Supply Chain Management: Strategy, Planning, and Operation

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For advanced undergraduate and MBA courses in Supply Chain Management. This book brings together the strategic role of the supply chain, key strategic drivers of supply chain performance, and the tools and techniques for supply chain analysis. Every chapter gives suggestions that managers can use in practice and all methodologies are illustrated with an application in Excel. Fully updated material keeps the book on the forefront of supply chain management. Distribution networks (Chapter 4); Sourcing (Chapter 13), discusses different sourcing activities including supplier assessment, supplier contracts, design collaboration, and procurement; Price and revenue management (Chapter 15); Early coverage of designing the supply chain network—after developing a strategic framework, readers can discuss supply chain network design in Chapters 5 and 6 and then move on to demand, supply, inventory, and transportation planning; Information Technology in the Supply Chain (Chapter 17). For business professionals managing the supply chain.
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Product Details

  • ISBN-13: 9780136094517
  • Publisher: Pearson Custom Publishing
  • Publication date: 6/28/2010

Meet the Author


Sunil Chopra is the IBM Distinguished Professor of Operations Management and Information Systems at the Kellogg School of Management. He has served as the interim dean and senior associate dean for curriculum and teaching, and the codirector of the MMM program, a joint dual-degree program between the Kellogg School of Management and the McCormick School of Engineering at Northwestern University. He has a PhD in operations research from SUNY at Stony Brook. Prior to joining Kellogg, he taught at New York University and spent a year at IBM Research.

Professor Chopra’s research and teaching interests are in supply chain and logistics management, operations management, and the design of telecommunication networks. He has won several teaching awards at the MBA and Executive programs of Kellogg. He has authored more than 40 papers and two books.

He has been a department editor for Management Science and an associate editor for Manufacturing & Service Operations Management, Operations Research, and Decision Sciences Journal. His recent research has focused on understanding supply chain risk and devising effective risk mitigation strategies. He has also consulted for several firms in the area of supply chain and operations management.


Peter Meindl is a portfolio manager with Kepos Capital in New York. Previously, he was a research officer with Barclays Global Investors, a consultant with the Boston Consulting Group and Mercer Management Consulting, and the director of strategy with i2 Technologies. He holds PhD, MS, BS, and BA degrees from Stanford, and an MBA from the Kellogg School of Management at Northwestern.

The first edition of this book won the prestigious Book of the Year award in 2002 from the Institute of Industrial Engineers.

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Table of Contents

Pt. I Building a Strategic Framework to Analyze Supply Chains 1
Ch. 1 Understanding the Supply Chain 3
Ch. 2 Supply Chain Performance: Achieving Strategic Fit and Scope 27
Ch. 3 Supply Chain Drivers and Obstacles 51
Pt. II Designing the Supply Chain Network 69
Ch. 4 Designing the Distribution Network in a Supply Chain 71
Ch. 5 Network Design in the Supply Chain 98
Ch. 6 Network Design in an Uncertain Environment 136
Pt. III Planning Demand and Supply in a Supply Chain 169
Ch. 7 Demand Forecasting in a Supply Chain 171
Ch. 8 Aggregate Planning in the Supply Chain 205
Ch. 9 Planning Supply and Demand in the Supply Chain: Managing Predictable Variability 228
Pt. IV Planning and Managing Inventories in a Supply Chain 247
Ch. 10 Managing Economies of Scale in the Supply Chain: Cycle Inventory 249
Ch. 11 Managing Uncertainty in the Supply Chain: Safety Inventory 296
Ch. 12 Determining Optimal Level of Product Availability 341
Pt. V Sourcing, Transporting, and Pricing Products 385
Ch. 13 Sourcing Decisions in a Supply Chain 387
Ch. 14 Transportation in the Supply Chain 411
Ch. 15 Pricing and Revenue Management in the Supply Chain 457
Pt. VI Coordination and Technology in the Supply Chain 475
Ch. 16 Coordination in the Supply Chain 477
Ch. 17 Information Technology and the Supply Chain 510
Ch. 18 E-Business and the Supply Chain 527
Name Index 559
Subject Index 561
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This book has grown from a course on supply chain management taught to second-year MBA students at the Kellogg School of Management at Northwestern University. The goal of this class was to cover not only high-level supply chain strategy and concepts, but also to give students a solid understanding of the analytical tools necessary to solve supply chain problems. With this class goal in mind, our objective was to create a book that would develop an understanding of the following key areas and their interrelationships:

  • The strategic role of the supply chain
  • The key strategic drivers of supply chain performance
  • Analytic methodologies for supply chain analysis

Our first objective in this book is for the reader to learn the strategic importance of good supply chain design, planning, and operation for every firm. The reader will be able to understand how good supply chain management can be a competitive advantage while weaknesses in the supply chain hurt the performance of a firm. We use many examples to illustrate this idea and develop a framework for supply chain strategy.

Within the strategic framework, we identify facilities, inventory, transportation, and information as the key drivers of supply chain performance. Our second goal in the book is to convey how these drivers may be used on a conceptual level during supply chain design, planning, and operation to improve performance. For each driver of supply chain performance, our goal is to provide readers with practical managerial levers and concepts that may be used to improve supply chain performance.

Utilizing these managerial levers requires knowledge ofanalytic methodologies for supply chain analysis. Our third goal is to give the reader an understanding of these methodologies. Every methodological discussion is illustrated with its application in Excel. In this discussion, we also stress the managerial context in which they are used and the managerial levers for improvement that they support.

The strategic frameworks and concepts discussed in the book are tied together through a variety of examples that show how a combination of concepts is needed to achieve significant improvement in performance.


Although the basic goal of the book remains unchanged, this second edition has several significant changes that we believe improve the book. The first such change is the addition of new chapters on distribution networks (Chapter 4), sourcing (Chapter 13), and price and revenue management (Chapter 15).

Chapter 4 provides a conceptual basis for designing a distribution network. It contains a discussion of different distribution networks and when a firm should prefer one over the other. The chapter provides a framework to answer questions such as: When is it best to structure a direct distribution system with all inventory stored at the manufacturer? When is it better to go through an intermediate distributor? When is it appropriate to stock and sell products at retail stores? Our goal is to provide managers with a logical framework for selecting the appropriate distribution network given product characteristics and the markets being served.

Chapter 13 takes a comprehensive look at various sourcing decisions within a supply chain. We discuss different sourcing activities including supplier assessment, supplier contracts, design collaboration, and procurement. Building on previous chapters, we show how a supplier's performance impacts total supply chain cost and provide a structure for supplier evaluation based on total cost. We describe various forms of supplier contracts and discuss their impact on supply chain profits, information distortion, and supplier behavior. Our goal in this chapter is to provide a framework for evaluating a variety of sourcing decisions.

Chapter 15 discusses how pricing and revenue management may be used to improve profits from a given set of supply chain assets. We discuss various situations where revenue management is applicable. The use of revenue management in supply chains is still in its early stages but is likely to become increasingly important. The goal of this chapter is to allow a manager to identify scenarios where revenue management can be used and then devise appropriate revenue management tactics. We believe that the areas addressed in the three new chapters are important and a significant addition to the first edition.

The second change in this edition is the sequence in which the material is presented. The major change relative to the first edition is that we have moved forward the section on designing the supply chain network (now Chapters 5 and 6). After developing a strategic framework, many will find it a more logical flow to discuss supply chain network design and then move on to demand, supply, inventory, and transportation planning.

In addition, we have completely rewritten Chapter 17 on information technology in the supply chain. Here we develop a new framework for supply chain software that we feel provides a much improved view of where enterprise software is headed. And finally, we have updated all of the remaining chapters, adding new ideas and examples, to keep the book on the forefront of supply chain management.

The book is targeted towards an academic as well as a practitioner audience. On the academic side, it should be appropriate for MBA students, engineering masters students, and senior undergraduate students interested in supply chain management and logistics. It should also serve as a suitable reference for both concepts as well as methodology for practitioners in consulting and industry.

There are many people we would like to thank who helped us throughout this process. We thank the reviewers whose suggestions significantly improved the book: Zhi-Long Chen, University of Maryland; Michael G. Kay, North Carolina State University; Ronald Lau, Hong Kong University of Science and Technology/University of South Dakota; Gregory N. Stack, Northern Illinois University; Dr. Srinivas Talluri, Michigan State University; and Lawrence E. Whitman, Witchita State University. We are grateful to the students at the Kellogg School of Management who suffered through typo-ridden drafts of earlier versions of the book. Specifically, we thank Christoph Roettelle and Vikas Vats for carefully reviewing several chapters and solving problems at the end of the chapters. Our developmental editor, Libby Rubenstein, who read all our writing with a critical eye and raised all the right issues, was instrumental in improving the book. The book is much better because of her involvement. We would also like to thank our editor Tom Tucker and the staff at Prentice Hall for their effort with the book. Finally, we would like to thank you, our readers, for reading and using this book. We hope it contributes to all of your efforts to improve the performance of companies and supply chains throughout the world.

Sunil Chopra
Kellogg School of Management
Northwestern University

Peter Meindl
Stanford University

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  • Anonymous

    Posted December 8, 2012

    useful in school and in the real world

    for anyone - whether you be focused on operations, a general manager, brand manager, retail manager, or just interested in business, this book helps identify the key components of a supply chain to align strategically to your business. highly recommended.

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