1. INTRODUCTION TO SUPPLY CHAIN MANAGEMENT1. ] What îs Supply Chain Management?1.2 The Developmenî Chain

1.3 Global Optimization

1.4 Managing Uncertainty and Risk1.5 The Evolution of Supply Chain Management

1.6 The Complexity

L 7 Key Issues in Supply Chain Management

1.8 Book Objectives and OverviewDiscussion Questions

CASE: MEDITECH SURGICAL

2. INVENTORY MANAGEMENT AND RISK POOLING

CASE: STEEL WORKS, INC.

2.1 Introduction

2.2 Single Stage Inventory Control2.2.1 The Economic Lot Size Model2.2.2 The Effect ofDemand Uncertainty2.2.3 Single Period Models2.2.4 Iniţial Inventory2.2.5 Multiple Order Opportunities2.2.6 Continuous Review Policy2.2.7 Variable Lead Times2.2.8 Periodic Review Policy2.2.9 Service Level Optimization

2.3 Risk Pooling

CASE: RISK POOLING

2.4 Centralized Versus Decentralized Systems2.5 Managing Inventory in the Supply Chain

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XXÎ

CONTENTS

2.6 Practicai Issues 552.7 Forecasting 56

2.7.7 Judgment Methods 572.7.2 Market Research Methods 582.7.3 Time-Series Methods 582.7.4 CausalMethods 592.7.5 Selecting the Appropriate Forecasting Technique 59

Summary 59Discussion Questions 60

CASE: SPORT OBERMEYER 63

3. NETWORK PLANNING 77

CASE: THE Bis CORPORATION 77

3.7 Introduction 79J. 2 Network Design 79

5.2 J Data Collection 803.2.2 Data Aggregation 82J. 2.3 Transportation Rates 853.2.4 Mileage Estimation 873.2.5 Waretow.se Coste 883.2. (5 Vfaretow.se Capacities 893.2.7 Potenţial Warehouse Locations 903.2. S Service Level Requirements 903.2.9 FutureDemand 903.2.70 Model and Data Validation 903.2.7 7 Solution Techniques 913.2.72 Key Features of a Network Configuration SCP 94

J. 3 Inventory Positioning and Logistics Coordination 953.3.7 Strategic Safety Stock 95

CASE: ELECCOMP INC. 97

3.3.2 Integrating Inventory Positioning and Network Design 102

3.4 Resource Allocation 104Summary 107

Discussion Questions 108

CASE: H. C. STARCK, INC. 109

4. SUPPLY CONTRACTS 123

CASE: AMERICAN TOOL WORKS 123

4.1 Introduction 1244.2 Strategic Components 125

4.2.7 Suppfy Contracts 1254.2.2 Limitations 130

4.3 Contracts for Make-to-Stock/Make-to-Order Supply Chains 1314.4 Contracts with Asymmetric Information 136

CONTENTS XXIII

4.5 Contracts for Nonstrategic Components 136

Summary 138

Discussion Questions 139

5. THE VALUE OF INFORMATION 143

CASE: BARILLA SpA (A) 143

5.1 Introduction 153

5.2 The Bullwhip Effect 1535.2.7 Quantifying the Bullwhip Effect 1565.2.2 The Impact of Centralized Information on the Bullwhip Effect 158

5.2 J Methodsfor Coping with the Bullwhip Effect 161

5.3 Information Sharing and Incentives 162

5.4 Effective Forecasts 164

5.5 Information for the Coordination of Systems 164

5.6 Locating Desired Products 165

5.7 Lead-TimeReduction 166

5.8 Information and Supply Chain Trade-offs 1665.8.1 Conflicting Objectives in the Supply Chain 1665.8.2 Designing the Supply Chain for Conflicting Goals 167

5.9 Decreasing Marginal Value of Information 170

Summary 171

Discussion Questions 171

CASE: REEBOK NFL REPLICA JERSEYS: A CASE FOR POSTPONEMENT 172

6. SUPPLY CHAIN INTEGRATION 179

CASE: DELL INC.: IMPROVING THE FLEXIBILITY OF THE DESKTOP PC SUPPLY CHAIN 179

6.1 Introduction 188

6.2 Push, Puii, and Push-Pull Systems 1886.2.1 Push-Based Supply Chain 1886.2.2 Pull-Based Supply Chain 1896.2.3 Push-Pull Supply Chain 1906.2.4 Identifying the Appmpriate Supply Chain Strategy 1916.2.5 Implementing a Push-Pull Strategy 193

6.3 The Impact of Lead Time 195

6.4 Demand-Driven Strategies 197

6.5 The Impact of the Internet on Supply Chain Strategies 1986.5.1 WhatlsE-Business? 2006.5.2 The Grocery Industry 2006.5.3 The Book Industry 2016.5.4 The Retail Industry 2016.5.5 Impact on Transportation and Fulfillment 202

Summary 203

Discussion Questions 203

CASE: THE GREAT INVENTORY CORRECTION 204

XXIV CONTENTS

7. DISTRIBUTION STRATEGIES 209

CASE: AMAZON.COM'S EUROPEAN DISTRIBUTION STRATEGY 209

7.1 Introduction 2307.2 Direct Shipment Distribuitori Strategies 2307.3 Intermediate Inventory Storage Point Strategies 231

7.3.1 Tradiţional Warehousing 2317.3.2 Cross-Docking 2337.3.3 Inventory Pooling 234

7.4 Transshipment 2397.5 Selecting an Appropriate Strategy 239Summary 240Discussion Questions 241

8. STRATEGIC ALLIANCES 243

CASE: HOW KIMBERLY-CLARK KEEPS CLIENT COSTCO IN DIAPERS 243

8.1 Introduction 2468.2 A Framework for Strategic Alliances 2478.3 Third-Party Logistics 249

8.3.1 WhatlsSPL? 2498.3.2 Advantages and Disadvantages of 3PL 25063.3 3PL Issues and Requirements 2528.3.4 3PLImplementation Issues 253

S. 4 Retailer-Supplier Partnerships 254S. 4.7 TypesofRSP 254S. 4.2 Requirements for RSP 255£•0 Inventory Ownership in RSP 25664.4 Issues in RSP Implementation 257

64.5 Sfe/« m RSP Implementation 25864.6 Advantages and Disadvantages of RSP 2588.4.7 Successes and Failures 259

S. 5 Distributor Integration 26065.7 Types of Distributor Integration 261&5.2 Issues in Distributor Integration 262

Summary 262

Discussion Questions 263

CASE: AUDIO DUPLICATION SERVICES, INC. (ADS) 263

CASE: THE SMITH GROUP 264

9. PROCUREMENT AND OUTSOURCING STRATEGIES 267

CASE: ZARA 267

9.1 Introduction 280

9.2 Outsourcing Benefits and Risks 281

9. J A Framework for Buy/Make Decisions 283

CONTENTS XXV

9.4 Procurement Strategies 2859.4.1 Supplier Footprint 287

9.5 E-Procurement 290

Summary 294

Discussion Questions 294

CASE: SOLECTRON: FROM CONTRACT MANUFACTURER TO GLOBAL SUPPLY

CHAIN INTEGRATOR 295

10. GLOBAL LOGISTICS AND RISK MANAGEMENT 309

CASE: WAL-MART CHANGES TACTICS TO MEET INTERNATIONAL TASTES 309

10.1 Introduction 31210.1.1 Global Market Forces 31310.1.2 Technological Forces 31410.1.3 Global Cost Forces 31410.1.4 Political and Economic Forces 314

70.2 Risk Management 31510.2.1 Many Sources of Risks 31510.2.2 Managing the Unknown-Unknown 31710.2.3 Managing Global Risks 32110.2.4 Requirements for Global Strategy Implementation 322

10.3 Issues in International Supply Chain Management 32310.3.1 Internaţional versus Regional Products 32310.3.2 Local Autonomy versus Central Control 32410.3.3 Miscellaneous Dangers 325

10.4 Regional Differences in Logistics 32610.4.1 Cultural Differences 32670.4.2 Infrastructure 32610.4.3 Performance Expectation and Evaluation 32710.4.4 Information System Availability 32810.4.5 Human Resources 328

Summary 328

Discussion Questions 329

11. COORDINATED PRODUCT AND SUPPLY CHAIN DESIGN 331

CASE: HEWLETT-PACKARD: DESKJET PRINTER SUPPLY CHAIN 331

11.1 A General Framework 338

77.2 Design for Logistics 34277.2.7 Overview 34211.2.2 Economic Packaging and Transportation 34211.2.3 Concurrent and Parallel Processing 34377.2.4 Standardization 34577.2.5 Selecting a Standardization Strategy 34811.2.6 Important Considerations 34977.2.7 The Push-Pull Boundary 34911.2.8 CaseAnalysis 350

f XXVI CONTENTS

11.3 Supplier Integration into New Product Development 35211.3.1 The Spectrum of Supplier Integration 35211.3.2 Keys to Effective Supplier Integration 353

11.3.3 A "Bookshelf" of Technologies and Suppliers 354

11.4 Mass Customization 35411.4.1 What h Mass Customization? 35411.4.2 Making Mass Customization Work 35511.4.3 Mass Customization and Supply Chain Management 356

Summary 357

Discussion Questions 357

CASE: HEWLETT-PACKARD COMPANY: NETWORK PRINTER DESIGN FOR UNIVERSALITY 358

12. CUSTOMER VALUE 365

CASE: MADE TO MEASURE 365

12.1 Introduction 368

72.2 The Dimensions of Customer Value 36912.2.1 Conformance to Requirements 37072.2.2 Product Selection 372

12.2.3 Price and Brand 37412.2.4 Value-Added Services 375

12.2.5 Relationships and Experiences 37612.2.6 Dimensions and Achieving Excellence 379

12.3 Customer Value Measures 380

12.4 Information Technology and Customer Value 382

Summary 385

Discussion Questions 386

13. SMART PRICING 387

CASE: STARBUCKS ECONOMICS: SOLVING THE MYSTERY OF THE ELUSIVE

"SHORT" CAPPUCCINO 387

13.1 Introduction 388

13.2 Price And Demand 389

13.3 Markdowns 390

13.4 Price Differentiation 391

13.5 Revenue Management 393

13.6 Smart Pricing 39613.6.1 Differential Pricing 396

13.6.2 Dynamic Pricing 398

13.7 Impact of the Internet 399

13.8 Caveats 400

Summary 401

Discussion Questions 401

CASE: THE GREAT REBATE RUNAROUND 402

CONTENTS XXVJi

14. INFORMATION TECHNOLOGY AND BUSINESS PROCESSES 405

CASE: SUPPLY CHAIN WHIRL 405

14.1 Introduction 407

14.2 The Importance of Business Processes 408

14.3 Goals of Supply Chain IT 414

CASE: 7-ELEVEN STOCKS UP ON TECH SAWY 418

14.4 Supply Chain Management System Components 42114.4.1 Decision-Support Systems 42214.4.2 IT for Supply Chain Excellence 425

14.5 Sales And Operations Planning 428

CASE: S&OP "EVOLUTION" AT ADTRAN 428

14.6 Integrating Supply Chain Information Technology 43014.6.1 ImplementationofERPandDSS 43114.6.2 "Best of Breed" versus Single-Vendor ERP Solutions 432

Summary 433

Discussion Questions 434

15. TECHNOLOGY STANDARDS 435

CASE: PACORINI STAYS ON TOP OF GLOBAL LOGISTICS MARKET WITH IBM SOA SOLUTION 435

15.1 Introduction 436

15.2 ITStandards 437

15.3 Information Technology Infrastructure 43915.3.1 Interface Devices 43915.3.2 System Architecture 43915.3.3 Electronic Commerce 441

15.4 Service-Oriented Architecture (SOA) 44415.4.1 Technology Base: IBM and Microsoft 44515.4.2 ERP Vendor Platform: SAP and Oracle 44615.4.3 Conclusion 447

75.5 Radio Frequency Identification (RFID) 44875.5.1 Introduction 44875.5.2 RFID Applications 44975.5.3. RFID and Point-of-Sale Data 45275.5.4 Business Benefits 45375.5.5 Supply Chain Efficiency 455

Summary 455

Discussion Questions 456

APPENDIXA COMPUTERIZED BEER GAME 457

A. l Introduction 457

A.2 The Tradiţional Beer Game 457A.2.7 The Difficulties with the Tradiţional Beer Game 458

A. 3 The Scenarios 459

A.4 Playing A Round 460

XXVIII CONTENTS

A.4.1 Introducing the Game 460A.4.2 Understanding the Screen 461

A.4.3 Playing the Game 462A.4.4 Other Features 464

A.5 Options And Settings 465

A.5.1 File Commands 465A.5.2 Options Commands 465A. 5.3 The Play Commands 468A.5.4 The Graphs Commands 469

A.5.5 The Reports Commands 470

APPENDIX B THE RISK POOL GAME 472

B. l Introduction 472

B.2 The Scenarios 472

B.3 Playing Several Rounds 473B.3. l Introducing the Game 473

B. 3.2 Understanding the Screen 474B.3.3 Playing the Game 475B.3.4 Other Features 475

B. 4 Options And Settings 475

B.4.1 File Commands 476B. 4.2 Pfaj Commands 4765.4J The Reports Commands 478

APPENDIX C EXCEL SPREADSHEET 480

C. l Introduction 480

C. 2 T/ie Spreadsheet 480

APPENDIX D THE BIDDING GAME 481

D. l Introduction 481

D.2 The Scenario 481

D. 3 Instructions For Excel Version Of The Game 482

BIBLIOGRAPHY 483

INDEX 489