Distribution Planning and Control: Managing in the Era of Supply Chain Management, Third Edition
David Frederick Ross
CONTENTS
PREFACE / XIX
PART 1. THE SCM AND THE DISTRIBUTION
MANAGEMENT ENVIRONMENT / 1
Introduction to Supply Chain Management / 3
1.1 Defining Logistics and Supply Chain
Management / 4
1.1.1 Defining Logistics / 5
1.1.2 Detailed Logistics Activities / 7
1.1.3 Detailed Logistics Performance
Measurements / 8
1.1.4 Defining Supply Chain Management / 9
1.2 The Evolution of Supply Chain Management / 15
1.2.1 Stage 1: Basic Logistics / 15
1.2.2 Stage 2: Total Cost Management / 17
1.2.3 Stage 3: Integrated Logistics Management / 17
1.2.4 Stage 4: Supply Chain Management / 18
1.2.5 Summary / 19
1.3 Supply Chain Structures / 19
1.3.1 Basic Supply Chain Structures / 20
1.3.2 Basic Supply Chain Strategies / 21
1.3.3 The SCOR® Supply Chain Framework / 22
1.3.4 Lean Supply Chain Model / 26
1.3.5 Adaptive, Demand-Driven Supply Chain
Model / 29
1.3.6 Components of Adaptive Supply Chain Management / 29
1.3.7 Demand-Driven Supply Network (DDSN) / 31
1.4 Supply Chain Maturity Model / 34
1.5 Trends in Supply Chain Management / 36
1.6 Goals of Today’s Supply Chains / 38
1.7 Summary / 39
Discussion Questions / 42
References / 43
The Distribution Management Environment / 45
2.1 Defining the Disribution Function / 46
2.2 Revisiting the Supply Chain / 47
2.2.1 Basic Supply Chain Distribution Formats / 49
2.2.2 Alternative Distribution Channel Formats / 50
2.3 Role of Distribution Channels / 58
2.3.1 Channel Service Outputs / 60
2.3.2 Other Functions of Distribution Channels / 61
2.4 Distribution Channel Transaction Flows / 64
2.5 Distribution Channel Inventory Flows / 68
2.5.1 Substituting Information for Inventory / 72
2.5.2 Reverse Logistics / 73
2.5.3 Sustainability / 75
2.6 Summary / 77
Discussion Questions / 79
References / 80
PART 2. SCM STRATEGIES, CHANNEL STRUCTURES,
AND DEMAND MANAGEMENT / 81
Crafting Business and Supply Chain Strategies / 83
3.1 Defining Business Strategy / 84
3.1.1 Scanning the External and Internal Business Environments / 84
3.1.2 Defining the Enterprise Vision, Mission, and Goals / 91
3.2 Crafting the Supply Chain Strategy / 99
3.2.1 Defining Supply Chain Strategy / 99
3.2.2 Stages of Supply Chain Strategy / 102
3.2.3 Supply Chain Strategy Performance Attributes / 104
3.2.4 Process Drivers of Supply Chain Performance / 105
3.2.5 Applying the Supply Chain Strategy Matrix / 113
3.3 Achieving Strategic Supply Chain “Fit” / 114
3.3.1 Concept of Supply Chain Strategic Fit / 114
3.3.2 Supply Chain Strategy Performance Metrics / 116
3.3.3 Balanced Scorecard Approach / 119
3.4 Supply Chain Strategy and Risk Management / 121
3.4.1 Defining Supply Chain Risk Management / 122
3.4.2 Managing Supply Chain Risk Resiliency / 128
3.4.3 SCRM Maturity Model / 132
3.4.4 Effect of Supply Chain Management on Resiliency / 134
3.5 Summary / 135
Discussion Questions / 138
References / 139
Designing Channel Networks / 141
4.1 Defining Channel Networks / 142
4.1.1 Exploring Channel Systems / 143
4.1.2 Basic Channel Networking Structures / 144
4.2 Network Configuration: Definitions / 146
4.2.1 Reasons for Channel Networks / 147
4.2.2 Network Channel Design Considerations / 148
4.3 Channel Network Design Process / 149
4.3.1 Map Channel Strategy / 149
4.3.2 Segment Marketplace / 155
4.3.3 Channel Positioning / 157
4.4 Channel Selection / 165
4.4.1 Facility Selection Issues / 167
4.4.2 Methods for Locating Channel Network Facilities / 168
4.5 Channel Implementation / 176
4.5.1 Selection of Channel Partners / 176
4.5.2 Role of Channel Power / 177
4.5.3 Managing Channel Conflict / 179
4.5.4 Achieving Strategic Channel Collaboration / 182
4.6 Summary / 185
Discussion Questions / 187
Problems / 187
References / 190
Forecasting in the Supply Chain Environment / 191
5.1 Forecasting: An Overview / 192
5.1.1 Elements of Forecasting / 193
5.1.2 Forecasting Levels / 196
5.2 Forecasting Techniques / 200
5.2.1 Qualitative Techniques / 201
5.2.2 Quantitative Intrinsic Techniques / 204
5.2.3 Basic Quantitative Forecasting Techniques / 204
5.3 Time-Series Analysis / 209
5.3.1 Basics of Time-Series Analysis / 209
5.3.2 Decomposition of a Time Series / 211
5.4 Associative (Correaltion) Forecasting / 222
5.4.1 Simple Associative Model / 223
5.4.2 Correlation Coefficient for Regression / 224
5.4.3 Multiple Variable Associative Forecast / 225
5.5 Alternative Forecasting Methods / 226
5.6 Managing Forecast Performance / 230
5.6.1 Measures of Forecast Error / 231
5.6.2 Why Forecasts Fail / 236
5.7 Summary / 238
Discussion Questions / 239
Problems / 239
Case Study / 242
References / 244
Demand Management / 245
6.1 Defining Demand Management / 246
6.1.1 Demand Management Definitions / 247
6.1.2 Components of Demand Management / 247
6.1.3 Formulating Demand Strategies / 248
6.2 Creating the Demand Plan / 250
6.2.1 Demand Planning / 250
6.2.2 Planning Demand / 251
6.2.3 Marketing Plan / 258
6.2.4 Sales Plan / 262
6.2.5 Developing the Demand Forecast / 265
6.3 Creating the Supply Plan / 270
6.3.1 Elements of Production Planning / 271
6.3.2 Resource Planning / 276
6.3.3 Inventory and Distribution Planning / 280
6.4 Balancing the Demand and Supply Plans / 283
6.4.1 S&OP: A Balancing Act / 284
6.4.2 S&OP Foundations / 286
6.4.3 Working with S&OP Planning Grids / 288
6.5 Monthly S&OP Process / 291
6.5.1 Step 1: Data Gathering / 292
6.5.2 Step 2: Demand Planning / 293
6.5.3 Step 3: Supply Planning / 293
6.5.4 Step 4: Pre-Executive S&OP Meeting / 295
6.5.5 Step 5: Executive S&OP Meeting / 296
6.5.6 Benefits of the S&OP Process / 298
6.6 Summary / 298
Discussion Questions / 301
Problems / 301
Case Study / 303
References / 306
PART 3. INVENTORY MANAGEMENT IN THE SUPPLY
CHAIN ENVIRONMENT / 307
Managing Supply Chain Inventories / 309
7.1 Inventory Management Basics / 310
7.1.1 The Magnitude of Inventory / 312
7.1.2 Inventory Management Objectives / 312
7.1.3 How Does Inventory Provide Value? / 313
7.1.4 The Purpose of Inventory / 315
7.1.5 The Role of Inventory Management / 316
7.1.6 Classes of Inventory / 317
7.1.7 Function of Inventory / 318
7.1.8 Types of Supply Chain Inventory / 320
7.2 Components of Inventory Decisions / 322
7.2.1 Cycle Inventory / 322
7.2.2 Safety Inventory / 323
7.2.3 Seasonal Inventory / 324
7.2.4 Surplus and Obsolete Inventory / 325
7.3 Inventory Costs / 326
7.3.1 Elements of Inventory Cost / 326
7.3.2 Inventory Valuation / 332
7.4 Inventory Control / 335
7.4.1 Transaction Management / 336
7.4.2 ABC Analysis / 337
7.4.3 Periodic Physical Inventory and Cycle Counting / 340
7.5 Performance Measurement / 342
7.5.1 Customer Service / 342
7.5.2 Financial Statements and Inventory / 344
7.5.3 Inventory Turns and Ratios / 346
7.6 Summary / 349
7.6.1 Supplement: Inventory Valuation Methods / 350
Discussion Questions / 354
Problems / 354
References / 356
Statistical Inventory Management / 357
8.1 Statistical Inventory Replenishment Concepts / 358
8.1.1 Understanding the Demand Driver / 358
8.1.2 Concept of Stock Replenishment / 360
8.1.3 Replenishment Review Interval / 362
8.1.4 Basic Terms of Statistical Inventory Replenishment / 364
8.2 Inventory Replenishment Techniques / 365
8.2.1 Visual Review System / 365
8.2.2 Two-Bin System / 366
8.2.3 Periodic Review / 367
8.2.4 Reorder Point / 367
8.2.5 Time-Phased Order Point (TPOP) / 367
8.2.6 Lean Inventory Systems / 368
8.3 Reorder Point Systems / 368
8.3.1 Reorder Point Basics / 368
8.3.2 Min/Max and Periodic Review / 379
8.4 Order Quantity Techniques / 382
8.4.1 The Economic Order Quantity / 383
8.4.2 Replenishment by Item Class / 392
8.5 Lean Inventory Management / 394
8.5.1 Lean and Supply Chain Management / 395
8.5.2 The Lean Inventory Replenishment Pull System / 397
8.6 Summary / 401
Discussion Questions / 402
Problems / 402
References / 405
Replenishment in a Multi-echelon Channel Environment / 407
9.1 Distribution Channel Basics / 408
9.1.1 Coupled Deployment “Push” Systems / 410
9.1.2 Independent Deployment “Pull” Systems / 414
9.1.3 Which to Choose: Order Points or DRP? / 418
9.2 The Basics of DRP / 423
9.2.1 Introduction to the DRP Grid / 423
9.2.2 DRP Order Policies and Safety Stock / 429
9.3 The DRP Calculation / 432
9.3.1 Basic Data Elements / 432
9.3.2 Bucketless DRP / 433
9.3.3 DRP Regeneration Frequency / 434
9.4 DRP in a Multi-echelon Environment / 435
9.4.1 DRP Planning Process / 436
9.5 Stocking Multi-echelon Supply Channels / 438
9.5.1 Bullwhip Effect / 439
9.5.2 Adjusting Channel Imbalances / 446
9.6 Supply Chain Capacity Planning / 449
9.6.1 Financial Estimating / 450
9.6.2 Transportation Planning / 451
9.6.3 Warehouse Space Planning / 453
9.6.4 Labor and Equipment Capacity / 455
9.7 Summary / 455
Discussion Questions / 457
Problems / 457
Case Study / 460
References / 463
PART 4. SUPPLY CHAIN OPERATIONS EXECUTION / 465
Customer Management / 467
10.1 The Revolution in CustomerManagement / 468
10.1.1 Understanding Today’s Customer / 469
10.1.2 Defining the Customer / 470
10.1.3 Understanding Customer Wants and Needs / 473
10.1.4 Marketing To Today’s Customer / 474
10.1.5 Creating Lifetime Customers / 476
10.1.6 Dimensions of Customer Values / 477
10.1.7 Creating the Customer-Centric Organization / 484
10.2 Customer Relationship Management / 486
10.2.1 Defining Customer Relationship Management (CRM) / 486
10.2.2 Components of CRM / 488
10.2.3 The Range of CRM Application Functions / 489
10.3 Customer Order Management / 499
10.3.1 Charting Customer Order Management Attributes / 500
10.3.2 Order Management Process / 503
10.3.3 The Order Management Cycle / 505
10.3.4 The Perfect Order / 508
10.3.5 Aligning Order and Fulfillment Supply Channels / 509
10.4 Customer Service Management / 511
10.4.1 Defining Customer Service Management / 511
10.4.2 Elements of Effective Service Management / 513
10.5 Summary / 525
Discussion Questions / 527
References / 528
Procurement and Supplier Management / 531
11.1 Defining the Procurement Function / 532
11.1.1 Defining Purchasing / 533
11.1.2 Categories of Purchasing / 533
11.1.3 Purchasing Responsibilities / 534
11.1.4 Objectives of Purchasing / 536
11.1.5 The Purchasing Organization / 538
11.2 Anatomy of Purchasing Strategy / 544
11.2.1 Role of Strategic Sourcing / 552
11.3 Supplier Relationship Management / 553
11.3.1 Supplier Relationship Types / 553
11.3.2 Advent of Supplier Relationship Management / 555
11.3.3 Advantages of Supplier Relationship Management / 557
11.3.4 Implementing Supplier Relationship Management / 558
11.4 Managing the Sourcing Process / 560
11.4.1 Sourcing Process Steps / 562
11.5 Purchase Order Management / 576
11.5.1 Purchase Processing Cycle / 577
11.6 Supplier and Procurement Performance Measurement / 584
11.6.1 Supplier Performance Measurement / 584
11.6.2 Purchasing Organization Performance Measurements / 587
11.7 Impact of e-Commerce on Procurement / 590
11.7.1 The Array of B2B e-Commerce Functions / 590
11.7.2 Structure of the B2B e-Commerce Marketplace / 597
11.7.3 Benefits of B2B e-Commerce / 598
11.8 Summary / 599
Discussion Questions / 601
Problems / 601
Case Study / 602
References / 604
Warehouse Management / 605
12.1 Defining Warehouse Management / 606
12.1.1 The Magnitude of Warehousing / 607
12.1.2 Warehousing Functions / 608
12.2 Types of Warehouse / 613
12.2.1 The Four Warehouse Types / 613
12.2.2 Specialized Warehouse Services / 617
12.3 Developing Warehouse Strategies / 619
12.3.1 Strategic Overview / 619
12.3.2 Developing the Warehouse Strategic Plan / 621
12.3.3 The Outsourcing Decision / 624
12.4 Warehouse Management Process / 626
12.4.1 Establishing Warehouse Standards / 627
12.4.2 Receiving and Stocking / 629
12.4.3 Order Picking and Shipping / 631
12.4.4 Performance Measurement / 636
12.5 Warehouse Design and Layout / 639
12.5.1 Warehouse Design and Layout Objectives / 640
12.5.2 Sizing the Warehouse / 641
12.5.3 Warehouse Layout / 644
12.6 Warehouse Storage Equipment / 650
12.6.1 Types of Storage Systems / 651
12.6.2 Stocking Inventory in Warehouse Locations / 657
12.6.3 The Cross-Docking Warehouse / 661
12.7 Warehouse Materials Handling Equipment / 662
12.7.1 Dock Door Equipment / 662
12.7.2 Mobile Materials Handling Equipment / 665
12.7.3 Packaging and Unitization / 669
12.7.4 Warehouse Automation / 672
12.8 Warehouse Management and Environmental Sustainability / 677
12.9 Today’s Warehouse Challenges / 679
12.10 Summary / 680
Discussion Questions / 682
Problems / 682
Case Study / 683
References / 685
Transportation Management / 687
13.1 Defining Transportation Management / 689
13.1.1 The Magnitude of Transportation / 689
13.1.2 The Principles of Transportation / 690
13.1.3 Transportation Services / 692
13.1.4 Transportation Participants / 694
13.1.5 Relationship of Transportation to Other Business
Functions / 695
13.1.6 Transportation Performance Characteristics / 697
13.2 Types of Transportation / 698
13.2.1 Forms of Transportation / 699
13.3 Modes of Transportation / 701
13.3.1 Motor Transport / 701
13.3.2 Railroad Transport / 703
13.3.3 Air Transport / 705
13.3.4 Water Transport / 706
13.3.5 Pipelines / 708
13.3.6 Transportation Mode Summary / 709
13.3.7 Intermodal Transportation / 709
13.4 Transportation Management Functions / 711
13.4.1 The Role of Transportation Administration / 713
13.5 Issues Confronting Transportation / 737
13.5.1 Transportation Infrastructure Issues / 738
13.5.2 Transportation Risk Management / 741
13.5.3 Transportation Management Technologies / 743
13.5.4 Transportation Management Systems (TMS) / 743
13.5.5 Yard Management Systems / 746
13.5.6 Routing, Scheduling, and Event Management Systems / 747
13.5.7 Driver-Focused Technologies / 748
13.6 Transportation Management LSPs / 749
13.6.1 Types of Transportation LSPs / 749
13.6.2 Range of Transportation LSP Services / 751
13.6.3 Working with LSPs / 751
13.7 Summary / 753
Discussion Questions / 756
Problems / 756
Case Study / 757
References / 759
PART 5. INTERNATIONAL DISTRIBUTION AND SUPPLY CHAIN
TECHNOLOGIES / 761
International Distribution / 763
14.1 Globalization of the World Economy / 765
14.1.1 Trends Accelerating Globalization / 766
14.1.2 Barriers to Globalization / 770
14.1.3 Summary / 773
14.2 Globalization Strategies / 774
14.2.1 Global Strategy Development / 775
14.2.2 Strategy Development Summary / 778
14.3 Channel Strategies / 779
14.3.1 Exporting / 780
14.3.2 Licensing / 783
14.3.3 Joint Ventures / 784
14.3.4 Direct Ownership / 785
14.3.5 Other Methods of Entry / 785
14.4 Managing Global Trade Networks / 787
14.4.1 Establishing Global Distribution Channels / 787
14.4.2 Global Marketing Issues / 792
14.4.3 Global Trade Management (GTM) Systems / 803
14.5 International Purchasing / 806
14.5.1 Overview / 806
14.5.2 Advantages of International Sourcing / 807
14.5.3 Countertrade Purchasing / 808
14.5.4 International Purchasing Management Process / 809
14.6 International Transportation and Warehousing / 814
14.6.1 International Transportation: Opening Issues / 814
14.6.2 Surface Transportation / 815
14.6.3 Ocean Transport / 817
14.6.4 International Air Transport / 819
14.6.5 International Warehousing / 819
14.7 Summary / 821
Discussion Questions / 824
References / 825
Information Technology and Supply Chain Management / 827
15.1 Foundations of Information Technology / 829
15.1.1 Information Technology Concepts / 830
15.2 Technology Architecture Basics / 833
15.2.1 Enterprise Technology Architecture / 833
15.2.2 Enterprise Business Architecture / 835
15.2.3 Inter-enterprise Business Architecture / 837
15.3 Information System Foundations / 840
15.3.1 The Five Basic Functions of Information Systems / 840
15.3.2 Principles of System Management / 842
15.3.3 Objectives of Information Technology
in the Supply Chain / 843
15.4 Supply Chain Management Business Technologies: Foundations / 844
15.4.1 Identifying Core SCM Business Technologies / 845
15.4.2 Advanced SCM Business Technologies / 848
15.4.3 Networking SCM Business Technologies / 849
15.4.4 SCM Business System Maturity Model / 854
15.5 Standard SCM Business Systems / 856
15.5.1 Enterprise Resources Planning (ERP) / 856
15.5.2 Supply Chain Management (SCM) Systems / 859
15.5.3 Evaluating Information Technology Solutions / 861
15.5.4 SCM Business Technology Configuration Choices / 863
15.6 Advent of SCM Internet Technologies / 864
15.6.1 Defining Internet Business / 865
15.6.2 Evolution of Internet Business / 866
15.6.3 Impact of Internet Business on the Supply Chain / 869
15.7 SCM Technology Implementation Issues / 871
15.7.1 SCM Technology Benefits and Risks / 871
15.7.2 Managing the Implementation Project / 873
15.8 Summary / 882
Discussion Questions / 884
References / 885
INDEX / 887