Supply Chain Management: Strategy, Planning, and Operation, Sixth Edition
Contents
Preface x
Part I Building a Strategic Framework to Analyze Supply Chains
Chapter 1 Understanding the Supply Chain 1
1.1 What Is a Supply Chain? 1
1.2 The Objective of a Supply Chain 3
1.3 The Importance of Supply Chain Decisions 5
1.4 Decision Phases in a Supply Chain 6
1.5 Process Views of a Supply Chain 8
1.6 Examples of Supply Chains 13
1.7 Summary of Learning Objectives 17
Discussion Questions 17 • Bibliography 18
Chapter 2 Supply Chain Performance: Achieving Strategic Fit and Scope 19
2.1 Competitive and Supply Chain Strategies 19
2.2 Achieving Strategic Fit 21
2.3 Expanding Strategic Scope 31
2.4 Challenges to Achieving and Maintaining Strategic Fit 34
2.5 Summary of Learning Objectives 35
Discussion Questions 36 • Bibliography 36
▶ CASE STUDY: The Demise of Blockbuster 37
Chapter 3 Supply Chain Drivers and Metrics 40
3.1 Financial Measures of Performance 40
3.2 Drivers of Supply Chain Performance 44
3.3 Framework for Structuring Drivers 46
3.4 Facilities 47
3.5 Inventory 49
3.6 Transportation 52
3.7 Information 53
3.8 Sourcing 56
3.9 Pricing 57
3.10 Summary of Learning Objectives 59
Discussion Questions 60 • Bibliography 61
▶ CASE STUDY: Seven-Eleven Japan Co. 61
▶ CASE STUDY: Financial Statements for Walmart Stores Inc. and
Macy’s Inc. 67
Part II D esigning the Supply Chain Network
Chapter 4 D esigning Distribution Networks and
Applications to Online Sales 69
4.1 The Role of Distribution in the Supply Chain 69
4.2 Factors Influencing Distribution Network Design 71
4.3 Design Options for a Distribution Network 74
4.4 Online Sales and the Distribution Network 87
4.5 Distribution Networks in Practice 100
4.6 Summary of Learning Objectives 101
Discussion Questions 102 • Bibliography 102
▶ CASE STUDY: Blue Nile and Diamond Retailing 103
Chapter 5 N etwork Design in the Supply Chain 108
5.1 The Role of Network Design in the Supply Chain 108
5.2 Factors Influencing Network Design Decisions 109
5.3 Framework for Network Design Decisions 114
5.4 Models for Facility Location and Capacity Allocation 116
5.5 Making Network Design Decisions in Practice 132
5.6 Summary of Learning Objectives 133
Discussion Questions 133 • Exercises 134 • Bibliography 138
▶ CASE STUDY: Managing Growth at SportStuff.com 139
▶ CASE STUDY: Designing the Production Network at CoolWipes 140
Chapter 6 D esigning Global Supply Chain Networks 142
6.1 The Impact of Globalization on Supply Chain Networks 142
6.2 The Offshoring Decision: Total Cost 144
6.3 Risk Management in Global Supply Chains 147
6.4 Discounted Cash Flows 151
6.5 Evaluating Network Design Decisions Using Decision Trees 153
6.6 To Onshore or Offshore: Evaluation of Global Supply Chain
Design Decisions Under Uncertainty 160
6.7 Making Global Supply Chain Design Decisions Under
Uncertainty in Practice 168
6.8 Summary of Learning Objectives 169
Discussion Questions 169 • Exercises 170 • Bibliography 171
▶ CASE STUDY: BioPharma, Inc. 172
▶ CASE STUDY: The Sourcing Decision at Forever Young 175
Part III Planning and Coordinating Demand and Supply in a
Supply Chain
Chapter 7 D emand Forecasting in a Supply Chain 177
7.1 The Role of Forecasting in a Supply Chain 177
7.2 Characteristics of Forecasts 178
7.3 Components of a Forecast and Forecasting Methods 179
7.4 Basic Approach to Demand Forecasting 180
7.5 Time-Series Forecasting Methods 182
7.6 Measures of Forecast Error 192
7.7 Selecting the Best Smoothing Constant 195
7.8 Forecasting Demand at Tahoe Salt 197
7.9 The Role of IT in Forecasting 202
7.10 Forecasting in Practice 203
7.11 Summary of Learning Objectives 204
Discussion Questions 204 • Exercises 205 • Bibliography 206
▶ CASE STUDY: Specialty Packaging Corporation 207
Chapter 8 Aggregate Planning in a Supply Chain 209
8.1 The Role of Aggregate Planning in a Supply Chain 209
8.2 The Aggregate Planning Problem 211
8.3 Aggregate Planning Strategies 213
8.4 Aggregate Planning at Red Tomato Tools 214
8.5 Aggregate Planning Using Linear Programming 215
8.6 Aggregate Planning in Excel 220
8.7 Building a Rough Master Production Schedule 224
8.8 The Role of IT in Aggregate Planning 225
8.9 Implementing Aggregate Planning in Practice 225
8.10 Summary of Learning Objectives 226
Discussion Questions 227 • Exercises 227 • Bibliography 229
▶ CASE STUDY: Kloss Planters and Harvesters 229
Chapter 9 Sales and Operations Planning: Planning Supply
and Demand in a Supply Chain 231
9.1 Responding to Predictable Variability in the Supply Chain 231
9.2 Managing Supply 232
9.3 Managing Demand 234
9.4 Sales and Operations Planning at Red Tomato 235
9.5 Implementing Sales and Operations Planning in Practice 241
9.6 Summary of Learning Objectives 242
Discussion Questions 242 • Exercises 242 • Bibliography 244
▶ CASE STUDY: Mintendo Game Girl 245
▶ CASE STUDY: Promotion Challenges at Gulmarg Skis 246
Chapter 10 Coordination in a Supply Chain 248
10.1 Lack of Supply Chain Coordination and the Bullwhip Effect 248
10.2 The Effect on Performance of Lack of Coordination 250
10.3 Obstacles to Coordination in a Supply Chain 252
10.4 Managerial Levers to Achieve Coordination 256
10.5 Continuous Replenishment and Vendor-Managed
Inventories 261
10.6 Collaborative Planning, Forecasting, and Replenishment 261
10.7 Achieving Coordination in Practice 265
10.8 Summary of Learning Objectives 266
Discussion Questions 267 • Bibliography 267
Part IV Planning and Managing Inventories in a Supply Chain
Chapter 11 Managing Economies of Scale in a Supply Chain:
Cycle Inventory 268
11.1 The Role of Cycle Inventory in a Supply Chain 268
11.2 Estimating Cycle Inventory-Related Costs in Practice 271
11.3 Economies of Scale to Exploit Fixed Costs 273
11.4 Aggregating Multiple Products in a Single Order 278
11.5 Economies of Scale to Exploit Quantity Discounts 286
11.6 Short-Term Discounting: Trade Promotions 297
11.7 Managing Multiechelon Cycle Inventory 302
11.8 Summary of Learning Objectives 305
Discussion Questions 306 • Exercises 306 • Bibliography 309
▶ CASE STUDY: Delivery Strategy at MoonChem 310
▶ CASE STUDY: Pricing and Delivery at KAR Foods 312
Appendix 11A: Economic Order Quantity 313
Chapter 12 Managing Uncertainty in a Supply Chain: Safety
Inventory 314
12.1 The Role of Safety Inventory in a Supply Chain 314
12.2 Factors Affecting the Level of Safety Inventory 316
12.3 Determining the Appropriate Level of Safety Inventory 318
12.4 Impact of Supply Uncertainty on Safety Inventory 327
12.5 Impact of Aggregation on Safety Inventory 330
12.6 Impact of Replenishment Policies on Safety Inventory 342
12.7 Managing Safety Inventory in a Multiechelon Supply Chain 346
12.8 The Role of IT in Inventory Management 346
12.9 Estimating and Managing Safety Inventory in Practice 347
12.10 Summary of Learning Objectives 348
Discussion Questions 349 • Exercises 349 • Bibliography 353
▶ CASE STUDY: Managing Inventories at ALKO Inc. 353
▶ CASE STUDY: Should Packing Be Postponed to the DC? 356
Appendix 12A: The Normal Distribution 357
Appendix 12B: The Normal Distribution in Excel 358
Appendix 12C: Expected Shortage per Replenishment Cycle 358
Appendix 12D: Evaluating Safety Inventory for Slow-Moving
Items 359
Chapter 13 Determining the Optimal Level of Product
Av ailability 361
13.1 The Importance of the Level of Product Availability 361
13.2 Factors Affecting Optimal Level of Product Availability 362
13.3 Managerial Levers to Improve Supply Chain Profitability 372
13.4 Setting Product Availability for Multiple Products Under
Capacity Constraints 386
13.5 Setting Optimal Levels of Product Availability in Practice 389
13.6 Summary of Learning Objectives 389
Discussion Questions 390 • Exercises 390 • Bibliography 392
▶ CASE STUDY: The Need for Speed at Winner Apparel 393
Appendix 13A: Optimal Level of Product Availability 394
Appendix 13B: An Intermediate Evaluation 395
Appendix 13C: Expected Profit from an Order 396
Appendix 13D: Expected Overstock from an Order 396
Appendix 13E: Expected Understock from an Order 397
Appendix 13F: Simulation Using Spreadsheets 397
Part V D esigning and Planning Transportation Networks
Chapter 14 T ransportation in a Supply Chain 400
14.1 The Role of Transportation in a Supply Chain 400
14.2 Modes of Transportation and Their Performance
Characteristics 402
14.3 Transportation Infrastructure and Policies 406
14.4 Design Options for a Transportation Network 409
14.5 Mumbai Dabbawalas: A Highly Responsive Distribution
Network 415
14.6 Trade-Offs in Transportation Design 416
14.7 Tailored Transportation 425
14.8 The Role of IT in Transportation 427
14.9 Making Transportation Decisions in Practice 427
14.10 Summary of Learning Objectives 428
Discussion Questions 429 • Bibliography 429
▶ CASE STUDY: Designing the Distribution Network for Michael’s
Hardware 430
▶ CASE STUDY: The Future of Same-Day Delivery: Same as the Past? 431
▶ CASE STUDY: Selecting Transportation Modes for China Imports 432
Part VI M anaging Cross-Functional Drivers in a Supply Chain
Chapter 15 Sourcing Decisions in a Supply Chain 433
15.1 The Role of Sourcing in a Supply Chain 433
15.2 In-House or Outsource? 435
15.3 Examples of Successful Third-Party Suppliers 441
15.4 Total Cost of Ownership 443
15.5 Supplier Selection—Auctions and Negotiations 446
15.6 Sharing Risk and Reward in the Supply Chain 448
15.7 The Impact of Incentives When Outsourcing 459
15.8 Designing a Sourcing Portfolio: Tailored Sourcing 461
15.9 Making Sourcing Decisions in Practice 463
15.10 Summary of Learning Objectives 464
Discussion Questions 465 • Exercises 465 • Bibliography 466
Chapter 16 Pricing and Revenue Management in a Supply
Chain 468
16.1 The Role of Pricing and Revenue Management in a Supply
Chain 468
16.2 Pricing and Revenue Management for Multiple Customer
Segments 470
16.3 Pricing and Revenue Management for Perishable Assets 477
16.4 Pricing and Revenue Management for Seasonal Demand 484
16.5 Pricing and Revenue Management for Bulk and Spot
Contracts 484
16.6 Using Pricing and Revenue Management in Practice 486
16.7 Summary of Learning Objectives 487
Discussion Questions 488 • Exercises 488 • Bibliography 489
▶ CASE STUDY: To Savor or to Groupon? 490
Chapter 17 Sustainability and the Supply Chain 492
17.1 The Role of Sustainability in a Supply Chain 492
17.2 The Tragedy of the Commons 494
17.3 Key Pillars of Sustainability 497
17.4 Sustainability and Supply Chain Drivers 500
17.5 Closed-Loop Supply Chains 504
17.6 The Pricing of Sustainability 505
17.7 Summary of Learning Objectives 507
Discussion Questions 508 • Bibliography 508
Part VII Online Chapter
Chapter A Information Technology in a Supply Chain
The Role of IT in a Supply Chain
The Supply Chain IT Framework
Customer Relationship Management
Internal Supply Chain Management
Supplier Relationship Management
The Transaction Management Foundation
The Future of IT in the Supply Chain
Risk Management in IT
Supply Chain IT in Practice
Summary of Learning Objectives
Discussion Questions • Bibliography
Index 509