Supply Chains: A Manager's Guide

Supply Chains: A Manager's Guide

by David A. Taylor
ISBN-10:
020184463X
ISBN-13:
9780201844634
Pub. Date:
09/26/2003
Publisher:
Addison-Wesley

Paperback

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Overview

Supply Chains: A Manager's Guide

Today's fiercest business battles are taking place between competitors' supply chains, with victory dependent on finding a way to deliver products to customers faster, better, and cheaper than anyone else. For proof, just look to Dell and Amazon.com, both of which revolutionized their industries by changing how companies produce, distribute, and sell physical goods. But they're hardly alone. By revamping their supply chains, Siemens CT improved lead time from six month to two weeks, Gillette slashed $400 million of inventory, and Chrysler saved $1.7 billion a year--before, alas, letting its innovative vendor partnerships falter.

It's a high-stakes game, and you don't have a lot of choice about playing; if your company touches a physical product, it's part of a supply chain. And your success ultimately hangs on the weakest link in that chain. In Supply Chains: A Manager's Guide, best-selling author David Taylor shows you how to assemble a killer supply chain using the knowledge, technology, and tools employed in supply-chain success stories. Using his signature fast-track summaries, graphics, and sidebars, Taylor offers a clear roadmap to understanding and solving the complex problems of supply-chain management.

Modern manufacturing has driven down the time and cost of the production process, leaving supply chains as the final frontier for cost reduction and competitive advantage. Supply Chains: A Manager's Guide will quickly give managers the foundation they need to contribute effectively to their company's supply-chain success.

Product Details

ISBN-13: 9780201844634
Publisher: Addison-Wesley
Publication date: 09/26/2003
Pages: 357
Product dimensions: 7.08(w) x 9.25(h) x 0.79(d)

About the Author

An internationally recognized authority on object technology, Dr. David A. Taylor has written numerous articles on business and technology, given keynote speeches at conferences, and served as the voice of authority for some of the world¿s leading companies. He is the author four books and coauthor of two others, including the acclaimed Object Technology, Second Edition: A Manager¿s Guide, (Addison-Wesley, 1998). Before founding Enterprise Engines, Inc., a company that develops supply-chain software, Dr. Taylor worked as a consultant helping Fortune 500 companies adopt object technology.



020184463XAB06252003

Read an Excerpt

In May 2001, Nike announced that it had lost sales in the preceding quarter because of problems in its supply chain. The amount of income lost was impressive: a cool $100 million. Three months later, Cisco Systems announced that it was writing down unusable inventory due to some confusion in its supply chain. The amount of its write-down was even more impressive: $2.2 billion. Isolated incidents? Only in terms of magnitude—supply chain failures are becoming increasingly common, and they are costing companies dearly. In addition to their impact on profits, problems in the supply chain have a devastating effect on stock prices, causing an average loss of $350 million in shareholder value with each reported incident. That's a steep price to pay for a single mistake.

The flip side of this coin is that, as Dell and Wal-Mart demonstrate every day, getting the supply chain right can yield a tremendous competitive advantage, allowing new players to overthrow entrenched industry leaders. Why is the supply chain so important to success? Because it's the new frontier of business. Modern manufacturing has driven most of the excess time and cost out of the production process, so there is little advantage to be gained on the shop floor. But supply chains are still notoriously wasteful and error-prone, and they offer huge opportunities for gaining competitive advantage. The result is a fundamental shift in the nature of competition. The fight for market dominance is no longer a battle between rival companies. The new competition is supply chain vs. supply chain.

What makes this new competition so challenging is the level of cooperation it requires. To forge winning teams, companies have to tear down the barriers between the functional silos within their organizations, and they have to replace adversarial supplier relationships with a win-win collaboration across the chain. Bringing about this level of cooperation isn't easy, but the best companies are already doing it, and they're starting to distance themselves from the rest of the pack.

As a by-product of this new competition, supply chain management has escalated from a support function to a core competence that cuts across the entire company. Managing the chain can no longer be left to specialists; in the new competition, the supply chain is every manager's business. If your company touches a physical product as it moves toward the market, it's part of a supply chain, and it will succeed in the new competition only if you and your fellow managers understand how to make the chain as efficient and effective as it can be.

This understanding can be hard to come by because supply chain management is a deep and technical subject. Most books on supply chains offer either simplistic formulas for success, in which a single solution fits every problem, or the kind of detailed analysis that only a practitioner could love. This book is my attempt to provide the balanced overview you need, giving you enough information to make intelligent decisions without dragging you into a morass of detail. Think of it as your playbook for the new competition.

The book is organized into five parts of three chapters each, as shown in Figure I. Part I lays out the business challenge, Part II describes the tools you need to meet this challenge, and the remaining parts explain supply chain management at three levels: operations, planning, and design. These last three parts all have the same structure, with one chapter each on demand, supply, and performance. This common structure provides a unique nine-chapter matrix for understanding and solving supply chain problems. At the back of the book, you'll find sources for the facts cited in the text, some suggested readings, and a glossary of common terms.

I assume you're busy and don't have a lot of time for reading, so I use something I call the fast track to help you absorb the material quickly. As you can see from this page, the fast track summarizes the key point of every paragraph. This is the fifth book I've written using this technique since I developed it 15 years ago, and I continue to use it because loyal readers all over the world have threatened to shoot me if I don't. In fact, many managers have told me that the best thing about my books is they don't actually have to read them—they get everything they need by skimming the fast track and looking at the drawings. I'm never sure whether to be flattered or offended by this observation, but there it is.

Feel free to jump around in the book. Part I is an executive briefing on chain-based competition; if all you need is the big picture, here it is. Part II is an introduction to supply chain tools; depending on your needs, you can study it, skim it, or skip it. The matrix organization of the remaining parts allows you to tackle the material in slices, reading Part IV to learn about planning, say, or Chapters 7, 10, and 13 for a tour of demand management.

Like all technical disciplines, supply chain management has developed jargon to help practitioners communicate with each other and keep outsiders at bay. To ease your way into the subject, I use specialized terms only as necessary and keep abbreviations to a minimum. But I also want to give you a working vocabulary in the subject, so I do introduce the appropriate terms as they come up, setting them in bold type and defining them in the glossary.

An excellent way to further your understanding of supply chains is to experience them directly using simulation models of the sort described in this book. If you'd like to see supply chains in action, direct your browser to www.supplychainguide.com. The site also offers in-depth discussions of advanced topics, reviews of books about supply chains, and links to software vendors, service providers, and other online resources. You can also find my current e-mail address there if you would like to drop me a note about the book or ask me a question about supply chains.

David A. Taylor, Ph.D.
San Mateo, California May 2003



Table of Contents

Acknowledgments.


Introduction.


About the Cover.

I. CHALLENGE.


1. The New Competition.

The Thrill of Victory.

The Agony of Defeat.

A High Stakes Game.

The New Competition.


2. The Rules of the Game.

Facilities and Links.

Demand, Supply, and Cash.

Distribution and Procurement.

Complexity and Variability.


3. Winning as a Team.

JIT Supply Programs.

Retail Replenishment Programs.

The Problem with Programs.

Insights from Game Theory.

Winning Through Collaboration.

II. SOLUTION.


4. Supply Chains as Systems.

Business Cybernetics.

A Rogues Gallery of Relations.

The Dynamics of Delay.

Feedback and Stability.


5. Modeling the Supply Chain.

The Case for Models.

Conceptual Models.

Mathematical Models.

Simulation Models.

Combining Models.


6. Supply Chain Software.

The Manufacturing Platform.

Advanced Planning Systems.

Supply Chain Applications.

Implicit Business Models.

Internet-Based Systems.

III. OPERATION.


7. Meeting Demand.

Communicating Demand.

Processing an Order.

Assembling the Goods.

Shipping the Order.

Collecting the Cash.

Accelerating Fulfillment.


8. Maintaining Supply.

Triggering Replenishment.

Determining Order Quantity.

Maintaining Safety Stock.

Streamlining Replenishment.


9. Measuring Performance.

Measuring Time.

Measuring Cost.

Measuring Efficiency.

Measuring Effectiveness.

IV. PLANNING.


10. Forecasting Demand.

Projecting Trends.

Aggregating Demand.

Analyzing the Future.

Integrating Forecasts.


11. Scheduling Supply.

Planning with ERP.

Optimizing with APS.

Validating with Simulators.

Integrating Schedules.


12. Improving Performance.

Setting Objectives.

Avoiding Conflicts.

Aligning Incentives.

Improving Planning.

V. DESIGN.


13. Mastering Demand.

Knowing the Customer.

Analyzing the Product.

Shaping Demand.

Stabilizing Demand.


14. Designing the Chain.

Choosing a Strategy.

Exploring Your Options.

Designing the Chain.


15. Maximizing Performance.

Increasing Velocity.

Pooling Risk.

Designing for Supply.

Postponing Differentiation.


Notes on Sources.

Suggested Readings.

Glossary.

Index.

Preface

Supply chain failures can be devastating

In May 2001, Nike announced that it had lost sales in the preceding quarter because of problems in its supply chain. The amount of income lost was impressive: a cool $100 million. Three months later, Cisco Systems announced that it was writing down unusable inventory due to some confusion in its supply chain. The amount of its write-down was even more impressive: $2.2 billion. Isolated incidents? Only in terms of magnitude; supply chain failures are becoming increasingly common, and they are costing companies dearly. In addition to their impact on profits, problems in the supply chain have a devastating affect on stock prices, causing an average loss of $350 million in shareholder value with each reported incident. That's a steep price to pay for a single mistake.

Competition is shifting to supply chains

The flip side of this coin is that, as Dell and Wal-Mart demonstrate every day, getting the supply chain right can yield a tremendous competitive advantage, allowing new players to overthrow entrenched industry leaders. Why is the supply chain so important to success? Because it's the new frontier of business. Modern manufacturing has driven most of the excess time and cost out of the production process, so there is little advantage left to be gained on the shop floor. But supply chains are still notoriously wasteful and error-prone, and they offer huge opportunities for gaining competitive advantage. The result is a fundamental shift in the nature of competition. The fight for market dominance is no longer a battle between rival companies. The ne

Cooperation is the key to success

What makes this new competition so challenging is the level of cooperation it requires. To forge winning teams, companies have to tear down the barriers between the functional silos within their organizations, and they have to replace adversarial supplier relationships with a win-win collaboration across the chain. Bringing about this level of cooperation isn't easy, but the best companies are already doing it and they're starting to distance themselves from the rest of the pack.

Supply chains are every manager's business

As a byproduct of this new competition, supply chain management has escalated from a support function to a core competence that cuts across the entire company. Managing the chain can no longer be left to specialists; in the new competition, the supply chain is every manager's business. If your company touches a physical product as it moves toward the market, it's part of a supply chain, and it will succeed in the new competition only if you and your fellow managers understand how to make the chain as efficient and effective as it can be.

This is your guide to the new competition

This understanding can be hard to come by because supply chain management is a deep and technica detail. If you're an experienced practitioner -- a transportation manager, say, or a logistics planner -- this book isn't for you. Otherwise, consider this your playbook for the new competition.

The book is organized around your needs

The book is organized into five parts of three chapters each. Part One lays out the business challenge, Part Two describes the tools you need to meet this challenge, and the remaining parts explain supply chain management at three levels: operations, planning and design. These last three parts all have the same structure, with one chapter each on demand, supply, and performance. This common structure provides a unique, nine-chapter matrix for understanding and solving supply chain problems. At the back of the book, you'll find sources for the facts cited in the text, some suggested readings, and a glossary of common terms.

The fast track makes your job easier

I assume you're busy and don't have a lot of time for reading, so I use something I call the fast track to help you absorb the material quickly. As you can see from this page, the fast track summarizes the key point of every paragraph. This but I continue to provide the text for those who want it.

You can read the book selectively

Feel free to jump around in the book. Part One is an executive briefing on chain-based competition; if all you need is the big picture, here it is. Part Two is an introduction to supply chain tools; depending on your needs, you can study it, skim it, or skip it. The matrix organization of the remaining parts allows you to tackle the material in slices, reading Part Four to learn about planning, say, or Chapters 7, 10 and 13 for a tour of demand management. Never mind that I've spent the last two years of my life working out the perfect order in which to present these ideas; if I can handle the idea of people skipping the text altogether I can handle the idea of your skipping around within it.

There's a glossary to help with the jargon

Like all technical disciplines, supply chain management has developed a jargon to help practitioners com current email address there in case you want to drop me a note about the book. I'd give it to you right here but I don't need the Viagra.

David A. Taylor, Ph.D.
San Mateo, California

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