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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
SUPPLY CHAIN MANAGEMENT BEST PRACTICES Although the fundamentals of the supply chain industry remain constant, massive shifts in the demands of the marketplace and powerful new technologies have changed the way supply chain and transportation companies must engage with and deliver solutions to their clients. In the newly revised Third Edition of Supply Chain Management Best Practices, noted journalist and supply chain expert David Blanchard delivers a compelling and comprehensive overview of the new technologies shaping the transportation and supply chain industries today and the processes that will transform them tomorrow. You'll discover a thorough introduction to supply chain management, along with examples of best-in-class supply chains in a variety of industries. You'll also find proven methods and KPIs for measuring the performance of a supply chain. The author presents the traditional core processes of supply chain management and discusses the techniques used by individual and trendsetting companies from around the world. Finally, you'll learn about the strategies, solutions, and technologies used by leading companies to design their global organizations. From drones and the Internet of Things to same-day delivery, omni-channel distribution, artificial intelligence, Uber-style freight transportation apps, blockchain, and robotics, the book discusses how the transfer of computing power from central mainframes into smartphones and cloud-based services has enabled game-changing technologies to reach companies of all shapes and sizes. Perfect for supply chain managers and professionals, chief financial officers, chief information officers, and controllers, Supply Chain Management Best Practices will also earn a place in the libraries of manufacturing, warehouse, and purchasing managers who seek a one-stop resource to help them understand the latest trends and the enduring foundations of the supply chain industry. BUILD BEST-IN-CLASS SUPPLY CHAIN CAPABILITIES IN YOUR ORGANIZATION WITH THIS NEWLY UPDATED RESOURCE FROM AN INDUSTRY LEADER The revised and updated Third Edition of Supply Chain Management Best Practices offers readers an insightful and comprehensive take on the concepts, processes, and technologies that define today's supply chain and transportation industries. You'll discover must-know information about traditional and core processes, as well as new technologies like drones, the Internet of Things, same-day delivery, and artificial intelligence that are transforming the industry. The book contains valuable case studies, stories, and recent examples from real organizations implementing exciting new supply chain initiatives that are changing the way professionals think about their field. You'll find proven methods for measuring the performance of supply chains and insights into the strategies, solutions, and technologies used by trendsetting companies across the world. Finally, you'll learn why the transfer of computing power from central mainframes to the cloud and handheld devices has fundamentally changed the supply chain industry. Ideal for executives, controllers, supply chain managers and professionals, as well as manufacturing, warehouse, and purchasing managers, the Third Edition of Supply Chain Management Best Practices remains an indispensable resource for anyone seeking to maintain and optimize a supply chain that functions as a competitive advantage.
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Seitenzahl: 556
Veröffentlichungsjahr: 2021
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Table of Contents
Cover
Title Page
Copyright
Dedication
Preface
Acknowledgments
PART 1: Introduction to Supply Chain Management
CHAPTER 1: If Supply Chain Is the Answer, Then What's the Question?
You Knew This Job Was Dangerous When You Took It
The Big Picture
The Supply Chain's Back Story
Roadblocks on the Supply Chain Path
Separating the Good from the Best
Notes
CHAPTER 2: Anatomy of a Supply Chain
Aerospace: Changing the Game, for Better or Worse
Consumer-Packaged Goods: The Moment of Truth
Food and Beverage: Cutting Out the Middleman
Healthcare: Driving Out Waste
Industrial Products: Diversity in the Supply Chain
Oil and Gas: Managing the Managers
Pharmaceuticals: Innovation in Real Time
Retail: It's Amazon's World—We're Just Shopping in It
Notes
CHAPTER 3: Supply Chain Metrics
How to Prevent a Supply Chain Heart Attack
What Makes a Supply Chain Leader?
Measure Satisfaction
Everybody's Talking About Benchmarking
Do the Right Things
Setting Your Sights High
Supply Chain Checkup
Learn the SCOR
SCM for Dummies
Follow the Roadmap
Make It All Meaningful
Focusing on the Customer
Notes
PART 2: Traditional Core Processes of Supply Chain Management
CHAPTER 4: Planning and Forecasting
A Bias Against Good Plans
From Soup to S&OP
No Time Like the Real Time
End-to-End Integration
Analyze This
A Happy Ending
Notes
CHAPTER 5: Procurement
A Formula for Success
Managing the Changes
Keep Your Friends Close and Your Suppliers Closer
Looking Backward to See Forward
Ensuring a Healthy Supply Chain
It Seemed Like a Good Idea at the Time
An Online Car Wreck
A Rating Service for Buyers and Sellers
Sustainable Sourcing Pays Off
Closing the Loop
Notes
CHAPTER 6: Manufacturing
The Toyota Way
Nearly Perfect
Leaning into Quality
Don't Settle for Occasional Improvement
The Value of Teamwork
Leaning in the Right Direction
Smart Manufacturing, Smarter Suppy Chains
Supply Chain in 3D
Collaborating on Product Designs
The Future of Manufacturing
Notes
CHAPTER 7: Transportation
Riding the Roads
Regulations and Deregulation
Fuel for Thought
A Capacity for Change
Know Thyself, and Thy Carrier, Too
Collaboration Is a Two-Way Street
A Carrier by Any Other Name
Automate to Consolidate
Autonomous Vehicles on Land, Sea, and Air
Do-It-Yourself Logistics
The Last Mile
Get It There on Time
Notes
CHAPTER 8: Distribution and Warehousing
Omni-Channel Surfing
A Great Idea in Theory
Virtual Inventory
Cross-Docking, Compliance, and Collaboration
Handle with Care
Saving on Labor
How to Better Manage Your Warehouse
Design for Supply Chain
Striking the Proper Balance
A Site for Sore Eyes
How Much Is Too Much?
A Quick Guide to Site Selection
The Three Deadly Sins of Warehousing
Notes
CHAPTER 9: Globalization
Playing by Somebody Else's Rules
Develop a Global Vision
Following the Plan
Friendly Nations
“Low Cost” Sometimes Means “Poor Service”
Total Cost of Supply Chain
Take a Look for Yourself
Finding the Next Global Hot Spot
The Need for Supply Chain Visibility
Shoring Up the Supply Chain
There's No Place Like Home
Notes
CHAPTER 10: Customer Service
The Perfect Order
The High Cost of Imperfection
Every Day Is a Holiday
One Good Return Deserves Another
Supply Chain in Reverse
Money in the Bank
A Better Way to Sell Mouthwash
A Nine-Step Program for CPFR
Don't Expect Collaboration to Be Easy
Respecting Your Partners
A Culture of Customer Satisfaction
How to Get the Most Out of a Relationship
Notes
PART 3: Supply Chain Strategies
CHAPTER 11: 3PLs
A Shift to the Supply Chain Side
Letting Somebody Else Do It
Supply Chain Essentials and Nonessentials
Finding Your Core Competency
The Same Set of Eyes
The Financial Impact of Outsourcing
Staying in Touch
Going Beyond the 3PL Model
Outpacing the Competition
Higher Demands, Higher Expectations
Notes
CHAPTER 12: Risk Management
Reducing Your Vulnerability
Don't Let Their Problems Become Your Problems
Shelter from Supply Chain Storms
Cybersecurity Blanket
Customs-Trade Partnership Against Terrorism
Getting Countries to Talk to Each Other
“It'll Never Happen Here”
Taking Responsibility for Your Supply Chain
Securing the Supply Chain
Taking Steps Toward Effective Compliance
An Investment Worth Making
Business as Unusual
Notes
CHAPTER 13: Supply Chain Technology
Getting the Job Done with AI
The ABCs of RFID
Proactive Replenishment
In Search of Payback
Work the Bugs Out
A Block Off the Ol' Chain
An Interconnected Collection of Technologies
Reinvent, Rethink, Reimagine
Notes
CHAPTER 14: Corporate Social Responsibility
Champions of CSR
Corporate Irresponsibility
Who's Minding the Supply Chain?
The Black Elephant in the Room
The Carbon Footprint of a Banana
Don't Reinvent the Wheel
Bridge Over Muddled Waters
Eco-Friendly Strategies
Notes
CHAPTER 15: The Financial Supply Chain
A Convergence of Talent
Zero Hour for Budgeting
Roll with the Changes
Supply Chain Finance: Part Strategy, Part Technology
Financials on the Rocks
Show Me the Money
Notes
CHAPTER 16: The Supply Chain Profession
People Management
Talent Search
Hiring Problem Solvers
Training the Next Generation
Toy Stories
Gray Matters
How Diverse Is Your Supply Chain?
What Keeps You Up at Night?
The Secret to Supply Chain Success
Notes
About the Author
Index
End User License Agreement
Guide
Cover Page
Table of Contents
Begin Reading
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Supply Chain Management Best Practices
Third Edition
DAVID BLANCHARD
Copyright © 2021 by David Blanchard. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
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Library of Congress Cataloging-in-Publication Data
Names: Blanchard, David, 1958- author.
Title: Supply chain management best practices / David Blanchard.
Description: Third Edition. | Hoboken : Wiley, 2021. | Revised edition of the author’s Supply chain management, c2010.
Identifiers: LCCN 2021010995 (print) | LCCN 2021010996 (ebook) | ISBN 9781119738237 (hardback) | ISBN 9781119738213 (adobe pdf) | ISBN 9781119738190 (epub)
Subjects: LCSH: Business logistics.
Classification: LCC HD38.5 .B476 2021 (print) | LCC HD38.5 (ebook) | DDC 658.5—dc23
LC record available at https://lccn.loc.gov/2021010995LC ebook record available at https://lccn.loc.gov/2021010996
Cover design: WileyCover image: (c) Kentoh/Shutterstock
To Nancy, Julia, and Grace
Preface
When I wrote the first edition of this book, the terrorist attacks of September 11, 2001, were still fresh in people's minds and the world was still grappling with new security procedures that changed travel, security, and global supply chains in ways that nobody could have imagined pre-9/11. The US Department of Homeland Security was as frequently mentioned in supply chain circles as the IRS is mentioned at accounting firms. It was pretty much accepted as gospel that the world as we knew it had been changed forever. Welcome, the saying went, to the New Normal, characterized by stringent security measures that would slow global trade to a near halt as cargo and passengers alike would need to be thoroughly screened at every land, sea, and airport.
I wrote the second edition a few years later when the United States, and pretty much the rest of the world, was plunged in what came to be known as the Great Recession. The housing market had tanked, the stock market had crashed, unemployment had spiked, and the new “New Normal,” we were told, would be an economy of very modest growth. Supply chain professionals were being advised to go lean—not just following the principles of continuous improvement, but preparing for an economy that might never fully bounce back.
That brings us to this third edition, which was written while the entire world was grappling with the COVID-19 pandemic. At this writing, while we seem to have gotten past the worst of the virus, and while the rapid development and distribution of vaccines are bolstering hopes that the pandemic could soon be downgraded to just a really bad health situation, it’s unclear as to exactly when, or if, we’ll see what the Next Normal looks like. It's safe to say that even after the impact of COVID-19 has faded somewhat into memory, there will always be another crisis or another “we've never seen anything like this before” moment on the global supply chain stage.
*
When you give a book a title like Supply Chain Management Best Practices, there's not much mystery in what it's going to be about. Throughout its 16 chapters, this book will identify some of the best supply chains in the world, describe in detail what it means to have a “best-in-class” supply chain, and offer suggestions—in the form of best practices—on how to build a world-class supply chain.
This book is largely told through the experiences of supply chain practitioners and experts. The companies and the people referred to in this book are real, as are their accomplishments (and, in some cases, their failures). What sets this book apart from other supply chain books is that I have taken a journalist's approach to the subject rather than an academic's or a consultant's. As the editorial director of a diverse group of trade publications, I've had access to supply chain professionals at companies of all sizes, in dozens of different industries. So in writing this book throughout its three editions, I have set out to tell the story of supply chain management through the eyes of the people who know it best.
In the United States alone, companies spend more than $1 trillion every year on transportation, warehousing, distribution, and associated inventory management. The responsibility for managing that spending falls squarely on the shoulders of supply chain professionals. Their roles may differ from company to company, but their goals are generally the same: develop and position their companies' supply chains so that they can compete and win in today's global marketplace. Many of these professionals work for companies that consider supply chain management and its many subdivisions (e.g., planning, purchasing, transportation, warehousing) largely as cost centers or as the group to blame when deliveries are late or shelves are empty. Yet it's an inescapable fact that many of the biggest and best-run companies got to their positions of dominance thanks to their adoption of best practices to manage their world-class supply chains.
This book, then, is designed to help you figure out how you can get your own company on the “best practices” track. It will explain why there is so much interest in supply chain management today by offering numerous examples of companies that have found success by focusing on specific processes within their supply chains. Through anecdotes, interviews, case studies, research, and analysis, the book will explore the development of supply chain management by looking at some of the people and the businesses largely responsible for its momentum.
Since the late 1990s, thanks to the industry consolidation in my own chosen field (media and publishing), I've worked for three different companies (Penton, Informa, and Endeavor) but the same group of publications. While I've covered such industry sectors as safety, corporate finance, and manufacturing, I've consistently maintained a supply chain beat for well over 20 years. In the course of writing the three editions of this book, I've had the opportunity to visit manufacturing plants, distribution centers, major ports, third-party logistics operations, and various government offices throughout North America and Latin America, Europe, and Asia. In preparing this third edition, I have added a significant amount of new material and additional best practices to each chapter, with the goal of producing as timely and relevant a book as possible.
The second edition was in print for over 10 years, so for this third edition I have updated the material wherever necessary, particularly in areas where the companies mentioned in previous editions have substantially changed their business model, have been acquired or otherwise no longer exist in their previous incarnation, or in some cases, when more recent examples made my points better. Best practices are not etched in stone, and what worked in 2007 or 2010 may have been improved upon, so I've replaced some case studies with more current examples. However, based on the feedback I received from course instructors who have used this book as a textbook and plan to do so in the future, I have kept the same basic structure to the book, and if the best practices mentioned in previous editions are still widely accepted and in use today, I have left those sections intact. And sometimes good stories are still good stories, even a decade later.
*
The book is organized into three parts. Part 1 opens with a brief introduction to supply chain management (Chapter 1), looks at examples of some best-in-class supply chains in a number of different industries (Chapter 2), and discusses ways to measure the performance of a supply chain (Chapter 3).
Part 2 presents the traditional core processes of supply chain management. Chapters 4 through 10 follow the progression of plan, source, make, deliver, return, and enable, and related points in between, and discuss in detail the best practices being followed by specific trendsetting companies.
Part 3 looks at best practices in strategic areas that have become increasingly important to supply chain management as we settle into the third decade of this century: third-party logistics (Chapter 11); risk management and business continuity, including a look at how supply chains reacted to the COVID-19 pandemic (Chapter 12); supply chain technology (Chapter 13); sustainability and corporate social responsibility (Chapter 14); and an all-new chapter on supply chain finance (Chapter 15). Finally, Chapter 16 focuses on the ultimate best practice: hiring and developing best-in-class supply chain personnel.
Acknowledgments
The genesis for writing this book came largely from a need to clean up my office. I've been writing about supply chain management for a long time, dating back to the days when nobody even used the words “supply chain,” and being a pack rat, I have several filing cabinets' and countless jumpdrives' worth of notes, interview transcripts, research studies, surveys, press kits, and article clippings, as well as several shelves stuffed with reference books. One day, staring at my daunting collection of supply chain stuff, the thought occurred to me: “Surely, there's got to be a book somewhere in all of this.” And indeed there was—in fact, with this current edition there have been three, and my collection of book material shows no sign of shrinking.
I mention this to dispel the myth that every book emerges fully formed from the divinely inspired mind of the author. Nothing could be further from the truth. This book evolved over time from the writing and editing I've done for the past three decades, especially the two decades I've spent in editorial management of various supply chain publications—including Supply Chain Technology News, Logistics Today, Material Handling & Logistics, and IndustryWeek—for Penton Media/Informa/Endeavor Business Media. Throughout my tenure with the company (the corporate owner of the magazines changed over the years, but I stayed put), I've also edited several other publications not necessarily supply chain–focused but whose readers were heavily influenced and impacted by the vagaries of the supply chain, such as EHS Today and Business Finance, and this book reflects my awareness of how the supply chain's influence continues to spread throughout all areas of an organization.
This book also references the reporting of many fine journalists who have worked with me and for me, and many of the insights on the following pages originated with them (and are duly noted throughout the book). In alphabetical order, I'd like to acknowledge and publicly thank Mary Aichlmayr, Peter Alpern, Tom Andel, Jill Jusko, Jonathan Katz, Brad Kenney, Bill King, Jennifer Kuhel, Steve Minter, Roger Morton, Helen Richardson, Adrienne Selko, Sarah Sphar, John Teresko, Perry Trunick, Laura Walters, Clyde Witt, and Nick Zubko for their contributions.
It's always good to thank your bosses, so thanks to those I've worked for at Penton/Informa/Endeavor since the late 1990s, namely Newt Barrett, Dave Madonia, Teri Mollison, Ron Lowy, Steve Minter, Pat Panchak, Karen Field, Travis Hessman, and John DiPaola. And special thanks to Bob Rosenbaum, not only because he had the good sense to hire me, but because he showed me that it was possible to write a supply chain book in the evenings and on weekends without completely losing your mind.
Not to single anybody out, but I also have to thank Nick Lester, Dick Green, Craig Shutt, Andy Horn, Steve Kane, and Paul Beard—just because.
I'm especially indebted to all the supply chain professionals who shared their experiences and insights with me, and in particular I'm eternally grateful for the collected wisdom and insights of the Material Handling & Logistics Editorial Advisory Board. And of course, this book wouldn't have been possible without the good graces of the fine folks at John Wiley & Sons, and for this third edition I'd like to thank in particular Sheck Cho, Susan Cerra, and Samantha Enders.
Finally, special thanks go to my parents, Jack and Dottie Blanchard, for their lifelong support. My dad passed away while I was writing this third edition, but his spirit fills every page. Thanks to my friends and family, especially my siblings and my son-in-law Joe, who supported me throughout the writing process and offered endless encouragement. I want to thank my daughters, Julia and Grace, for being there with me along every step of this trilogy-writing journey. Over the course of these three editions they've grown from young girls into difference-making young women who constantly inspire me. And most of all, I'd like to thank my wife and soulmate Nancy, who gives meaning to my life every day. WEATSIA!
PART 1Introduction to Supply Chain Management
CHAPTER 1If Supply Chain Is the Answer, Then What's the Question?
Flashpoints
A supply chain is the sequence of events that cover a product's entire lifecycle, from conception to consumption.
A “one size fits all” supply chain strategy is doomed to failure.
Although the modern concept of supply chain management dates back to the early 1980s, very few companies have fully embraced it.
Building a best-in-class supply chain requires money, time, talent, energy, focus, commitment, and guts.
You Knew This Job Was Dangerous When You Took It
Imagine, if you will, a typical day in the life of a supply chain professional. Your boss comes into your office with one of those looks you've come to dread—furrowed brow, deep-set eyes, concerned scowl. He looks you straight in the eye and asks you why it costs so much to transport your company's products to your customers. You can tell by the expression on his face that he doesn't want to hear about fuel costs or industry consolidation or next-day delivery expectations from your customers. It's your job to worry about that stuff, not his. And right now, even though your budget projections say you'll have to spend at least 5% more on transportation this year than you did last year, your boss tells you in no uncertain terms that he expects you to keep the increase down to 2%, or less. Preferably less.
As you stand waiting for the Keurig machine to brew your much-needed second cup of coffee for the morning, your director of sales approaches you with a sheepish smile and asks if you can arrange for an extra thousand widgets to be made and shipped to a big customer by the end of next week. Actually, she doesn't really ask you so much as tell you, since she's already promised the customer that it will happen. She leaves before you get the chance to ask if she's charging the customer double the normal price since it'll cost you at least twice the normal rates to source the parts used to make the widgets from your offshore supplier, plus the cost of expedited delivery. On top of that, production will have to schedule an extra shift to get that many widgets made that quickly.
Later in the morning, while you're patting yourself on the back because you managed to find a domestic source for most of the widget parts, your boss asks you to shepherd your company's Internet of Things (IoT) initiative. The Department of Defense (DoD), another big customer, has started using IoT technology to keep better track of its inventory. Your boss wants you to figure out how IoT is going to help your company and result in more business from the DoD. Your boss waves off the list of questions that immediately come to your mind; he wants you to answer those questions yourself, provide him with regular updates on your progress, and map out an implementation plan that results in a decent return on investment within a year—no easy accomplishment given that the start-up costs on sensors and other hardware alone could quickly add up to $1 million for a limited trial.
For all his many faults, though, your boss is a fair man, and recognizing the extra burdens he's been laying on you, he invites you to lunch. Before your salad arrives, though, he's already launched into a harangue about automation. Your competitors have been getting to market faster and are spending less money to do it, and he's convinced it's because they've deployed automated guided vehicles in their warehouses. So when you get back to the office, he wants you to figure out which type of warehouse robot can manage your facility better, faster, and cheaper for you. Your customer service levels, needless to say, cannot change in the slightest, unless of course they actually improve. And make sure the union steward knows this technology investment won't lead to any layoffs.
Oh, and one more thing, your boss adds as you get up to leave the restaurant: He wants you to schedule another trip to Asia (your seventh trip there in three years). It's time, he says, to get serious about this corporate social responsibility stuff, and he wants you to oversee an audit of your offshore suppliers.
Most of your afternoon is spent trying to mend some fences down in the information technology (IT) department. Your chief information officer has made it clear that absolutely nobody is going home today until somebody can figure out why the supply chain planning system still isn't fully integrated with the inventory management system—and why manufacturing keeps making 12-inch widgets when the sales plan calls for 18-inch versions. Toward the end of the afternoon, your plant manager asks for “a little bit of help” calculating what the plant's carbon footprint is. You get the unmistakable feeling that he wouldn't mind one bit if you figured it out for him.
As you finally shut down your computer and get ready to call it a day, your head of human resources pops her head in your doorway and tells you she hasn't had a bit of luck yet finding a global trade expert, so it looks like you'll have to keep filling in for a while longer. Hearing the tail end of that conversation, your boss walks with you out to the parking lot and reminds you he still needs to see your contingency plan in the event an outbreak of a disease nobody even heard of a month ago spreads throughout the region where one of your key suppliers is located. Oh, and a big storm is developing in the Atlantic Ocean, and another one of your supplier's plants is right in the storm's path. Fortunately, you'll be able to monitor the situation from your home throughout the evening, thanks to the cloud-based supply chain alert dashboard app your company has purchased for you.
At the end of the day, after you've kissed your spouse goodnight and laid your head on your pillow, you drift off to sleep secure in the knowledge that the distance between you and your supply chain is no further than the smartphone 12 inches away from you on your nightstand.
The Big Picture
Admittedly, the preceding example represents a rather extreme and time-compressed scenario, but on any given day, a supply chain manager has to deal with numerous situations quite similar to those just described, with the expectation that costs will be minimized, disruptions will be avoided, customers will be satisfied, and the profitability of the company will be enhanced. No pressure, right?
Maybe we're getting ahead of ourselves, though, so let's start at the beginning: What exactly is a supply chain? There are plenty of definitions for the term, and we'll look at a couple of them, but this question gets asked so often because the answer tends to change depending on who's doing the telling. It's like that old fable about the blind men who stumble on an elephant and try to tell each other what the elephant is like: The man holding the elephant's leg thinks the animal looks like a tree; the man holding the tail thinks an elephant resembles a rope; a third man who grabbed a tusk thinks the whole animal must look like a spear. Each of their answers is partly right, but anybody who has actually seen an elephant smiles at the story because they know these blind men are missing the big picture.
The funny thing is, those kinds of faulty assumptions are made all the time about supply chains. For instance, since online retailer Amazon's supply chain is based on a model of guaranteed deliveries and free shipping, that's become the de facto model for all online retail companies, or for that matter, for any company in any industry. However, while Amazon can deploy its own warehouse robots and trucks to ensure your new desk lamp arrives by Thursday, ExxonMobil relies on an entirely different distribution network to move its products from pipeline to refinery to tanker to gas station. So, the idea that “one supply chain strategy fits all” is as wrong-headed as thinking that an elephant looks like a tree.
A supply chain, boiled down to its basic elements, is the sequence of events and processes that take a product from dirt to dirt, in some cases literally. It encompasses a series of activities that people have engaged in since the dawn of commerce. Consider the supply chain General Mills manages for every box of cornflakes it sells: A farmer plants a certain number of corn seeds, cultivates and harvests a crop, sells the corn to a processing facility, where it is baked into cornflakes, then is packaged, warehoused to a distributor, transported to a retail store, put on a store shelf, sold to a consumer, and ultimately eaten. If the cornflakes are not sold by the expiration date on the box, then they are removed from the retailer's shelf and disposed of.
A supply chain, in other words, extends from the original supplier or source (the farmer and the seed) to the ultimate customer (the consumer who eats the cornflakes). So whether you're talking about an Intel semiconductor that begins its life as a grain of sand or a Ford Explorer that ends its life in a junkyard where its remaining usable components (tires, seat belts, headlights) are sold as parts, everything that happens in between those “dirt-to-dirt” milestones encompasses some aspect of the supply chain.
APICS Supply Chain Council, an organization that develops industry benchmarks and metrics, came up with a way to summarize the concept of supply chain management in just six words: plan, source, make, deliver, return, and enable.1 While it's difficult to find a consensus in any field, let alone a field that intersects with so many disparate disciplines, that six-word definition has been accepted as the basic description of what a supply chain looks like and what its core functions are. (The Supply Chain Operations Reference, or SCOR, model is discussed in Chapter 3.)
For those who like a little sizzle with their steak, another industry group, the Council of Supply Chain Management Professionals (CSCMP), is a bit more descriptive with its definition: “Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities.” That includes coordinating and collaborating with channel partners, including suppliers, intermediaries, third parties, and customers. In short: “Supply chain management integrates supply and demand management within and across companies.”2
The Supply Chain's Back Story
As noted, the concept of working with suppliers and customers is as old as commerce itself, but the modern idea of a “supply chain” is fairly recent, probably dating back no further than the late 1950s to the pioneering research conducted by Jay Forrester and his colleagues at the Massachusetts Institute of Technology (MIT). A half century ago, Forrester began studying supply pipelines and channel interrelationships between suppliers and customers, and he identified a phenomenon that later came to be known as the bullwhip effect.
Forrester noticed that inventories in a company's pipeline (i.e., supply chain) tend to fluctuate the further they are from the ultimate end user.3 The idea of the bullwhip effect remained largely a curiosity until the 1990s, when computers were fast enough, powerful enough, and affordable enough that researchers could not only gain an understanding of the bullwhip effect, but also design software programs that could circumvent it. Supply chain management as a discipline basically evolved out of Forrester's quest to understand and ultimately control these increases in demand fluctuations. Although he didn't use the exact words “supply chain” to describe his findings, “Forrester and his group should really get the credit for supply chain management,” asserts Edward Marien, long-time director of supply chain management programs (now retired) at the University of Wisconsin.4
At some point in the early 1980s, the concepts of transportation, distribution, and materials management began to merge into a single, all-encompassing term: supply chain management. The term apparently first appeared in print in 1982 and has been attributed to Keith Oliver, a consultant with Booz Allen. In any event, in 1985, Harvard professor Michael Porter's influential book, Competitive Advantage, illustrated how a company could become more profitable by strategically analyzing the five primary processes on which its supply chain5 framework is built:
Inbound logistics
. These are the activities associated with receiving, storing, and disseminating inputs to the product (material handling, warehousing, inventory control, transportation scheduling, and returns to suppliers).
Operations
. This refers to the activities associated with transforming inputs into the final product form (machining, packaging, assembly, equipment maintenance, testing, printing, and facility operations).
Outbound logistics
. These are the activities associated with collecting, storing, and physically distributing the product to buyers (finished goods warehousing, material handling, freight delivery, order processing, and scheduling).
Sales and marketing
. Within a supply chain context, these are the activities that induce buyers to purchase a product and enable them to buy it (advertising, promotions, sales force, quoting, channel selection, channel relations, and pricing).
Service
. This refers to the activities associated with providing service to enhance or maintain the value of the product (installation, repair, training, parts supply, and product adjustment).
6
Like Forrester before him, Porter saw that companies could significantly improve their operations by focusing on interrelationships among business units. These interrelationships, he wrote, are “tangible opportunities to reduce costs or enhance differentiation in virtually any activity in the value chain. Moreover, the pursuit of interrelationships by some competitors is compelling others to follow suit or risk losing their competitive position.” As a result, according to Porter, it is critically important for companies to focus on horizontal strategy—a coordinated set of goals and policies across distinct but interrelated business units. This horizontal strategy, which is a succinct way of describing supply chain management, represents the essence of corporate strategy.7
Although their work was separated by more than two decades, both Forrester and Porter saw that a vertical strategy—the idea of compartmentalizing every department and group into unconnected silos—was counterproductive to a company's long-term growth and health. Curiously, more than three decades after Porter's work, companies are still trying to figure out how to get their managers to cooperate across departments and functions, share resources, and cross-sell products to promote the entire company's bottom line.8
The terms may change throughout the years, but the underlying goal of supply chain management has remained constant:
Articulate exactly what a company's supply chain looks like and what it encompasses.
Identify specific bottlenecks that are slowing down the movement of information, goods, and services.
Put the right processes in place to get the right products delivered to the right place on time.
Empower the right people so they can accomplish all of the above.
Roadblocks on the Supply Chain Path
Although the concept of supply chain management entered the public consciousness nearly 40 years ago, to date relatively few companies have fully embraced the idea. Even though many of the best-known manufacturing and retail companies in the world are as celebrated for their supply chains as they are for their brands, it's rare to hear of a company attempting full-scale supply chain projects, and of those that do, many are stymied by various roadblocks that make them question whether the end result will be worth the aggravation.
Consulting firm Accenture teamed up with Stanford University and global business school INSEAD to try to figure out why that should be. Of the companies they studied, it turns out that more than half encountered unexpected problems in the course of their supply chain transformations. Exacerbating the situation is the fact that these problems aren't easily solved:
Technology implementations didn't work as promised
. The supply chain movement faced a moment of crisis when the Internet bubble burst, taking many supply chain technology vendors (and even more vaporware companies) with it. Companies that should have known better assumed that establishing a website was a ticket to instant riches, and they embraced the Internet with a giddy “gold rush” fervor. They spent millions on ill-advised “end-to-end” projects that had no timeline for deliverable payback, and they got badly burned in the process. To this day, despite the numerous (and often breathless) articles in mainstream publications about the Internet of Things, blockchain, machine learning, and other disruptive technologies, many companies remain extremely cautious about investing in any kind of envelope-pushing supply chain solution.
Projects cost too much and never came close to meeting service targets
. This problem predates the supply chain. The list of unfinished and underimplemented enterprise resource planning (ERP) projects is a lengthy one, and unfortunately there are plenty of similarly out-of-control supply chain projects to add to that list. Many of these enterprise-wide initiatives end up being a bottomless money pit of costs with no end in sight and no discernible benefits.
Supply chain projects were inconsistent with a company's current business strategy
. The unfortunate reality is that many companies don't have a well-defined business strategy. Trying to plug a supply chain initiative into an uncertain and continually shifting corporate plan can wear out even the most patient project managers.
It was too difficult to manage change internally and externally
. For a supply chain project to succeed, employees first need to be convinced that sharing product and transactional data between their own divisions is a good thing. Too often, companies will fail in their attempts at collaborating with key supply chain partners because their own internal groups don't cooperate with each other. You have to be able to trust your own people before you can hope to collaborate with other companies.
9
Breaking down these inter-departmental silos is still largely an unrealized goal, even after all these years. In a survey of 300 retail and consumer goods CEOs conducted by consulting firm PwC, only 18% said they have eliminated operational silos at their companies—this despite the fact that retailers today succeed or fail largely on their ability to connect consumers with the products they want, at any time, via any channel.10 (We'll examine this trend, known as omni-channel retailing, in greater detail in Chapter 8.)
In fact, as supply chain consultant Lora Cecere has observed, one big problem is that the supply chain itself has become a silo. With the growth of supply chain departments and organizations, it's become easier for the other areas of a company to throw anything vaguely related to supply chain management over the wall and expect the supply chain people to fix it. As Cecere explains it, “For some, in the process, [supply chain] can become a dirty word. In a functional organization, the definition of a supply chain as yet another function becomes a problem, not a part of the solution.”11
The Accenture study, incidentally, looked at companies that ultimately found a way to successfully launch and complete their supply chain initiatives. You can well imagine that at companies that have had far worse luck with their projects, many managers close and lock their doors behind them every time they see a supply chain project leader walking toward their offices.
Separating the Good from the Best
There's no getting around it—supply chain management is just plain difficult. No single company has all the answers, and what's more, most companies ask virtually the same questions. So why are some companies celebrated for their supply chain successes, while other companies seem to be stuck in a rut? What distinguishes a best-in-class supply chain from every other supply chain?
Daniel Stanton, author of Supply Chain Management for Dummies, says there are clear differences between good supply chains and bad ones: “A good supply chain will always give your customers what they want for a price that they're willing to pay, while leaving a sufficient profit margin for your company.” That definition, he admits, sounds a bit simplistic, as he hastens to add that “actually designing and managing a supply chain that can profitably meet your customers' expectations is tricky.”12 So what's the secret to supply chain success?
As this book will illustrate, every top-performing company—no matter what industry it competes in—has aggressively attacked its inventory problems, committed resources to improving its customer service levels, and partnered with its key suppliers to take control of its supply chain. Every single one of them.
Top-performing supply chains, quite frankly, do things a little differently from everyone else. According to Debra Hofman, an analyst with Gartner, best-in-class companies share these three traits:
They aim for balance
. These companies may not be the very best in every category, but they are consistently good enough in all areas that they add up to be best-in-class.
They increase demand visibility
. Having a high level of forecast accuracy is the key to reaching perfect order fulfillment, which is the holy grail of customer service.
They isolate high costs
. The best companies know where they hold their costs and why, so that's where they focus their best practices and technology investments.
13
Karen Butner, who leads the IBM Institute for Business Value, boils it all down to one common factor: “Top supply chains all have the ability to respond quickly to shifts in demand with innovative products and services.”14
When it comes to best practices, supply chain success requires commitment at the highest corporate levels. It should surely come as no surprise that Tim Cook, CEO of Apple, used to manage the company's end-to-end supply chain, or that prior to becoming chair and CEO of General Motors, Mary Barra ran her company's global product development, purchasing, and supply chain. Mike Duke, former CEO of Walmart, had previously run the retail giant's logistics department. These companies all live or die by their supply chain proficiency, so having a chief executive who understands the interplay between every corporate department, as well as the interrelationships with both customers and suppliers, just makes sense.
“Emerging supply chain leaders are those who can handle the day-to-day work of plan-source-make-deliver while simultaneously seeing further over the horizon,” observes Kevin O'Marah, chief content officer with supply chain research firm SCM World. “This means understanding where the business's strategy is likely to hit a wall or, better still, what confluence of trends might create a sustainable profit opportunity down the road.”15
Bruce Tompkins, president of supply chain consulting firm MonarchFx, who has worked with many supply chain professionals over a four-decade career, offers these five characteristics of great supply chain leaders:
A calm demeanor.
Experienced at solving relevant problems.
Learner—somebody who has “a good working knowledge of supply chains in general and [their] company specifically,” he says.
A good listener.
Collaborator. “Great leaders don't do things all by themselves, and set the speed for the entire organization,” Tompkins observes. “They know how to use the people around them to get things done as a team or group.”
16
Booz Allen, the consulting firm that first popularized the term supply chain management, reports that companies with CEO-level support for their supply chain projects have nearly twice the annual savings in customer service costs as companies where the responsibility is lower in the organization. In a survey of senior executives, Booz Allen concludes, “Without guidance and oversight from the CEO and the company's full leadership team, the supply chain's performance often does not live up to expectations.”17
Best practices don't just happen by throwing a lot of money at your supply chain problems. Improvements come through strategies that identify and track key supply chain processes early and often. As J. Paul Dittmann, director of the University of Tennessee's Office of Corporate Partnership, has observed, very few companies actually have a documented supply chain strategy.18 “Such a strategy,” he suggests, “starts with assessing the future needs of their customers. The strategy development process then determines the new supply chain capabilities the company will need in the future to meet its customers' needs. Unfortunately, most supply chain organizations are so consumed with the daily battles of cutting cost, managing inventory, and delivering good customer service that they don't plan properly for the future, sometimes with disastrous results.” Indeed, whenever companies experience the first hint of trouble, whether it's the onset of an economic recession or a new competitor that seemingly sprang up overnight, the supply chain strategy is often shelved, where it sits collecting dust for many years.
In short, building and maintaining an end-to-end supply chain organization takes money, but it also takes time, talent, energy, focus, commitment from senior management, and a lot of guts to pull it off successfully. However, those are the qualities that the best-run companies in the world share, and it's why they're on top. As Dittmann says, “supply chain is the frontier of competition.” In the next chapter, we'll look at specific examples of how some well-known companies in a number of different industries are managing their best-in-class supply chains.
Notes
All website citations throughout this book were confirmed in November 2020.
1
“Enable” was added to the SCOR model in 2012 and basically refers to the management of the other five processes; in other words, supply chain management itself.
2
www.cscmp.org
.
3
Forrester spells out many of his theories in the book
Industrial Dynamics
(Cambridge, MA: MIT Press, 1961).
4
David Blanchard, “Moving Past the Problems Can Be Problematical,”
Chief Logistics Officer
(October 2003), 5.
5
Porter actually uses the term
value chain
rather than
supply chain
, but the difference is mainly one of semantics.
6
Michael Porter,
Competitive Advantage: Creating and Sustaining Superior Performance
(New York: The Free Press, 1985), 39–43.
7
Ibid., 318–319.
8
Carol Hymowitz, “Mind Your Language: To Do Business Today, Consider Delayering,”
The Wall Street Journal
(27 March 2006), B1.
9
Blanchard, “Moving Past the Problems Can Be Problematical.”
10
“Retail CEOs Need to Remove Organizational Silos,”
Material Handling & Logistics
(24 February 2016),
www.mhlnews.com
.
11
Lora Cecere, “Don't Make Supply Chain a Dirty Word!”
Forbes
(10 December 2013),
www.forbes.com
.
12
Daniel Stanton,
Supply Chain Management for Dummies
(Hoboken, NJ: Wiley, 2018), 73.
13
Debra Hofman, “The Secret to Supply Chain Excellence Is Balance,”
AMR Research Alert Highlight
(22 April 2004), 1.
14
Karen Butner, “Scoring High on the Supply Chain Maturity Model,” presentation delivered at Supply Chain World, Dallas, TX (27 March 2006).
15
Kevin O'Marah, “Supply Chain Leaders Making the Move to CEO,”
Forbes
(21 April 2016),
www.forbes.com
.
16
Bruce Tompkins, “5 Traits and Examples of Great Supply Chain Leaders,” Tompkins International (8 April 2020),
www.tompkinsinc.com
.
17
Peter Heckmann, Dermot Shorten, and Harriet Engel, “Supply Chain Management at 21,”
Chief Logistics Officer
(August 2003), 19–24.
18
J. Paul Dittmann, “What's On the Minds of Supply Chain Professionals Today?”
IndustryWeek
(1 June 2009),
www.industryweek.com
.
CHAPTER 2Anatomy of a Supply Chain
Flashpoints
Best-in-class supply chains share many common characteristics, no matter what industry they're in.
It takes a coordinated team effort to build, maintain, and sustain a well-run supply chain.
Best practices don't just happen—somebody has to champion them, devise them, and then apply them.
Supply chains are defined as much by their similarities as by their differences. While there may not appear to be much in common between, say, a multibillion-dollar big-box retailer and a single-site mom-and-pop shop, in fact both companies operate on the same principle: When you're out of stock, you're out of business. With out-of-stock rates averaging 10% (in some product categories, it can be considerably higher), having products on the shelves is the be-all and end-all of retail life. So retailers of all shapes and sizes—whether they're mass discounters the size of a small country like Walmart or a modest chain of three comic book stores—are naturally inclined toward adopting best practices that will maximize their revenues (e.g., rapid replenishment) while minimizing their costs (e.g., demand planning).
The story is much the same for manufacturers, distributors, nonprofits, service industries—in short, any organization that makes or moves products, whether physical or digital, has common supply chain challenges. According to Jim Tompkins, chairman of supply chain consulting firm Tompkins International, top-performing supply chains share the following seven characteristics:
They have a clear supply chain strategy as their foundation. This strategy is based on a deep understanding of the company's business strategy.
They are adaptable and quick, which allows them to compete in today's dynamic environment.
They are transparent, have clearly stated performance expectations, and have a culture of accountability to their customers.
They are focused on continuous improvement throughout the supply chain, and aim at peak-to-peak performance.
They know their strengths and their weaknesses, and participate in benchmarking activities.
They have an end-to-end perspective, focusing on the supply chain activities of plan-buy-make-move-store-sell (Tompkins' tweak of the SCOR model's basic definition of the supply chain as plan-source-make-deliver-return-enable).
They have a global, rather than regional, focus.
1
In short, the best-run organizations have developed world-class supply chains that extend from their customers' customers to their suppliers' suppliers, and all points in between. As this chapter illustrates, many of the best practices of one industry can be tweaked so that they'll work for another industry as well.
Best practices tell only part of the story, though. For one thing, best practices are not etched in stone. Thanks to advances in technology and changes in customer expectations, what might have been considered best-in-class not that long ago (for instance, next-day delivery) is now considered as a standard option for delivering products to customers, and if 3D printing technology continues to evolve, instant (or almost instant) delivery could become not only achievable but routine. The best practices in this chapter, then, are meant to provide a flavor for what companies have done and are doing to expand the possibilities of supply chain management, but they're certainly not meant to be the last word.
What's undeniable is that behind every successful supply chain organization is a team of dedicated and influential change agents. Or, to put it more simply, a supply chain wins or loses based on the quality of the people who manage it. With that in mind, let's look at some of the most innovative efforts at supply chain management in several industries and at some of the people who have spearheaded their companies' best practices efforts.
Aerospace: Changing the Game, for Better or Worse
It's only fitting that we should start by looking at the Boeing Co., as the aerospace giant's 787 Dreamliner project is not only a game changer when it comes to pushing the boundaries of what's possible with a fully connected supply chain, but it's also an example of what can go wrong when a company's supply chain reach exceeds its grasp.
Boeing's goal with the Dreamliner was nothing short of evolutionary: Rather than merely talking about an extended enterprise that involved key partners in every step along the supply chain, Boeing would actually do it. Namely, Boeing the airplane maker would become Boeing the airplane assembler, outsourcing the entire production of its new aircraft to suppliers, and then finishing the plane at the final assembly stage. On the face of it, that doesn't sound radically different from what the major automakers do, locating Tier 1 suppliers in close proximity to the assembly plants. However, while an automobile might be built with as many as 8,000 to 10,000 parts, an airplane might have three million parts or more.
In addition, while in the past Boeing had used outside suppliers to build roughly 50% of its planes, its plan for the Dreamliner was to outsource 70% of its fabrication, with much of the major components coming from outside the United States. Engines, for instance, would come from both Ohio and the UK; wingtips from Korea; trailing edges from Australia and Japan; center fuselages from Italy; cargo access doors from Sweden; and passenger entry doors from France. In fact, Boeing went so far as to develop a cargo plane—the Dreamlifter—to transport the larger parts, such as wings and fuselage, to the final assembly plant in Everett, Washington.2
The reason for outsourcing so much of the production work is the realization that the best process skills in aerospace oftentimes lie outside Boeing's factories, says Mike Bair, former head of the Dreamliner program. The new plane would involve not only a new supply chain plan, but also the development of lightweight composite materials and fuel-efficient engines, new production processes, and an interior architecture that would set new standards for passenger comfort. The Dreamliner became the fastest-selling commercial aircraft in history, based on preorders. However, orders do not necessarily mean deliveries.3
Due to numerous setbacks and supply chain problems, Boeing was not able to deliver any Dreamliners by its initial target date of May 2008. Nor were they able to fill any orders in 2009, or 2010. As it turned out, the first 787 wasn't delivered to a customer until September 2011. The company admitted that it was “more difficult than we anticipated to complete the structural work on the airplane out of sequence in our Everett factory.”
In The Supply-Based Advantage, consultant Stephen C. Rogers explains that the never-ending delays weren't due to a flawed supply chain strategy; instead, it was the unprecedented nature of the project itself that led to the problems. “The supply chain structure for the Dreamliner took best-in-class supply chain thinking and applied it from the design phase through to production,” he observes. However, “the scale and scope of the task was enormous when considering the sheer number of parts, amount of innovation, number of subcontracting tiers, and geographical dispersion of the contractors. No company ever managed such a project before.” Since nearly three-quarters of the work was being done by suppliers, naturally most of the production problems were on the supplier end as well, and as Boeing quickly discovered, a game-changing initiative like the Dreamliner requires extreme supply chain management.
In response, Boeing instituted a more intense supplier support and monitoring system to address breakdowns in the supply chain. Rogers points out, “The key [for Boeing] is to manage what counts and find ways to extend resources through the use of suppliers. This is easier said than done since many Tier 2 and Tier 3 suppliers have allegiance to the Tier 1 supplier, not the company that is buying the chain's combined output. Why? Because the relationship is typically tier to tier, not across multiple tiers.”4
Assessing Boeing's troubles launching the Dreamliner, consultant Suman Sarkar observes that by distributing the production of the aircraft across numerous countries, Boeing found itself facing various language, culture, and coordination challenges—and these challenges were compounded by Boeing's engineers making multiple design changes at a moment's notice. “Unless a supplier had worked with Boeing before, it became difficult for suppliers to manage this constant change philosophy,” Sarkar says. “Implementing change takes time when you are working with suppliers in different parts of the world. In a rush to meet the deadline for launch, corners were sometimes cut, which resulted in post-launch problems.”5
Ultimately, the aerospace giant ended up acquiring some of its key suppliers, which increased Boeing's involvement in the production stages by transforming its outsourcers into in-house providers. As a result, the company's reliance on a very old-fashioned (but time-tested) best practice—buying out a supplier—trumped its game-changing strategy. While Boeing is still dogged by quality problems (exacerbated, according to a 2019 New York Times investigation, by “a culture that often values production speed over quality”),6 the company has succeeded in upping its monthly production of Dreamliners to 14.
Consumer-Packaged Goods: The Moment of Truth
There is a defining moment of truth for every customer who enters a retail store, and it comes when the customer selects a specific product for
