supply chain management - GBV

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F o urth

Edition

SUPPLY CHAIN MANAGEMENT STRATEGY, PLANNING, AND OPERATION

GLOBAL EDITION

Sunil Chopra Kellogg School of Management Northwestern University

Peter Meindl Barclays Global Investors

Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

CONTENTS Preface 15

Part I

Building a Strategic Framework to Analyze Supply Chains 19

Chapter 1 Understanding the Supply Chain 20 1.1 1.2 1.3 1.4

What Is a Supply Chain? 20 The Objective of a Supply Chain 22 The Importance of Supply Chain Decisions 23 Decision Phases in a Supply Chain 25

1.5 Process Views of a Supply Chain 26 1.6 Examples of Supply Chains 32 1.7 Summary of Learning Objectives 35 Discussion Questions

36



Bibliography

36

Chapter 2 Supply Chain Performance: Achieving Strategic Fit and Scope 37 2.1 Competitive and Supply Chain Strategies 37 2.2 Achieving Strategic Fit 39 2.3 Expanding Strategic Scope 52 2.4 Obstacles to Achieving Strategic Fit 55 2.5 Summary of Learning Objectives 57 Discussion Questions

58



Bibliography

58

Chapter 3 Supply Chain Drivers and Metrics 59 3.1 Drivers of Supply Chain Performance 59 3.2 Framework for Structuring Drivers 61 3.3 Facilities 62 3.4 Inventory 65 3.5 Transportation 3.6 Information

67

69

3.7 Sourcing 72 3.8 Pricing 74 3.9 Summary of Learning Objectives 76 Discussion Questions 77 • Bibliography Case Study: Seven-Eleven Japan Co. 78

Part II Designing the Supply Chain Network

77

85

Chapter 4 Designing Distribution Networks and Applications to e-Business 86 4.1 The Role of Distribution in the Supply Chain 86 4.2 Factors Influencing Distribution Network Design 87

10

Contents

4.3 Design Options for a Distribution Network 91 4.4 E-Business and the Distribution Network 104 4.5 Distribution Networks in Practice 118 4.6 Summary of Learning Objectives Discussion Questions 120 • Case Study: Aquafresh 121

120

Bibliography

Chapter 5 Network Design in the Supply Chain

121

125

5.1 The Role of Network Design in the Supply Chain 5.2 5.3 5.4 5.5

125

Factors Influencing Network Design Decisions 126 Framework for Network Design Decisions 132 Models for Facility Location and Capacity Allocation The Role of IT in Network Design 150

5.6 Making Network Design Decisions in Practice 5.7 Summary of Learning Objectives

134

151

152

Discussion Questions 152 • Exercises 153 Bibliography 157 • Case Study: Regional Expansion for Kazafekra 157

C h a p t e r 6 Designing Global Supply Chain Networks

159

6.1 The Impact of Globalization on Supply Chain Networks 6.2 The Offshoring Decision: Total Cost 161

159

6.3 Risk Management in Global Supply Chains 163 6.4 The Basic Aspects of Evaluating Global Supply Chain Design

167

6.5 Evaluating Network Design Decisions Using Decision Trees 170 6.6 AM Tires: Evaluation of Global Supply Chain Design Decisions Under Uncertainty 178 6.7 Making Global Supply Chain Design Decisions Under Uncertainty in Practice 189 6.8 Summary of Learning Objectives 190 Discussion Questions 190 • Exercises 191 Bibliography 192 • Case Study: BioPharma, Inc.

193

Part III Planning Demand and Supply in a Supply Chain 197 Chapter 7 Demand Forecasting in a Supply Chain 198 7.1 The Role of Forecasting in a Supply Chain

198

7.2 Characteristics of Forecasts 199 7.3 Components of a Forecast and Forecasting Methods 7.4 Basic Approach to Demand Forecasting 201 7.5 Time-Series Forecasting Methods 203 7.6 Measures of Forecast Error

214

7.7 Forecasting Demand at Tahoe Salt 215 7.8 The Role of IT in Forecasting 221 7.9 Risk Management in Forecasting 221 7.10 Forecasting in Practice 222

200

Contents

7.11 Summary of Learning Objectives 223 Discussion Questions 223 • Exercises 223 Bibliography 224 • Case Study: Specialty Packaging Corporation, Part A 225

Chapter 8 Aggregate Planning in a Supply Chain

227

8.1 The Role of Aggregate Planning in a Supply Chain 227 8.2 The Aggregate Planning Problem 229 8.3 8.4 8.5 8.6

Aggregate Planning Strategies 230 Aggregate Planning Using Linear Programming Aggregate Planning in Excel 238 The Role of IT in Aggregate Planning 241

231

8.7 Implementing Aggregate Planning in Practice 241 8.8 Summary of Learning Objectives 242 Discussion Questions 243 • Exercises 243 Case Study: Specialty Packaging Corporation, Part B 245

Chapter 9 Sales and Operations Planning: Planning Supply and Demand in a Supply Chain 247 9.1 Responding to Predictable Variability in the Supply Chain 247 9.2 Managing Supply 248 9.3 Managing Demand 250 9.4 Implementing Sales and Operations Planning in Practice 257 9.5 Summary of Learning Objectives 258 Discussion Questions 258 • Exercises 258 Bibliography 260 • Case Study: Mintendo Game Girl

260

Part IV P l a n n i n g a n d M a n a g i n g I n v e n t o r i e s in a S u p p l y C h a i n 2 6 3 Chapter 10 Managing Economies of Scale in a Supply Chain: Cycle Inventory 264 10.1 The Role of Cycle Inventory in a Supply Chain 264 10.2 Estimating Cycle Inventory-Related Costs in Practice 267 10.3 Economies of Scale to Exploit Fixed Costs 269 10.4 Economies of Scale to Exploit Quantity Discounts 281 10.5 Short-Term Discounting: Trade Promotions 291 10.6 Managing Multiechelon Cycle Inventory 296 10.7 Summary of Learning Objectives 299 Discussion Questions 300 • Exercises 300 Bibliography 302 • Case Study: Delivery Strategy at MoonChem 302 • Appendix 10A: Economic Order Quantity 304

Chapter 11 Managing Uncertainty in a Supply Chain: Safety Inventory 305 11.1 The Role of Safety Inventory in a Supply Chain 305 11.2 Determining Appropriate Level of Safety Inventory 307

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12

Contents

11.3 Impact of Supply Uncertainty on Safety Inventory 318 11.4 Impact of Aggregation on Safety Inventory 320 11.5 Impact of Replenishment Policies on Safety Inventory 330 x

11.6 Managing Safety Inventory in a Multiechelon Supply Chain 333 11.7 The Role of IT in Inventory Management 334 11.8 Estimating and Managing Safety Inventory in Practice 335 11.9 Summary of Learning Objectives 336 Discussion Questions 337 • Exercises 337 Bibliography 339 • Case Study: Rationalization and Consolidation: Inventory Issues at Fruitfresh 340 • Appendix 11A: The Normal Distribution 342 • Appendix 11B: The Normal Distribution in Excel 343 • Appendix 11C: Expected Shortage Cost per Cycle 343 • Appendix 11D: Evaluating Safety Inventory for Slow-Moving Items 344

Chapter 12 Determining the Optimal Level of Product Availability 345 12.1 The Importance of the Level of Product Availability 345 12.2 Factors Affecting Optimal Level of Product Availability 346 12.3 Managerial Levers to Improve Supply Chain Profitability 356 12.4 Setting Product Availability for Multiple Products Under Capacity Constraints 367 12.5 Setting Optimal Levels of Product Availability in Practice 369 12.6 Summary of Learning Objectives 370 Discussion Questions 370 • Exercises 370 Bibliography 373 • Appendix 12A: Optimal Level of Product Availability 373 • Appendix 12B: An Intermediate Evaluation 374 • Appendix 12C: Expected Profit from an Order 374 • Appendix 12D: Expected Overstock from an Order - 375 • Appendix 12E: Expected Understock from an Order 375 • Appendix 12F: Simulation Using Spreadsheets 376

Part V Designing and Planning Transportation Networks 379 Chapter 13 Transportation in a Supply Chain 380 13.1 The Role of Transportation in a Supply Chain 380 13.2 Modes of Transportation and Their Performance Characteristics 382 13.3 Transportation Infrastructure and Policies 386 13.4 Design Options for a Transportation Network 389 13.5 Trade-Offs in Transportation Design 393 13.6 Tailored Transportation 401 13.7 The Role of IT in Transportation 403 13.8 Risk Management in Transportation 404 13.9 Making Transportation Decisions in Practice 405 13.10 Summary of Learning Objectives 405 Discussion Questions Bibliography 407

406 •

Exercises 406

Contents

Part VI Managing Cross-Functional Drivers in a Supply Chain 409 Chapter 14 Sourcing Decisions in a Supply Chain 410 14.1 The Role of Sourcing in a Supply Chain 410 14.2 In-House or Outsource 412 14.3 Third- and Fourth-Party Logistics Providers 418 14.4 Supplier Scoring and Assessment 420 14.5 Supplier Selection—Auctions and Negotiations 424 14.6 Contracts, Risk Sharing, and Supply Chain Performance 427 14.7 Design Collaboration 437 14.8 The Procurement Process 439 14.9 Sourcing Planning and Analysis 441 14.10 The Role of IT in Sourcing 441 14.11 Risk Management in Sourcing 443 14.12 Making Sourcing Decisions in Practice 443 14.13 Summary of Learning Objectives 444 Discussion Questions Bibliography 446

445 •

Exercises 445

Chapter 15 Pricing and Revenue Management in a Supply Chain 448 15.1 The Role of Pricing and Revenue Management in a Supply Chain 448 15.2 Pricing and Revenue Management Segments 450 / 15.3 Pricing and Revenue Management 15.4 Pricing and Revenue Management 15.5 Pricing and Revenue Management Contracts 463

for Multiple Customer for Perishable Assets 457 for Seasonal Demand 462 for Bulk and Spot

15.6 The Role of IT in Pricing and Revenue Management 465 15.7 Using Pricing and Revenue Management in Practice 465 15.8 Summary of Learning Objectives 467 Discussion Questions Bibliography 469

468



Exercises 468

Chapter 16 Information Technology in a Supply Chain 470 16.1 The Role of IT in a Supply Chain 470 16.2 The Supply Chain IT Framework 472 16.3 Customer Relationship Management 475 16.4 Internal Supply Chain Management 476 16.5 Supplier Relationship Management 477 16.6 The Transaction Management Foundation 478 16.7 The Future of IT in the Supply Chain 479 16.8 Risk Management in IT 479

13

14

Contents

16.9 Supply Chain IT in Practice 480 16.10 Summary of Learning Objectives 482 Discussion Questions

482



Bibliography

Chapter 17 Coordination in a Supply Chain

482

483

17.1 Lack of Supply Chain Coordination and the Bullwhip Effect 483 17.2 The Effect on Performance of Lack of Coordination 485 17.3 Obstacles to Coordination in a Supply Chain 487 17.4 Managerial Levers to Achieve Coordination 491 17.5 Building Strategic Partnerships and Trust Within a Supply Chain 496 17.6 Continuous Replenishment and Vendor-Managed Inventories 502 17.7 Collaborative Planning, Forecasting, and Replenishment (CPFR) 502 17.8 The Role of IT in Coordination 506 17.9 Achieving Coordination in Practice 506 17.10 Summary of Learning Objectives 508 Discussion Questions Name Index Subject Index

511 513

509



Bibliography

509

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supply chain management - GBV

F o urth Edition SUPPLY CHAIN MANAGEMENT STRATEGY, PLANNING, AND OPERATION GLOBAL EDITION Sunil Chopra Kellogg School of Management Northwestern U...

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