, transport using, 191 Trust-based relationship, developing, 321–324 assessing relationship, 322 effective conflict resolution mechanisms, designing, 323 effective contracts, creating, 323 equity, 322 identifying operational roles, 322 managing, 324–325 clear method of communication, 324 commitment, 324 fairness, 324 performance visibility, 324 reciprocal interdependence, 322 sequential interdependence, 322 Trust-based versus power-based relationships, 319–321 U Uniform plant loading, 283 United Parcel Service (UPS), 180 United Postal Service Inc (UPS), 197 V Value advantage, 37–39 Value chain, Value conflicts, 326 Value network, Value-segments, 38 Value Stream Mapping (VSM), 302 Value, SCM as a source of, 39–40 Vendor managed inventory (VMI), 268–269 Vertical integration versus coordination, 76–77 Virtual teaming, 165 Visibility, 277 Visual signals, 281–282 Voice of the customer (VOC), 103–105, 285–286 Voluntary Interindustry Commerce Standards (VICS), 230 W Wal-Mart, 21, 38, 127, 347–348 Warehousing, 193–196, 344 in supply chain, 193–194 Waste, 275 elimination of, 276 Water, transport using, 191 Weeks-of-supply, 169 Weighted moving average, 219 Willingness-to-pay (WTP), 392 Wireless communication technologies, 22 Withholding information, 334 Work cells, 141 Work-in-process (WIP), 243 World Health Organization (WHO), 209–210 Z Zara, Spanish retailer, 19 ... References CHAPTER 12 305 305 Global Supply Chain Management Global Supply Chain Management Supply Chain Leader’s Box—Challenges of Global Culture: Wal-Mart Global Market Challenges Managerial Insights... Sustainable Supply Chain Management What is Sustainability? Global Insights Box: The Great Pacific Garbage Patch Supply Chain Leader’s Box: Aracruz Celulose Evaluating Sustainability in SCM Sustainability... representative Library of Congress Cataloging-in-Publication Data Sanders, Nada R Supply chain management : a global perspective / Nada R Sanders p cm Includes bibliographical references and index