Discussion 6

User Generated

ebuvgcngry3089

Writing

Ben Franklin Career Center

Description

After reading Chapters 10 and 11, reflect and discuss the following questions:

Discuss the role of distribution in the supply chain. Provide examples of how distribution operations can positively and negatively affect supply chain performance.

Describe the major challenges faced by production managers in the current environment.

  1. Discuss the role of transportation in the supply chain. Provide examples of how transportation can positively and negatively affect supply chain performance.
  2. Describe the major challenges faced by transportation managers in the current environment.
  3. Use the following headings to organize your paper: Introduction, Question 1, Question 2, Question 3, Question 4, Conclusion, References.

Unformatted Attachment Preview

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Supply Chain Management A LOGISTICS PERSPECTIVE 10e Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Supply Chain Management A LOGISTICS PERSPECTIVE 10e John J. Coyle The Pennsylvania State University • C. John Langley, Jr. The Pennsylvania State University • Robert A. Novack The Pennsylvania State University • Brian J. Gibson Auburn University Australia • Brazil • Mexico • Singapore • United Kingdom • United States Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. This is an electronic version of the print textbook. Due to electronic rights restrictions, some third party content may be suppressed. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. The publisher reserves the right to remove content from this title at any time if subsequent rights restrictions require it. For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for materials in your areas of interest. Important Notice: Media content referenced within the product description or the product text may not be available in the eBook version. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Supply Chain Management: A Logistics Perspective, Tenth Edition John J. Coyle, C. John Langley, Jr., Robert A. Novack and Brian J. Gibson Vice President, General Manager, Science, Math & Quantitative Business: Balraj Kalsi © 2017, © 2013 Cengage Learning® WCN: 02-200-202 ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may be reproduced or distributed in any form or by any means, except as permitted by U.S. copyright law, without the prior written permission of the copyright owner. Product Director: Mike Schenk For product information and technology assistance, contact us at Cengage Learning Customer & Sales Support, 1-800-354-9706 Sr. Product Team Manager: Joe Sabatino For permission to use material from this text or product, submit all requests online at www.cengage.com/permissions Further permissions questions can be emailed to permissionrequest@cengage.com Product Manager: Aaron Arnsparger Sr. Product Assistant: Adele Scholtz Content Developer: Theodore Knight Marketing Director: Kristen Hurd Sr. Marketing Manager: Nate Anderson Sr. Marketing Coordinator: Eileen Corcoran Art and Cover Direction, Production Management, and Composition: Cenveo Publisher Services Intellectual Property Analyst: Brittani Morgan Library of Congress Control Number: 2016930710 ISBN: 978-1-305-85997-5 Cengage Learning 20 Channel Center Street Boston, MA 02210 USA Project Manager: Nick Barrows Manufacturing Planner: Ron Montgomery Cover Image(s): Shutterstock/Cienpies Design Cengage Learning is a leading provider of customized learning solutions with employees residing in nearly 40 different countries and sales in more than 125 countries around the world. Find your local representative at www.cengage.com. Cengage Learning products are represented in Canada by Nelson Education, Ltd. To learn more about Cengage Learning Solutions, visit www.cengage.com Purchase any of our products at your local college store or at our preferred online store www.cengagebrain.com Printed in the United States of America Print Number: 01   Print Year: 2016 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Dedication A very special note of thanks and appreciation is due to our families. John Coyle would like to thank his wife Barbara, their children John and Susan, and their grandchildren Lauren, Matthew, Elizabeth Kate, Emily, Ben, Cathryn, and Zachary. John Langley would like to thank his wife Anne, their children Sarah and Mercer, and their grandchildren Bryson, Molly, and Anna. Bob Novack would like to thank his wife Judith and their children Tom, Elizabeth, and Alex. Brian Gibson would like to thank his wife Marcia, son Andy, and his longtime mentor Dr. Bob Cook (1947–2014). Another note of gratitude is due to Ms. Kusumal Ruamsook, Research Associate and Instructor, The Center for Supply Chain Research and Department of Supply Chain and Information Systems, Penn State University. We thank Kusumal for her many contributions to the preparation of this 10th edition, including not only certain areas of subject matter but also for her preparation of PowerPoint slide decks that will be of great value to those who use the text in a classroom environment. Appreciation is extended also to the staff and students who work with the Center for Supply Chain Research who contributed significantly to the overall effort related to the preparation of this edition. The authors of Supply Chain Management: A Logistics Perspective would like to express their sincere appreciation and respect for the many contributions made to this text by Dr. John Coyle, Professor Emeritus of Logistics and Supply Chain Management at The Pennsylvania State University. The first edition was published in 1976 by Dr. Coyle and co-author Dr. Edward J. Bardi. Looking back at the preface to that first edition, the first sentence reads: “Business logistics is a relatively new field of study in business administration.” While this discipline has grown in many ways over many years, we find that excellence today in areas such as supply chain and value chain are heavily dependent on sound planning and execution in the area of logistics. In fact, the subtitle of this text was carefully crafted to underscore the importance of logistics as a key element of supply chain management. It has been a great privilege for the authors of this text to have had the opportunity to work in close quarters with Dr. Coyle to provide a textbook that hopefully has been and will continue to be valuable to students, professors, and industry practitioners who have relied on our book as a useful resource. Also, the authors wish to express special recognition to John’s wife, Barbara, who has had “up close and personal” involvement with these first 10 editions of Supply Chain Management: A Logistics Perspective. In appreciation for her support of our collective writing effort, we would like to bestow on Mrs. Barbara Coyle the title of “Honorary Author” of this 10th edition. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Brief Contents Preface xxv About the Authors xxix Part I Chapter  1 Supply Chain Management: An Overview    3 Chapter  2 Global Dimensions of Supply Chains    27 Chapter  3 Role of Logistics in Supply Chains    51 Chapter  4 Distribution and Omni-Channel Network Design    89 Part II Chapter  5 Sourcing Materials and Services    139 Chapter  6 Producing Goods and Services    171 Chapter  7 Demand Management    207 Chapter  8 Order Management and Customer ­Service    233 Part III Chapter  9 Managing Inventory in the Supply Chain    289 Chapter 10  Distribution—Managing Fulfillment ­Operations    371 Chapter 11  Transportation—Managing the Flow of the Supply Chain    417 Part IV  Chapter 12 Aligning Supply Chains    477 Chapter 13 Supply Chain Performance Measurement and Financial Analysis    507 Chapter 14  Supply Chain Technology—Managing ­Information Flows    549 Chapter 15  Strategic Challenges and Change for ­Supply Chains    581 Subject Index 621 Name Index 635 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. vii Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Contents Preface xxv About the Authors xxix Part I Chapter  1 Supply Chain Management: An Overview 3 SUPPLY CHAIN PROFILE: SAB Distribution: The Final Chapter 4 1-1 Introduction 5 1-2 Shaping the Supply Chains of the Twenty-First Century: Evolution and Change 6 1-2-1 Globalization 7 1-2-2 Technology 9 1-2-3 Organizational Consolidation and Power Shifts 9 1-2-4 The Empowered Consumer 10 1-2-5 Government Policy and Regulation 10 ON THE LINE: Changing Times for Drugs 11 1-3 Supply Chains: Development and Shaping for the Twenty-First Century 12 1-3-1 Development of the Concept 12 1-4 Major Supply Chain Issues 18 1-4-1 Supply Chain Networks 18 1-4-2 Complexity 19 1-4-3 Inventory Deployment 19 1-4-4 Information 19 1-4-5 Cost and Value 20 1-4-6 Organizational Relationships 20 1-4-7 Performance Measurement 20 1-4-8 Technology 21 1-4-9 Transportation Management 21 1-4-10 Supply Chain Security 21 1-4-11 Talent Management 22 Summary 22 Study Questions 23 Notes 23 Case 1.1: Lehigh Valley Transport and Logistics Service (LVTLS) 24 Case 1.2: Central Transport, Inc. 25 ix Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. x Contents Chapter  2 Global Dimensions of Supply Chains 27 SUPPLY CHAIN PROFILE: “The Impact of Changing Weather Patterns” 28 2-1 Introduction 28 2-2 Rationale for Global Trade and Commerce 29 2-3 Contributing Factors for Global Commerce and Supply Chain Flows 30 2-3-1 Population Size and Distribution 30 ON THE LINE: Economic Growth and the Birth Rate 34 2-3-2 Land and Resources 34 2-3-3 Technology and Information 35 2-4 Global Supply Chain Flows 35 2-5 Supply Chains in a Global Economy 39 ON THE LINE: More Deliveries, Same Cost 40 2-6 Global Markets and Strategy 41 2-7 Supply Chain Security: A Balancing Act 43 2-8 Ports 44 2-9 North American Free Trade Agreement 45 Summary 45 Study Questions 46 Notes 46 Case 2.1: Red Fish, Blue Fish, LLP 48 Chapter  3 Role of Logistics in Supply Chains 51 SUPPLY CHAIN PROFILE: Small Ports Boxed Out by Big Ships 3-1 Introduction 52 3-2 What Is Logistics? 54 3-3 Value-Added Roles of Logistics 3-3-1 Form Utility 56 3-3-2 Place Utility 56 52 55 ON THE LINE: AGE OF THE DRONE: Good News or Bad News??? 56 3-3-3 Time Utility 56 3-3-4 Quantity Utility 57 3-3-5 Possession Utility 58 3-4 Logistics Activities 58 3-4-1 Transportation 58 3-4-2 Storage 59 3-4-3 Packaging 59 3-4-4 Materials Handling 59 3-4-5 Inventory Control 59 3-4-6 Order Fulfillment 60 3-4-7 Forecasting 60 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Contents xi 3-4-8 Production Planning 60 3-4-9 Procurement 60 3-4-10 Customer Service 60 3-4-11 Facility Location 61 3-4-12 Other Activities 61 ON THE LINE: “Ups and Wiley Coyote” 61 3-5 Logistics in the Economy: A Macro Perspective 62 3-6 Logistics in the Firm: The Micro Dimension 65 3-6-1 Logistics Interfaces with Manufacturing or Operations 65 3-6-2 Logistics Interfaces with Marketing 66 3-6-3 Logistics Interfaces with Other Areas 68 3-7 Logistics in the Firm: Factors Affecting the Cost and Importance of Logistics 68 3-7-1 Competitive Relationships 68 3-7-2 Product Relationships 71 3-7-3 Spatial Relationships 73 3-7-4 Logistics and Systems Analysis 75 Summary 76 Study Questions 76 Notes 77 Case 3.1: Jordano Food Products 78 Case 3.2: Senco Electronics Company 80 Appendix 3A Techniques of Logistics System Analysis 81 Short-Run/Static Analysis 81 Long-Run/Dynamic Analysis 82 Appendix 3B Approaches to Analyzing Logistics Systems 84 Materials Management versus Physical Distribution Nodes versus Links 85 Logistics Channels 86 84 Chapter  4 Distribution and Omni-Channel Network Design 89 SUPPLY CHAIN PROFILE: Why is Tennessee a Hotbed for 90 4-1 Introduction 90 4-2 The Need for Long-Range Planning 92 4-2-1 The Strategic Importance of Supply Chain Network Design 92 4-2-2 Changes to Global Trade Patterns 93 4-2-3 Changing Customer Service Requirements 93 Manufacturing? Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xii Contents 4-2-4 Shifting Locations of Customer and/or Supply Markets 94 4-2-5 Change in Corporate Ownership/Merger and Acquisition Activity 94 4-2-6 Cost Pressures 94 4-2-7 Competitive Capabilities 95 4-2-8 Corporate Organizational Change 96 4-3 Supply Chain Network Design 96 4-3-1 Step 1: Define the Supply Chain Network Design Process 97 4-3-2 Step 2: Perform a Supply Chain Audit 97 4-3-3 Step 3: Examine the Supply Chain Network Alternatives 98 4-3-4 Step 4: Conduct a Facility Location Analysis 98 4-3-5 Step 5: Make Decisions Regarding Network and Facility Location 99 4-3-6 Step 6: Develop an Implementation Plan 99 4-4 Major Locational Determinants 99 4-4-1 Key Factors for Consideration 100 ON THE LINE: Supply Chain Managers Target U.S. Cities for Onshoring 103 4-4-2 Current Trends Governing Site Selection 104 4-5 Modeling Approaches 105 4-5-1 Optimization Models 106 4-5-2 Simulation Models 109 4-5-3 Heuristic Models 110 4-5-4 Potential Supply Chain Modeling Pitfalls to Avoid 111 4-5-5 Example of a Heuristic Modeling Approach: The Grid Technique 111 4-5-6 Transportation Pragmatics 116 4-6 Omni-Channel Network Design 117 4-6-1 Introduction 117 Opportunities ON THE LINE: Keynote: Omni-channel’s Impact on Supply Chain 118 4-6-2 Channels of Distribution 119 4-6-3 Customer Fulfillment Models 121 Management ON THE LINE: Distribution: What does it take to be an Omni-channel 124 Summary 127 Study Questions 128 Fulfillment DC? Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Contents xiii Case 4.1: Johnson & Johnson 130 Case 4.2: Bigelow Stores 131 Notes 132 Appendix 4A Grid Method—Sensitivity Analyses and Application to Warehouse Location In a City 133 Grid Method—Sensitivity Analysis 133 Grid Method—Application to Distribution Center Location in a City 133 Part II Chapter  5 Sourcing Materials and Services 139 SUPPLY CHAIN PROFILE: Strategic Sourcing Facilitates Innovation, Transformation, and Cost Reduction 140 5-1 Introduction 140 5-2 Types and Importance of Items and Services Purchased 142 5-3 Strategic Sourcing Process 145 5-3-1 Step 1: Develop Strategic Plan 146 5-3-2 Step 2: Understand Spend 146 5-3-3 Step 3: Evaluate Supply Sources 147 5-3-4 Step 4: Finalize Sourcing Strategy 147 5-3-5 Step 5: Implement Sourcing Strategy 150 5-3-6 Step 6: Onboarding and Transitioning 151 5-3-7 Step 7: Collaborative Process Improvement 151 ON THE LINE: Haworth, Inc. Realizes $1.2 Million in Cross-Border 152 5-4 Supplier Evaluation and Relationships 152 5-5 Total Landed Cost (TLC) 153 5-6 e-Sourcing and e-Procurement 155 5-6-1 Which of These Solutions Should be Considered 156 Savings ON THE LINE: Transportation Sourcing—Innovative Approaches to Bid Optimization 158 5-7 e-Commerce Models 159 Summary 160 Study Questions 161 Notes 161 Case 5.1: Alligator, Inc. 162 Case 5.2: Trans-Global, Inc. 164 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xiv Contents Appendix 5A The Special Case of Procurement Price 165 Sources of Price 165 Traditional Basic Input Costs 166 Direct Transaction Costs 166 Supplier Relational Costs 167 Landed Costs 167 Quality Costs/Factors 168 Operations Logistics Costs 168 Chapter  6 Producing Goods and Services 171 SUPPLY CHAIN PROFILE: Establishing a Production Footprint: 172 6-1 Introduction 172 6-2 The Role of Production Operations in Supply Chain Management (SCM) 173 6-2-1 Production Process Functionality 174 6-2-2 Production Tradeoffs 175 6-2-3 Production Challenges 177 6-3 Operations Strategy and Planning 178 6-3-1 Production Strategies 178 ON THE LINE: A North American Manufacturing Comeback 182 6-3-2 Production Planning 184 6-4 Production Execution Decisions 186 6-4-1 Assembly Processes 186 ON THE LINE: Have it Your Way 187 6-4-2 Production Process Layout 189 6-4-3 Packaging 191 ON THE LINE: Developing More Sustainable Packaging 193 6-5 Production Metrics 194 6-5-1 Total Cost 195 6-5-2 Total Cycle Time 195 6-5-3 Delivery Performance 195 6-5-4 Quality 195 6-5-5 Safety 195 6-6 Production Technology 196 Summary 198 Study Questions 199 Notes 199 Case 6.1: Hudson Guitars 202 Case 6.2: Elvis Golf Ltd. 204 The VW Journey Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Contents Chapter  7 xv Demand Management 207 SUPPLY CHAIN PROFILE: The Great Convergence 7-1 Introduction 209 7-2 Demand Management 209 7-3 Balancing Supply and Demand 208 212 ON THE LINE: Volatility in Demand has Become the Norm 212 7-4 Traditional Forecasting 213 7-4-1 Factors Affecting Demand 213 7-5 Forecast Errors 214 7-6 Forecasting Techniques 216 7-6-1 Simple Moving Average 216 7-6-2 Weighted Moving Average 218 7-6-3 Exponential Smoothing 220 ON THE LINE: Practice Change 222 7-7 Sales and Operations Planning 222 7-8 Collaborative Planning, Forecasting, and ­Replenishment 224 Summary 227 Study Questions 228 Notes 228 Case 7.1: Tires for You, Inc. 229 Case 7.2: Playtime, Inc. 231 Chapter  8 Order Management and Customer Service 233 E-COMMERCE SURVEY ASKS: Need for Green or Need for Speed? 234 8-1 Introduction 234 8-2 Influencing the Order—Customer Relationship ­Management 236 8-2-1 Step 1: Segment the Customer Base by ­Profitability 236 8-2-2 Step 2: Identify the Product/Service Package for Each Customer Segment 237 8-2-3 Step 3: Develop and Execute the Best Processes 237 8-2-4 Step 4: Measure Performance and Continuously Improve 238 8-2-5 Activity-Based Costing and Customer Profitability 239 8-3 Executing the Order—Order Management and Order Fulfillment 245 8-3-1 Order-to-Cash (OTC) and Replenishment Cycles 246 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xvi Contents 8-3-2 Length and Variability of the Order-to-Cash Cycle 250 8-4 E-Commerce Order Fulfillment Strategies 252 8-5 Customer Service 252 8-5-1 The Logistics/Marketing Interface 253 8-5-2 Defining Customer Service 253 8-5-3 Elements of Customer Service 255 ON THE LINE: Timely Delivery Matters Most 259 8-5-4 Performance Measures for Customer Service 259 8-6 Expected Cost of Stockouts 261 8-6-1 Back Orders 262 8-6-2 Lost Sales 262 8-6-3 Lost Customer 263 8-6-4 Determining the Expected Cost of Stockouts 263 8-7 Order Management Influences on Customer Service 263 8-7-1 Product Availability 264 8-7-2 Financial Impact 267 8-7-3 Order Cycle Time 269 8-7-4 Logistics Operations Responsiveness 272 8-7-5 Logistics System Information 275 8-7-6 Postsale Logistics Support 277 ON THE LINE: After-Sales Service: The Forgotten Supply Chain 279 8-8 Service Recovery 280 Summary 281 Study Questions 282 Notes 283 Case 8.1: Telco Corporation 284 Case 8.2: Webers, Inc. 286 Part III Chapter  9 Managing Inventory in the Supply Chain 289 SUPPLY CHAIN PROFILE: Inventory Management Requires an End-to-End 290 9-1 Introduction 290 9-2 Inventory in the U.S. Economy 291 9-3 Inventory in the Firm: Rationale for Inventory 292 9-2-1 Batching Economies or Cycle Stocks 294 9-2-2 Uncertainty and Safety Stocks 295 9-2-3 Time/In-Transit and Work-in-Process Stocks 295 Approach Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Contents xvii 9-2-4 Seasonal Stocks 297 9-2-5 Anticipatory Stocks 298 9-2-6 Summary of Inventory Accumulation 298 9-2-7 The Importance of Inventory in Other Functional Areas 298 9-3 Inventory Costs 299 9-3-1 Inventory Carrying Cost 300 9-3-2 Ordering and Setup Cost 303 9-3-3 Carrying Cost Versus Ordering Cost 306 9-3-4 Expected Stockout Cost 307 SUPPLY CHAIN PROFILE: Is RFID Ready for a Reinvention? 311 9-3-5 In-Transit Inventory Carrying Cost 312 9-4 Fundamental Approaches to Managing Inventory 313 9-4-1 Key Differences Among Approaches to Managing Inventory 313 9-4-2 Principal Approaches and Techniques for Inventory Management 315 9-4-3 Fixed Order Quantity Approach (Condition of Certainty) 316 9-4-4 Fixed Order Quantity Approach (Condition of Uncertainty) 325 9-4-5 Fixed Order Interval Approach 332 9-4-6 Summary and Evaluation of EOQ Approaches to Inventory Management 333 9-5 Additional Approaches to Inventory Management 334 SUPPLY CHAIN TECHNOLOGY: Distributor of Education Supplies Passes 334 9-5-2 Just-in-Time Approach 335 9-5-3 Materials Requirements Planning 338 9-5-4 Distribution Requirements Planning 343 9-5-5 Vendor-Managed Inventory 345 9-6 Classifying Inventory 347 9-6-1 ABC Analysis 347 9-6-2 Quadrant Model 350 9-6-3 Inventory at Multiple Locations—The Square-Root Rule 351 Summary 353 Study Questions 354 Notes 355 Case 9.1: MAQ Corporation 356 Case 9.2: Baseball Card Emporium 357 Inventory Exam Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xviii Contents Appendix 9A Special Applications of the EOQ Approach 358 Adjusting the Simple EOQ Model for Modal Choice Decisions—The Cost of Inventory in Transit 358 Adjusting the Simple EOQ Model for Volume Transportation Rates 361 Adjusting the Simple EOQ Model for Private Carriage 365 Adjusting the Simple EOQ Model for the Establishment and Application of In-Excess Rates 365 Summary 369 Chapter 10 Distribution—Managing Fulfillment Operations 371 SUPPLY CHAIN PROFILE: The Changing Face of Distribution 372 10-1 Introduction 373 10-2 The Role of Distribution Operations in SCM 373 10-2-1 Distribution Facility Functionality 374 10-2-2 Distribution Tradeoffs 376 10-2-3 Distribution Challenges 378 ON THE LINE: DC Automation: Solving the Labor Dilemma 379 10-3 Distribution Planning and Strategy 380 10-3-1 Capability Requirements 380 10-3-2 Network Design Issues 382 10-3-3 Facility Considerations 386 (and more) ON THE LINE: Efficient and Environmentally Friendly DCs 389 10-4 Distribution Execution 390 10-4-1 Product-Handling Functions 390 10-4-2 Support Functions 393 10-5 Distribution Metrics 394 10-6 Distribution Technology 396 10-6-1 Warehouse Management Systems 397 ON THE LINE: Convergence is the Word in WMS 398 10-6-2 Automatic Identification Tools 399 Summary 401 Study Questions 402 Notes 402 Case 10.1: Power Force Corporation 404 Case 10.2: TV Gadgetry 406 Appendix 10A Materials Handling 408 Objectives and Principles of Materials Handling Materials-Handling Equipment 409 408 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Contents xix Summary 415 Notes 416 Chapter 11 Transportation—Managing the Flow of the Supply Chain 417 418 11-1 Introduction 419 11-2 The Role of Transportation in Supply Chain Management 419 11-2-1 Role Inhibitors 420 11-3 Modes of Transportation 422 11-3-1 Motor Carriers 423 11-3-2 Railroads 425 11-3-3 Air Carriers 427 11-3-4 Water Carriers 428 11-3-5 Pipelines 430 11-3-6 Intermodal Transportation 432 ON THE LINE: The Sixth Mode of Transportation 434 11-4 Transportation Planning and Strategy 434 11-4-1 Functional Control of Transportation 435 11-4-2 Terms of Sale 435 11-4-3 Decision to Outsource Transportation 437 11-4-4 Modal Selection 439 11-4-5 Carrier Selection 443 ON THE LINE: Courting the Carrier Community 444 11-4-6 Rate Negotiations 445 11-5 Transportation Execution and Control 445 11-5-1 Shipment Preparation 445 11-5-3 Freight Documentation 446 11-5-4 Maintain In-Transit Visibility 448 11-5-5 Transportation Metrics 448 11-5-6 Monitor Service Quality 450 11-6 Transportation Technology 451 ON THE LINE: Freight Visibility Solutions 452 11-6-1 Transportation Management Systems 453 Summary 454 Study Questions 455 Notes 456 Case 11.1: Vibrant Video 458 Case 11.2: Bob’s Custom BBQs 460 SUPPLY CHAIN PROFILE: A Transportation “Perfect Storm” Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xx Contents Appendix 11A Federal Regulation of the Transportation Industry 462 Economic Regulation 464 Safety Regulation 465 Summary 466 Notes 467 Appendix 11B Basis of Transportation Rates 468 Cost of Service 468 Value of Service 469 Distance 470 Weight of Shipment 471 Commodity Characteristics 471 Level of Service 472 Summary 473 Notes 473 Part IV  Chapter 12 Aligning Supply Chains 477 SUPPLY CHAIN PROFILE: Why is Strategic Alignment So Hard? 478 12-1 Introduction 479 12-1-1 Intensity of Involvement 480 12-1-2 Model for Developing and Implementing ­Successful Supply Chain Relationships 481 12-1-3 Imperative for Collaborative Relationships 485 12-2 Third-Party Logistics—Industry Overview 488 ON THE LINE: Collaborative Distribution to Achieve Strategic Goals 488 12-2-1 Definition of Third-Party Logistics 489 12-2-2 Example Services of 3PL Providers 491 12-2-3 Global 3PL Market Size and Scope 492 12-3 Third-Party Logistics Research Study—Industry Details 494 12-3-1 Profile of Logistics Outsourcing Activities 494 12-3-2 Strategic Role of Information Technology 496 ON THE LINE: Collaboration Technologies Facilitate 3PL-Customer 496 12-3-3 Management and Relationship Issues 498 12-3-4 Customer Value Framework 499 12-3-5 A Strategic View of Logistics and the Role of 3PLs 500 Summary 500 Study Questions 501 Relationships Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Contents xxi Notes 502 Case 12.1: Quik Chips, Inc. 503 Case 12.2: HQ Depot 505 Chapter 13 Supply Chain Performance Measurement and Financial Analysis 507 SUPPLY CHAIN PROFILE: CLGN Book Distributors.com 508 13-1 Introduction 510 13-2 Dimensions of Supply Chain Performance Metrics 510 13-3 Developing Supply Chain Performance Metrics 515 ON THE LINE: Establishing Ocean-Alliance KPIs 516 13.4 Performance Categories 516 13-5 The Supply Chain–Finance Connection 521 13-6 The Revenue–Cost Savings Connection 522 13-7 The Supply Chain Financial Impact 523 ON THE LINE: What’s the ROI on a Managed Transportation Services 527 13-8 Financial Statements 527 13-9 Financial Impact of Supply Chain Decisions 528 13-10 Supply Chain Service Financial Implications 533 Summary 541 Study Questions 541 Notes 543 Case 13.1: Wash & Dry, Inc. 544 Case 13.2: Paper2Go.com 545 Relationship? Appendix 13A Financial Terms 546 Chapter 14 Supply Chain Technology—Managing Information Flows 549 SUPPLY CHAIN PROFILE: Omni-channel Retailing Runs on 550 14-1 Introduction 551 14-2 Information Requirements 551 14-2-1 Meet Quality Standards 552 14-2-2 Support Multidirectional Flows 554 14-2-3 Provide Decision Support 554 14-3 Systems Capabilities 555 14-3-1 Enable Process Excellence 555 14-3-2 Link Network Elements 557 14-3-3 Mitigate Known Risks 558 14-4 SCM Software 559 14-4-1 Planning 560 Information Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xxii Contents ON THE LINE: Planning Software Drives Forecast Accuracy 14-4-2 14-4-3 14-4-4 14-4-5 561 Execution 562 Event Management 563 Business Intelligence 563 Facilitating Tools 564 ON THE LINE: RFID Supports Omni-channel Success 566 14-5 SCM Technology Implementation 566 14-5-1 Needs Assessment 566 14-5-2 Software Selection 567 14-5-3 Implementation Issues 569 14-6 Supply Chain Technology Innovations 570 14-6-1 Internet of Things 570 14-6-2 Mobile Connectivity 571 14-6-3 Functional Automation 572 Summary 573 Study Questions 574 Notes 574 Case 14.1: Inflate-a-Dome Innovations 578 Case 14.2: Grand Reproductions Inc. 580 Chapter 15 Strategic Challenges and Change for Supply Chains 581 SUPPLY CHAIN PROFILE: Adapting Your Supply Chain for the Future…Now 582 15-1 Introduction 582 15-2 Principles of Supply Chain Management 583 15-2-1 Principle 1: Segment Customers Based on Service Needs 583 15-2-2 Principle 2: Customize the Logistics ­Network 584 15-2-3 Principle 3: Listen to Signals of Market Demand and Plan Accordingly 585 15-2-4 Principle 4: Differentiate Products Closer to the Customer 585 15-2-5 Principle 5: Source Strategically 586 15-2-6 Principle 6: Develop a Supply Chain-Wide Technology Strategy 586 15-2-7 Principle 7: Adopt Channel-Spanning ­Performance Measures 587 15-2-8 An Update on the Seven Principles of SCM 587 15-3 Supply Chain Analytics and Big Data 588 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Contents xxiii 588 15-3-1 Supply Chain Analytics Maturity Model 589 15-3-2 Analytical Resources 591 15-3-3 Big Data and the Supply Chain 591 15-4 Omni-Channel 593 15-4-1 Strategies for Success 593 15-4-2 The Future of Omni-Channel 595 15-5 Sustainability 596 15-5-1 Benefits and Challenges 596 15-5-2 Social and Environmental Responsibility 597 15-5-3 Reducing Risk 598 15-5-4 “R’s” of Sustainability 598 15-5-5 Reverse Flows 599 15-6 3-D Printing 600 15-6-1 An Inside Look at 3-D Printing 601 15-6-2 Illustrative Examples of 3-D Printing 601 ON THE LINE: Maersk Uses 3-D Printing for Spare Parts on Ships 602 15-6-3 3-D Printing Strategic Impacts on Supply Chains and Logistics 603 15-7 The Growing Need for SCM Talent Management 603 ON THE LINE: Employer Branding in Action 606 15-8 Closing Thoughts 606 Summary 608 Study Questions 608 Notes 609 Case 15.1: Snoopze’s P. O. Plus 611 Case 15.2: Peerless Products, Inc. 613 ON THE LINE: The Changing Geography of Supply Chains Appendix 15A Reverse Logistics Systems versus Closed Loops 614 Customer Returns 616 Environmental Challenges 617 Economic Value 617 Achieving a Value Stream for Reverse Flows 618 Managing Reverse Flows in a Supply Chain 619 Subject Index Name Index 621 635 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Preface The publication of the 10th edition of this text, Supply Chain Management: A Global Logistics Perspective, in the spring of 2016 will mark the 40th anniversary of the first edition. While the original edition was titled THE MANAGEMENT OF BUSINESS LOGISTICS, the title and content changes made to the original text over the course of that 40 years period reflect the dynamic happenings in the United States and other countries throughout the world. If we had predicted drones making deliveries, 3-D printing replacing inventory, robots filling orders in warehouses and modern mobile phones for shopping in 1976, we may have been committed to an appropriate institution or accused of writing science fiction. Albeit, in this edition these developments plus numerous others are given coverage and acceptance with an explanation of their impact on global economies and specifically the logistics and supply chain systems of many businesses in the twenty-first century. The World has changed dramatically, especially the business environment, which has been described by some pundits as a “white water” world. You had to “fasten your seat belt” and put on your protective “helmet” to survive the tumultuous changes and fast pace of the last 40 years. Through it all, logistics and supply chain management played an increasingly important role to improve organizational efficiency, effectiveness, and competitiveness. In 1976, some individuals suggested that the United States was destined to become a second class economic power and would be surpassed by Japan, West Germany and others in the highly competitive, global marketplace for producing products and services. The U.S. economy was in the “doldrums,” but the seeds of change were being sowed. The first important change was the deregulation of major elements of the transportation system in the United States that occurred over a several year period in the late 1970s and early 1980s. The net result of deregulation was that the purchase and sale of transportation services became similar to the selling and buying of other goods and services with limited government oversight. The more competitive prices spurred economic activity by lowering the cost of goods sold and helped to make U.S. products more competitive in domestic and global markets. The subsequent deregulation of the financial and communication industries contributed to additional economic vitality in the 1980s as pointed out in Chapter 1. Globalization, technology, and more informed consumers also influenced and changed the dynamics of the U.S. economy in the 1990s (discussed in more detail in Chapter 1). A critical ingredient for all the changes and the resurgence of the U.S. economy was the development of efficient and effective supply chains by many organizations as well as logistics and supply chain service providers (3PLs) that contributed to the growth of the U.S. economy and its global presence throughout the world. It was an amazing set of changes that we hope have been adequately reflected in the various editions of this text over the previous 40 years (hence the content and title changes noted above). Global organizations learned that lean, fast, agile, and flexible supply chains were a requirement of the twenty-first century where economic swings would likely be quicker and of shorter duration than in the past. Adaptability and readiness were also ingredients for continuing growth and profitability. Another important lesson for success was a recognition that “finance” had to be a common language for supply chain executives because that was the basic language of the boardroom. EPS, ROA, ROI, cash flow, and shareholder value had to be embraced by supply chain executives in reporting their contributions to the success of the organization. These were the metrics the executive board would use to evaluate performance. While order cycle time, inventory turns and order xxv Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xxvi Preface fill rates could be used as internal metrics for judging supply chain and logistics performance, they had to be translated into terms that resonated well with executive management. Recognizing the fast paced change that has continued into the twenty-first century and the criticality of efficient and effective supply chain management, the authors have attempted to reflect these dimensions in the 10th edition of this text with new content and some reordering of the topics to improve the flow of material. Part I-Supply Chain Foundations This section of the text provides a framework for an appreciation and understanding of supply chain management as it developed and expanded to meet the challenges of the last 30 years. Chapter 1 provides an overview of the role and importance of supply chain management in the twenty-first century. This is followed by Chapter 2 that has been added to explore the global issues of the twenty-first century among the various countries of the world with an in-depth look at demographics. Chapter 3 explores the important dimensions of logistics management in support of global supply chain challenges. This provides due recognition to the critical role played by logistics as the backbone of supply chains. The final chapter in Part 1, Chapter 4 explores the challenges of supply chain design in a traditional sense, as well as in the rapidly-emerging context of omni-channel distribution. Part II-Supply Chain Fundamentals The underlying fundamentals of supply chains can be visualized in the so-called SCOR® Model that provides a solid conceptual view of the key ingredients of a supply chain. The content of this section continues in the spirit of the SCOR® model, with each chapter exploring one of the critical components of the model. Strategic sourcing is the topic for Chapter 5 with consideration being given to sourcing materials and services. In this era of outsourcing, the strategic global procurement of goods and services has taken on increased importance and relevance. The focus of Chapter 6 is on operations. Efficient and effective operations in manufacturing and related areas such as maintenance are of great significance in the supply chain. Chapter 7 in this section examines the outbound-to-customer needs and requirements to add value for customers. The fourth and final Chapter 8 in this section considers customer service and order management with emphasis on measurement and financial impact. Part III-Cross-Chain Logistics Processes This section takes an in-depth look at the major supply chain process areas that are essential to achieving the objectives of customer order fulfillment. Referred to as “crosschain logistics processes,” these areas of competency are major contributors to the successfully executing the delivery of raw materials, components, and finished processes, consistent with requirements. To provide useful insight and perspectives on this topic, Chapter 9 focuses on contemporary and futuristic approaches to managing inventory in the supply chain. Chapter 10 highlights the role of distribution as a key supply chain responsibility and Chapter 11 provides broad coverage of the importance of transportation as a key element of overall supply chain success. Collectively, the successful execution of these processes contribute significantly to achieving the promise of the efficient and effective supply chain by ensuring that customers receive the right product in the right quantities at the right place, right time, and at the right cost. Customers will therefore be satisfied and the order-to-cash flow should be maximized. While seemingly not as “glamorous” to some as other aspects of supply chain management, they are nevertheless an essential components of successful supply chains. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Preface xxvii Part IV-Supply Chain Challenges and Future Directions Part IV examines the strategic issues that face supply chain managers as organizations strive to remain competitive in the global economy. One of the issues is that of supply chain alignment which has been receiving increasing attention by supply chain professionals and academics. Covered in Chapter 12 is the need for alignment on both internal and external perspectives because of the need for collaboration among supply chain participants. Chapter 12 also provides useful information regarding the role of third party providers of logistics services, and how they may contribute to desired degrees of alignment among members of the supply chain. Chapter 13 provides insight into the important areas of performance measurement and financial analysis that are so critical to successfully executing today’s supply chain responsibilities. The topic of technology is examined in Chapter 14 because of its increasingly critical role in achieving supply chain success. Not only are supply chain technologies important to the functioning of supply chains and the organizations that are involved, but they have become key contributors to creating customer value and making significant contributions to the success of overall organizations. In short, it has become apparent that the use of capable technologies has become a very important change agent to help deal with the increasing pressures faced by supply chains. Last, Chapter 15 provides an insightful look at some of the governing principles of supply chain management, and how they continue to evolve and remain current in the fast-changing world of supply chain management. This concluding chapter also provides in-depth commentaries on several topics that are of great contemporary and future interest to achieving the goals of supply chain management and overall business success. Features • Learning Objectives at the beginning of each chapter provide students with an overall perspective of chapter material and also serve to establish a baseline for a working knowledge of the topics that follow. • Supply Chain Profiles are the opening vignettes at the beginning of each chapter that introduce students to the chapter’s topics through familiar, real-world companies, people, and events. • On the Line features are applied, concrete examples that provide students with hands-on managerial experience of the chapter topics. • End-of-chapter summaries and study questions reinforce material presented in each chapter. • Short cases at the end of each chapter build upon what students have learned. Questions that follow the cases sharpen critical thinking skills. Ancillaries The website contains three essential resources: • The Instructor’s Manual includes chapter outlines, answers to end-of-chapter study questions, commentary on end-of-chapter short cases and end-of-text comprehensive cases, and teaching tips. • A convenient Test Bank offers a variety of true/false, multiple choice, and essay questions for each chapter. • PowerPoint slides cover the main chapter topics and contain graphics from the main text. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. About the Authors John J. Coyle is currently director of corporate relations for the Center for Supply Chain Research and professor emeritus of logistics and supply chain management in the Smeal College of Business at Penn State University. He holds a BS and MS from Penn State and earned his doctorate from Indiana University in Bloomington, Indiana, where he was a U.S. Steel Fellow. He joined the Penn State faculty in 1961 and attained the rank of full professor in 1967. In addition to his teaching responsibilities, he has served in a number of administrative positions, including department head, assistant dean, senior associate dean, special assistant for strategic planning to the university pres­ident, and executive director of the Center for Supply Chain Research. He also served as Penn State’s faculty representative to the NCAA for 30 years and to the Big Ten for 10 years. Dr. Coyle was the editor of the Journal of Business Logistics from 1990 to 1996. He has authored or coauthored 20 books or monographs and numerous articles in pro­fessional journals. He has received 14 awards at Penn State for teaching excellence and advising. In addition, he received the Council of Logistics Management’s Distinguished Service Award in 1991; the Philadelphia Traffic Club’s Person of the Year Award in 2003; and the Eccles Medal from the International Society of Logistics for his contribu­tions to the Department of Defense and the Lion’s Paw Medal from Penn State for Distinguished Service, both in 2004. Dr. Coyle currently serves on the boards of two logistics and supply chain service companies. C. John Langley Jr. is clinical professor of supply chain management in the Smeal College of Business at Penn State University and also serves as director of development in the Center for Supply Chain Research. Previously, he served as the John H. Dove professor of supply chain management at the University of Tennessee and the SCL professor of supply chain management at the Georgia Institute of Technology. Dr. Langley is a former president of the Council of Supply Chain Management Professionals and a recipient of the Council’s Distinguished Service Award. He has been recognized by the American Society of Transportation and Logistics as an honorary distinguished logistics professional for his long-term contributions and continuing commitment to the transportation logistics community, and he is a recipient of the Outstanding Alumnus Award from Penn State’s Business Logistics Program. Dr. Langley received his BS degree in mathematics, MBA in finance, and Ph.D. in business logistics, all from Penn State University. Dr. Langley has coauthored several books, including Supply Chain Management: A Logistics Perspective. Also, he is lead author of the annual Third Party Logistics Study and recently completed the 2016 20th Annual 3PL Study. His research publications have appeared in journals such as the Journal of Business Logistics, International Journal of Physical Distribution and Logistics Management, International Journal of Logistics Management, Supply Chain Management Review, and Land Economics. Dr. Langley serves on the Boards of Directors of UTi Worldwide, Inc., Forward Air Corporation, and Averitt Express, Inc., in addition to several involvements on academic advisory boards to logistics organizations. He also participated as a member of the Program Faculty for the Kühne Logistics University in Hamburg, Germany, currently serves as education advisor for NASSTRAC. xxix Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xxx About the Authors Robert Novack is an associate professor of supply chain management in the Department of Supply Chain and Information Systems at Penn State University. From 1981 to 1984 he worked in operations management and planning for the Yellow Freight Corporation in Overland Park, Kansas, and from 1984 to 1986 he worked in planning and transportation at Drackett Company in Cincinnati, Ohio. Dr. Novack’s numerous articles have been published in such publications as the Journal of Business Logistics, Transportation Journal, and International Journal of Physical Distribution and Logistics Management. He also is a coauthor of Creating Logistics Value: Themes for the Future. Active in the Council of Supply Chain Management Professionals, he has served as over­all program chair for the annual conference, as a track chair, and as a session speaker as well as a member of numerous committees. Dr. Novack holds the CTL designation from AST&L and is a member of WERC. He earned a BS degree and an MBA in logistics from Penn State University and a Ph.D. in logistics from the University of Tennessee. Brian J. Gibson is executive director of the Center for Supply Chain Innovation and the Wilson Family Professor of supply chain management at Auburn University. Previously, he served on the faculty of Georgia Southern University and as a logistics manager for two major retailers. He has received multiple awards for outstanding teaching, research, and outreach. Gibson’s research has been published in the Journal of Business Logistics, International Journal of Logistics Management, International Journal of Physical Distribution and Logistics Management, Supply Chain Management Review, Supply Chain Quarterly, and other leading publications. He is coauthor of Transportation: A Supply Chain Perspective, author of the electronic textbook Supply Chain Essentials, and lead author of the annual State of the Retail Supply Chain Report. Dr. Gibson serves as SCPro certification chair and board member for the Council of Supply Chain Management Professionals, education advisor for NASSTRAC, and supply chain steering committee member for the Retail Industry Leaders Association. Dr. Gibson earned a BS from Central Michigan University, an MBA from Wayne State University, and a Ph.D. in logistics and transportation from the University of Tennessee. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Part I This section of the text provides a framework and overview to provide an appreciation, some insights and an understanding of supply chain management as it expanded and developed over the course of the last 30 years. This part of the text has been updated and revised again to better reflect the authors’ view of the dynamic happenings of the 21st century for global supply chains. Companies and other organizations will need to navigate the associated challenges to achieve efficiency and effectiveness while executing to meet the expectations of their “customers.” The first chapter provides an overview of the role and increasing importance of supply chain management in today’s tumultuous environment. This chapters explores the external forces impacting global supply chains and the major challenges and issues in the 21st century. The chapter also provides an overview the basis tenets of supply chain management and its development. The second chapter covering the global dimensions of supply chains has been repositioned in the text and expanded to explicate more fully the complexity of the global demographic and economic issues that will continue to impact global supply chains. Effective response to these global dynamics will be critical for survival. Chapter 3 discusses and explores the dimensions of logistics management and its importance to the proficiency of global supply chains. The role of logistics as the “backbone” for world class supply chains is examined and explained. Chapter 4 has been repositioned in Part I and expanded to include an analysis and discussion of omni-channel distribution and the related network design. This is an important issue and growing challenge for many supply chains as they respond to the needs of today’s demanding and technology savvy consumers. 1 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 1 SUPP LY C H A I N M A NA G E M E NT: A N OV E RV IE W Learning Objectives After reading this chapter, you should be able to do the following: • Explain how efficient and effective supply chains can improve customer fulfillment and cash flow. • Discuss the development and shaping of supply chains in leading organizations and understand their contributions to their financial viability. • Appreciate the important role of supply chain management among private as well as public or nonprofit organizations. • Understand the contributions of supply chain management to organizational efficiency and effectiveness for competing successfully in the global marketplace. • Explain the benefits that can be achieved form implementing supply chain best practices. • Understand the major supply chain challenges and issues faced by organizations currently and in the future. 3 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 4 Chapter 1 Supply Chain Profile SAB Distribution: The Final Chapter SAB was established as a classic, middle-of-the-supply chain organization since it purchased consumer products from major manufacturers such as Kraft, Kimberly-Clark, Procter & Gamble (P&G), Unilever, and others and sold them to smaller distributors, wholesalers, and retailers. When Susan Weber assumed the role CEO of SAB in 2010, she knew that in spite of several major changes, its continued survival depended upon the company reexamining its role in various supply chains and making appropriate strategic and tactical changes. COMPANY BACKGROUND SAB Distribution was established in 1949 in Harrisburg, Pennsylvania, by three World War II veterans (Skip, Al, and Bob) who had served as navy supply officers. Harrisburg was selected because of its central location in the mid-Atlantic region and because of its access to rail and highways for suppliers and potential customers. The founders of SAB recognized the need for a consumer products wholesaling company to serve medium- and small-size retailers within a 200-mile radius of Harrisburg. The company grew and prospered in subsequent years. The company was incorporated in 1978, and a CEO, Pete Swan, was appointed in 1980 when the founders retired. SAB’s market area expanded into nearby states, such as New York, New Jersey, and Delaware, and its product line expanded from nonperishable food products to include perishables and nonfood consumer products. Sue Purdum took over from Pete Swan in 1995 when the company was facing major competitive challenges that could have led to the sale of the company, but she “navigated” the company successfully. Susan Weber assumed the CEO role with the full knowledge that significant change was necessary if SAB was to continue to survive as a profitable organization. Essentially, SAB needed a transformation in the scope of its activities. CURRENT SITUATION SAB is faced with a number of challenges to its future existence. First and foremost, many of its customers compete against large retailers like Walmart that can buy directly from the same consumer product manufacturers as SAB, with no “middleman.” Walmart’s buying advantage had to be offset in some way to keep SAB’s customers competitive. In addition, globalization was affecting SAB’s business because of an increase in imported products for the more diverse population of the United States and the ongoing search for lower-priced alternatives. The net effect was a much more complex and competitive business environment with more potential volatility. When Sue Purdum assumed the role of CEO in 1995, she analyzed the competitive environment and understood the need to change to SAB’s business practices. She focused upon efficiency in warehouse operations, improved fulfillment, and developed partnerships with a core group of motor carriers. Finally, she invested in information technology. The net effect of these changes lowered the cost of doing business for SAB’s customers and enabled them to be more competitive. It was a winwin since SAB also became more efficient and effective as well as more profitable. Initially, Susan Weber followed the lead of Sue Purdum, but she knew that she had to transform the company to attract large retailers as customers. Their current customers were losing market share to the larger retailers which negatively impacted SAB’s profitability. Susan Weber realized that the large retailers outsourced part of their logistics operations to thirdparty logistics companies to lower their cost of doing business. Given SAB’s proficiency in logistics, she believed that there were opportunities for SAB to eliminate duplicative echelons in those supply chains. For example, between a producer’s plant and a retail store, there were often three or more distribution locations where products were stored and handled. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Supply Chain Management: An Overview The SAB managers recognized the challenge of Susan Weber’s assessment of their competitive market but also the opportunities associated with the changes that she outlined. After five years of Susan Weber’s leadership, SAB attracted five large regional retail chains in the Northeast and developed a distribution park for warehousing, a transportation hub, and a call center near Scranton, Pennsylvania. The new distribution park allowed SAB to expand their value-added services to customers by providing third-party logistics services (warehousing and inventory management, order fulfillment, delivery and special packaging). SAB hopes to attract additional regional chains such as Wegman’s. A focus for their new distribution park is fresh fruits, vegetables, and other perishable food items, commonly referred to as the cold supply chain. SAB’s success with their distribution park has caught the attention of several other companies who are planning similar operations along the eastern seaboard. Recently, Susan was informed by a daughter of one of the founders of SAB that the family had been contacted by a representative of a major investment group that wanted to buy the family’s share of the stock (65%) and take the company private. The potential buyout had major implications for Ms. Weber and her valued employees. She felt that SAB could survive in the current environment, but she would have to present a plan to the family owners that would convince them to maintain their current ownership position. As you read this text, consider how SAB could address the challenges of their current environment including: (1) cost pressure; (2) having a responsive/demand driven supply chain; (3) supply chain visibility; (4) more collaborative supply chain relationships; and (5) improved information flow and data analytics. 1-1 Introduction The first decade of the twenty-first century was a period of rapid change for most organizations, especially businesses. That rate of change has not slowed down, and the second decade has been more volatile than previous years. The external forces of change require organizations to be much more nimble and responsive; that is, organizations need to be able to change and/or transform themselves to survive in the intensely competitive, global environment. The SAB case is a good example of this survivor mode which forces companies to transform. SAB would have been driven out of business in the 1990s if it had not changed, and it now faces an even more daunting challenge, which will necessitate still bigger changes. Several quotes cited in a previous edition of this book are still apropos. They are as follows: “Change is inevitable, but growth and improvement are optional.”1 “When the rate of change outside the organization is faster than inside, the end is near.”2 Susan Weber, CEO of SAB, understands the wisdom of these comments and the need to collaborate with their customers. The rationale for SAB to change can be made by comparing the top retail establishments in 2000, 2010, and 2014 (see Table 1.1). One could argue that most retailers are essentially supply chain companies since they buy products produced by others and sell these same products to their customers. While other factors such as merchandising, pricing, store location, and layout are very important, supply chain management and logistics are key ingredients for success in today’s highly competitive global environment. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 5 6 Chapter 1 v Table 1.1 Leading Retailers (Sales/Year) 2000 2010 2014 1. Wal-­Mart 1. Wal-­Mart 1. Wal-­Mart 2. Kroger 2. Kroger 2. Kroger 3. The Home Depot 3. Target 3. Costco 4. Sears, Roebuck & Company 4. Walgreen 4. The Home Depot 5. Kmart 5. The Home Depot 5. Walgreen 6. Albertson’s 6. Costco 6. Target 7. Target 7. CVS Caremark 7. CVS Caremark 8. JC Penny 8. Lowe’s 8. Lowe’s 9. Costco 9. Best Buy 9. Amazon.com 10. Safeway 10. Sears Holdings 10. Safeway Source: National Retail Federation (NRF) https://nrf.com/resources/annual-retailer-lists/top-100-retailers Susan Weber (CEO, SAB) appears to comprehend the potential role that supply chains can play in making retail organizations successful. She also seems to understand that the dynamics of today’s global environment requires thinking “out of the box.” Table 1.1 demonstrates the forces of change and the need to adapt with the shifts which have occurred. In 2010, five of the top 10 retailers of 2000 are not on the list anymore with the caveat that Sears and Kmart were merged. Note that Sears and Kmart were #4 and #5 in 2000, but after the merger, the combined company was #10. Four new companies were on the 2010 list. In 2014, two new companies (Amazon and Safeway) joined the top 10 while Sears and Best Buy were eliminated. Amazon’s appearance on the list is most notable because of their business model with no stores. Amazon’s impact will be the basis of discussion in following chapters. At this juncture, an examination of the major external forces or change drivers shaping supply chains is appropriate to examine their impact on various organizations and their supply chains. 1-2 Shaping the Supply Chains of the Twenty-First Century: Evolution and Change The dynamics of the global environment changed dramatically during the 1990s, and organizations had to adapt to these changes or perish. Unfortunately, there were a number of casualties along the way. Some previously successful companies did not survive in the more competitive global marketplace because they did not adapt and change. Leading companies such as Westinghouse, Bethlehem Steel, and RCA are no longer in business. Currently successful leaders such as IBM, General Electric, and McDonald’s are struggling to survive as they try to make appropriate changes in their business models. Some individuals argue that an appropriate business mantra should be “disrupt or be disrupted” which may be a way of stating an older axiom, “think outside the box”. Five major external forces are driving the rate of change: globalization, technology, organizational consolidation, the empowered consumer, and government policy and Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Supply Chain Management: An Overview Figure 1.1 7 External Change Drivers Technology Organizational Consolidation Globalization External Change Drivers Empowered Consumers Energy & Sustainability Government Policy & Security Source: Center for Supply Chain Research, Penn State University. regulation. (See Figure 1.1) The confluence of these factors in the twenty-first century has dramatically changed the economic landscape and provided an opportune business climate for the development of global supply chains and supply chain management. 1-2-1 Globalization Globalization was the most frequently cited change factor by business leaders, and it replaced the post–World War II Cold War as the dominant driving force in world economics. The concept of the global marketplace or the global economy took on a special meaning for all enterprises (profit and nonprofit; small, medium, and large; products or services) and for individual consumers in the 1990s and the first decade of the twenty-first century. Globalization led to a more competitive economic and geopolitical environment which resulted in opportunities and threats both economic and political. Some individuals have argued that there is no “geography” in the current global environment (figuratively speaking) or, perhaps more aptly, that time and distance have been compressed. For example, companies seeking to rationalize their global networks ask such questions as: (1) Where in the world should we source our materials and/or services? (2) Where in the world should we manufacture or produce our products or services? (3) Where in the world should we market and sell our products or services? (4) Where in the world should we warehouse and distribute our products? (5) What global transportation and related service alternatives should we consider? Some important issues or challenges for supply chains in the global economy are more economic and political risk; shorter product life cycles; and the blurring of traditional organizational boundaries. All three deserve some discussion. Supply and demand have become more volatile for a number of reasons. Acts of terrorism, for example, the ISIS attacks in the Middle East and pirates attacking cargo ships, Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 8 Chapter 1 have serious implications for the flow of commerce. Companies have put security measures in place to protect their global supply chains and to act quickly to offset challenges to their supply chains which has increased their cost, but the risk is ever present. Natural catastrophes such as hurricanes, floods, typhoons, and earthquakes have become more problematic because of climate changes and because they pose a very significant challenge for global supply chains. Challenges to supply and demand are usually exacerbated in number and severity by the distances involved, which necessitates risk mitigation strategies. It has been argued that an interruption or disruption to a supply chain that cuts off the flow of information and products is analogous to a “heart attack” that cuts off the flow of blood to the heart. Like a heart attack, supply chain disruption can have lasting effects. The global supply chains of the best companies must be adaptive, resilient, and responsive to meet the challenges of the global economy and develop mitigating strategies for disruptive forces. Shorter product life cycles are a manifestation of the ability of products and services to be duplicated quickly. Technology companies are particularly vulnerable to the threat of their new products being reengineered. However, almost all products in the highly competitive global environment are faced with this issue. From a supply chain perspective, shorter product life cycles present a challenge for inventory management. Products that are duplicated will most likely face a faster reduction in demand and require new pricing policies, both of which present challenges to effective inventory management. The risk of obsolescence as new products are developed is another challenge for inventory management. It also means continually developing new products or reconfiguring old products to maintain market share. The rate of development and change in technology is particularly disruptive to existing enterprises and has led to the demise of some. The blurring of traditional organizational boundaries is the result of companies having to adjust or transform their business model or the way that they do business in the more competitive global economy. For example, to maintain financial viability (read profitability), companies may outsource activities and processes to another company that can provide what they need more efficiently and hopefully more effectively. They may also add to their current operations or services to provide additional value for customers. SAB followed this strategy to retain and add customers. Outsourcing is not new. No organization is completely independent. The competitiveness of the global environment, however, has increased the scope of outsourcing both domestically and globally. As previously mentioned, companies need to analyze how they do business in order to stay competitive and financially viable. Nike, for example, outsources all of its manufacturing and has done so for many years. Many automobile and computer manufacturers outsource components or parts that they need for finished products as well as logistics related services. From a supply chain and logistics perspective, the growth in outsourcing is noteworthy because it increases the importance of effective and efficient supply chain management because supply chains are longer and more complex. A strong compliment to the growth in the global economy has been the growth and development in the technology related to supply chains. Mention has been made of time and distance being compressed, and technology has certainly played a major role in making this happen. Technology will be discussed as the next external change factor. It should be noted that some organizations think that technology has become a more important driver of change than globalization. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Supply Chain Management: An Overview 1-2-2 Technology Technology has had a major impact on supply chains as a facilitator of change as c­ ompanies have transformed their processes. However, it is also a major force in changing the dynamics of the marketplace. Individuals and organizations are “connected” 24/7 and have access to information on the same basis via the Internet. Search engines, such as Google and others, have made it possible to gather timely information quickly. We no longer have to wait for information to be “pushed out” to us; we can “pull” information as we need it. Vast stores of data and information are virtually at our fingertips. Social networks such as Facebook or Twitter are playing an ever increasing role in business organizations and ­influence supply chains because of their impact on customer demand and the speed of information transfers. Some individuals have argued that another relevant mantra for ­businesses in the twenty-first century is “twitter and tweet or retreat.” Many companies see opportunities to “data mine” the social media to uncover demand related information for improved forecasting and marketing. As will be discussed in more detail, “cloud c­ omputing”, is more than a “buzz word” and is revolutionizing information systems. Technology has allowed individuals and smaller organizations to connect to the world’s “knowledge pools” to create and establish opportunities for collaboration in supply chains. Outsourcing to the less-developed countries was enhanced by technology. Collaboration opportunities with individuals and companies throughout the globe have increased which has created market opportunities as employment opportunities increased. Technology has spawned the development of Uber, Airbnb, and other such organizations which have disrupted their respective marketplaces. Susan Weber, as SAB’s new CEO, will have to more fully exploit the opportunities presented by technology both on the procurement side of business and in marketing products to customers. Her predecessor used technology to improve internal processes, for example, warehouse operations and order fulfillment as well as transportation carrier collaboration. SAB will need to focus more externally with information technology to improve overall supply chain efficiency and effectiveness. 1-2-3 Organizational Consolidation and Power Shifts After World War II, product manufacturers became the driving force in supply chains. They developed, designed, produced, promoted, and distributed their products. Frequently, they were the largest organizations in the supply chain in terms of sales volume, employees, buying power, locations, and other factors. They typically exerted their influence throughout the supply chain often to their specific economic advantage, especially in the distribution of their products. During the 1980s and especially the 1990s, a significant change occurred as retail giants such as Walmart, Sears, Kmart, Home Depot, Target, Kroger, McDonald’s, etc., became powerful market leaders and engines for change. While other retailers are not as large as Walmart, their size and economic buying power have also increased significantly. An important aspect of the economic power shift toward the retail end of the supply chain is that many consumer product companies find that 15 to 20 percent of their customers account for 70 to 80 percent of their total sales. The large retailers were accorded services such as scheduled deliveries, “rainbow” pallets (mixed arrays of products or stock-keeping units [SKUs]), advance shipments notices (ASNs) shrink-wrapped pallets, etc. These services allowed retailers to operate more efficiently and often more effectively and provide scale economies to the producers which was Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 9 10 Chapter 1 a win-win arrangement with savings passed on to the consumer. Subsequent chapters will more fully explicate the benefits. As more collaboration is practiced among organizations in the supply chains, they can gain shared cost savings and improved customer service. For example, sharing point-ofsale data is a powerful collaborative tool for mitigating the so-called “bullwhip effect” of inventory in the supply chain which has multiple benefits for supply chain collaborators. Companies that report innovative best practices usually obtain about half of their innovative insights outside their company through collaboration with suppliers and customers. The power of information sharing and collaboration cannot be overstated. This is a key area for SAB to exploit as it tries to adapt to its competitive environment and increase sales with existing and new customers. Data sharing will help SAB to lower product stock-outs and related lost sales to improve on-shelf availability of their products for increased sales. 1-2-4 The Empowered Consumer The impact of the consumer is more direct for supply chains today because the consumer has placed increased demands at the retail level for an expanded variety of products and services. The implementation of an omni-channel distribution strategy by large retailers, which will be discussed in Chapter 4, is an excellent example of a current strategy made feasible with technology that is having a major impact on marketing sales at the retail level. Consumers are empowered by the information that they have at their disposal from the Internet and other sources. Their access to product sources and related information has expanded exponentially. Consumers have the opportunity to compare prices, quality, and service. Consequently, they demand competitive prices, high quality, tailored or customized products, convenience, flexibility, and responsiveness. They tend to have a low tolerance level for poor quality in products and services. They report their likes and dislikes on the Internet to third party organizations such as Yelp. Some consumers have increased buying power due to high income levels. They demand the best quality, at the best price, with the best service. These demands place increased challenges and pressure on the various supply chains for consumer products. The demographics of our society with the increase in two-career families and singleparent households have made time and convenience critical factors for many households. The expectation for service is frequently 24/7 availability with a minimum of wait time. The age old axiom of “let the buyer beware” should probably be changed to “let the seller beware.” The Internet enables buyers to expand their buying alternatives and quickly make comparisons before they purchase. The omni-channel distribution option provides additional flexibility for consumers. The power of the consumer has caused much change in how supply chains function. Supply chains have felt the pressure to keep prices stable even during inflationary periods. Collaboration has frequently been the basis for efficiencies to mitigate increased costs. 1-2-5 Government Policy and Regulation The fifth external change factor is the various levels of government (federal, state, and local) that establish and administer policies, regulations, taxes, etc., which impact businesses and their supply chains. The deregulation of several important sectors of our economy that occurred in the 1980s and 1990s is a good example. The deregulated sectors include transportation, communications, and financial institutions, which are cornerstones of the infrastructure for most organizations. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Supply Chain Management: An Overview 11 Beginning in the late 1970s and into the 1980s, the U.S. transportation industry was deregulated at the federal level in terms of economic controls such as rates and areas of service. The net effect was that it became possible for transportation services to be purchased and sold in a more competitive environment. Transportation companies were also allowed to offer more than just transportation services. Many motor carriers, for example, became logistics services companies and offered services that include order fulfillment, inventory management, and warehousing. They have moved aggressively ahead in the deregulated environment to view themselves as outsourcing partners for potential strategic advantages (see Case 1.1). The financial sector was also deregulated at the federal level. Financial markets became more competitive, flexible, and responsive to customer needs. The deregulation of financial institutions fostered changes in how businesses can operate with respect to cash flow, purchase cards, and short-term investment. These changes made organizations more On the Line Changing Times for Drugs One of the U.S. industries being buffeted by the “winds of change” in the twenty-first century is the pharmaceutical industry which has been a major force in the U.S. economy for many years. The industry has provided consistent and excellent employment opportunities and inceased returns to shareholders for years. However, the industry has been challenged in recent years by more intense global competition; a related growth in the prescription and use of generic drugs; the end of patent protection for a growing number of their major drugs; a slower development of new “blockbuster” drugs to treat major illnesses; more regulation; and an unresponsive supply chain. One of several “cures” may come to mind for the challenges enumerated in earlier paragraph, but there is no question that there is a glaring need for managing their supply chains more efficiently and effectively along with better execution. Discussion with key executives noted a need to change their strategy from a push approach to a pull strategy. The push approach has led to overstocks of some SKU’s and stock-outs of others with consequent higher inventory costs and perhaps lost sales. There is also a need for their supply chains to be more responsive to demand “signals” in a timely manner. Another needed change is a more collaboration with suppliers, customers, and logistics service providers. In the past, pharmaceutical companies could essentially dictate and control what happened in their supply chains. Participants in the supply chain were usually not considered to be “partners” or needed collaborators. Valuable information and potential innovations were probably squandered along the way. As has been pointed out in recent years, supply chain collaborators and partners often provide half or more of the innovative changes that lowered cost and/or improved service. Another need is for improved information flow and management as well as more visibility along the supply chain. This is a necessary ingredient for improved decisions in logistics and transportation. Too frequently, data has been incomplete or incorrect resulting in higher cost and/or ineffective customer service. Timely and accurate Information flow is important and is a necessary part of improving pharmaceutical supply chains and the financial viability of the industry. The pharmaceutical industry is still an important part of the economy but like some other sectors and individual companies, they need to make innovative changes in their supply chains and related activities to be more competitive and financially viable in the twenty-first century. Source: John J. Coyle and Kusumal Ruamsook, Center for Supply Chain Research, Penn State University. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 12 Chapter 1 cogn...
Purchase answer to see full attachment
Explanation & Answer:
550 Words
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

The final answer is here please check it out and let me know if you're satisfied😀 it's been awesome working with you.

Running head: DISTRIBUTION OPERATIONS AND TRANSPORTATION

Distribution Operations and Transportation in SCM
Name of Student
Name of Institution

1

DISTRIBUTION OPERATIONS AND TRANSPORTATION

2

Distribution operations and Transportation in SCM
Introduction
(Coyle, Langley, Novack, & Gibson, 2016, p. 373- 379) Highlight the roles of
distribution operations and their impacts on the performance of supply chains. They continue to
note the challenges that production managers face in the current environment.
Coyle et al. (2016, p. 419-422) Continue to discuss the role of transportation in supply
chain management and the significant challenges that transportation managers face in the current
environment.
Q-1
Maintenance of a balance between the supply and demand: This involves having
distribution facilities assemble the necessary products required all year round and delivering
them as the need arises.
Protection against uncertainty: Distribution systems guard their inventories against
disruptions in supply...


Anonymous
Really helped me to better understand my coursework. Super recommended.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Similar Content

Related Tags