/I 3-4) Of 30-2/f
Fifth Edition
SUPPLY CHAIN MANAGEMENT
STRATEGY, PLANNING, AND OPERATION
Global Edition
Sunil Chopra
Kellogg School of Management
Peter Meindl
Kepos Capital
PEARSON
Boston Columbus Indianapolis New York San Francisco Upper Saddle River
Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto
Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo
CONTENTS
Preface 10
Part I
Building a Strategic Framework to Analyze Supply
Chains
Chapter 1 UNDERSTANDING THE SUPPLY CHAIN 13
1.1
What Is a Supply Chain? 13
1.2
The Objective of a Supply Chain
1.3
The Importance of Supply Chain Decisions
1.4
Decision Phases in a Supply Chain
1.5
1.6
1.7
Process Views of a Supply Chain 20
Examples of Supply Chains 25
Summary of Learning Objectives 29
Discussion Questions
29
15
16
18
Bibliography
30
Chapter 2 SUPPLY CHAIN PERFORMANCE: ACHIEVING STRATEGIC
FIT A N D SCOPE 31
2.1 Competitive and Supply Chain Strategies 31
2.2 Achieving Strategic Fit 33
2.3 Expanding Strategic Scope 44
2.4 Challenges to Achieving and Maintaining Strategic Fit 46
2.5 Summary of Learning Objectives 48
Discussion Questions
48
Bibliography
49
Chapter 3 SUPPLY CHAIN DRIVERS A N D METRICS
3.1
Financial Measures of Performance
3.2
3.3
Drivers of Supply Chain Performance 53
Framework for Structuring Drivers 55
3.4
3.5
3.6
3.7
Facilities 56
Inventory 59
Transportation 61
Information 63
3.8
3.9
Sourcing 66
Pricing 68
50
3.10 Summary of Learning Objectives
Discussion Questions
50
71
70
Bibliography
71
CASE STUDY: Seven-Eleven Japan Co.
72
CASE STUDY: Financial Statements for Wal-Mart Stores Inc.
78
Contents
Part II
Designing t h e Supply Chain N e t w o r k
Chapter 4
DESIGNING DISTRIBUTION NETWORKS
AND APPLICATIONS TO ONLINE SALES 80
4.1 The Role of Distribution in the Supply Chain 80
4.2 Factors Influencing Distribution Network Design 81
4.3 Design Options for a Distribution Network 85
4.4 Online Sales and the Distribution Network 98
4.5 Distribution Networks in Practice 111
4.6 Summary of Learning Objectives 112
Chapter 5
NETWORK DESIGN IN THE SUPPLY CHAIN 1 2 0
5.1 The Role of Network Design in the Supply Chain 120
5.2
5.3
5.4
5.5
Factors Influencing Network Design Decisions 121
Framework for Network Design Decisions 126
Models for Facility Location and Capacity Allocation 128
Making Network Design Decisions in Practice 144
5.6
Summary of Learning Objectives 145
Chapter 6
Discussion Questions 113 Bibliography 113
CASE STUDY: Blue Nile and Diamond Retailing 114
Discussion Questions 146 Exercises 146 Bibliography 151
CASE STUDY: ManagingGrowthatSportStuff.com 151
CASE STUDY: Designing the Production Network at CpolWipes 153
DESIGNING GLOBAL SUPPLY CHAIN NETWORKS 155
6.1 The Impact of Globalization on Supply Chain Networks 155
6.2 The Offshoring Decision: Total Cost 157
6.3
Risk Management in Global Supply Chains 160
6.4
6.5
6.6
Discounted Cash Flows 164
Evaluating Network Design Decisions Using Decision Trees 165
To Onshore or Offshore: Evaluation of Global Supply Chain
Design Decisions Under Uncertainty 173
6.7
Making Global Supply Chain Design Decisions Under
Uncertainty in Practice 182
Summary of Learning Objectives 182
6.8
Discussion Questions 183 Exercises 183
Bibliography 185
CASE STUDY: BioPharma, Inc. 186
CASE STUDY: Global Supply Design for the Future: Nokia 188
Part III Planning and Coordinating Demand and Supply
in a Supply Chain
Chapter 7
D E M A N D FORECASTING IN A SUPPLY CHAIN
7.1 The Role of Forecasting in a Supply Chain 190
7.2
Characteristics of Forecasts 191
190
Contents
7.3
7.4
7.5
Components of a Forecast and Forecasting Methods
Basic Approach to Demand Forecasting 193
Time-Series Forecasting Methods 195
7.6
7.7
7.8
7.9
7.10
7.11
7.12
Measures of Forecast Error 205
Selecting the Best Smoothing Constant 207
Forecasting Demand at Tahoe Salt 209
The Role of IT in Forecasting 215
Risk Management in Forecasting 216
Forecasting in Practice 217
Summary of Learning Objectives 217
192
Discussion Questions 218 Exercises 218
Bibliography 220
CASE STUDY: Specialty Packaging Corporation, Part A 220
Chapter 8
AGGREGATE PLANNING IN A SUPPLY CHAIN 223
8.1 The Role of Aggregate Planning in a Supply Chain 223
8.2 The Aggregate Planning Problem 225
8.3 Aggregate Planning Strategies 227
8.4 Aggregate Planning Using Linear Programming 228
8.5 Aggregate Planning in Excel 236
8.6
8.7
8.8
8.9
,
Chapter 9
Building a Rough Master Production Schedule 238
The Role of IT in Aggregate Planning 239
Implementing Aggregate Planning in Practice 240
Summary of Learning Objectives 240
Discussion Questions 241 Exercises 241
Bibliography 243
CASE STUDY: Specialty Packaging Corporation, Part B 243
SALES A N D OPERATIONS PLANNING: PLANNING SUPPLY
A N D D E M A N D IN A SUPPLY CHAIN 2 4 6
9.1
9.2
9.3
9.4
9.5
Responding to Predictable Variability in the Supply Chain 246
Managing Supply 247
Managing Demand 249
Implementing Sales and Operations Planning in Practice 256
Summary of Learning Objectives 257
Discussion Questions 257 Exercises 258
CASE STUDY: Mintendo Game Girl 260
Chapter 10 COORDINATION IN A SUPPLY CHAIN
10.1
10.2
10.3
10.4
10.5
10.6
Bibliography
260
262
Lack of Supply Chain Coordination and the Bullwhip Effect 262
The Effect on Performance of Lack of Coordination 264
Obstacles to Coordination in a Supply Chain 266
Managerial Levers to Achieve Coordination 270
Continuous Replenishment and Vendor-Managed Inventories 275
Collaborative Planning, Forecasting,
and Replenishment (CPFR) 276
Contents
10.7 Achieving Coordination in Practice 279
10.8 Summary of Learning Objectives 281
Discussion Questions 281 Bibliography
P a r t IV
282
P l a n n i n g a n d M a n a g i n g I n v e n t o r i e s in a S u p p l y C h a i n
Chapter 11 MANAGING ECONOMIES OF SCALE IN A SUPPLY CHAIN:
CYCLE INVENTORY 283
11.1 The Role of Cycle Inventory in a Supply Chain 283
11.2 Estimating Cycle Inventory-Related Costs in Practice 286
11.3 Economies of Scale to Exploit Fixed Costs 288
11.4 Economies of Scale to Exploit Quantity Discounts 301
11.5 Short-Term Discounting: Trade Promotions 312
11.6 Managing Multiechelon Cycle Inventory 317
11.7 Summary of Learning Objectives 319
Discussion Questions 320 Exercises 320
Bibliography 322
CASE STUDY: NAN 323
Appendix 11A: Economic Order Quantity 325
Chapter 12 MANAGING UNCERTAINTY IN A SUPPLY CHAIN: SAFETY
INVENTORY 326
12.1
12.2
12.3
12.4
12.5
The Role of Safety Inventory in a Supply Chain 326
Determining the Appropriate Level of Safety Inventory 328
Impact of Supply Uncertainty on Safety Inventory 339
Impact of Aggregation on Safety Inventory 341
Impact of Replenishment Policies on Safety Inventory 353
12.6 Managing Safety Inventory in a Multiechelon Supply Chain 356
12.7 The Role of IT in Inventory Management 357
12.8 Estimating and Managing Safety Inventory in Practice 358
12.9 Summary of Learning Objectives 359
Discussion Questions 360 Exercises 360
Bibliography 363
CASE STUDY: Managing Inventories at ALKO Inc. 363
CASE STUDY: Shall it be postponed? 365
Appendix 12A: The Normal Distribution 366
Appendix 12B: The Normal Distribution in Excel 367
Appendix 12C: Expected Shortage Cost per Cycle 368
Appendix 12D: Evaluating Safety Inventory for Slow-Moving
Items 369
Chapter 13 DETERMINING THE OPTIMAL LEVEL OF PRODUCT
AVAILABILITY 370
13.1 The Importance of the Level of Product Availability 370
13.2 Factors Affecting Optimal Level of Product Availability 371
13.3 Managerial Levers to Improve Supply Chain Profitability 382
Contents
13.4 Setting Product Availability for Multiple Products Under
Capacity Constraints 396
13.5 Setting Optimal Levels of Product Availability in Practice
13.6 Summary of Learning Objectives
Discussion Questions 399
Bibliography 402
398
399
Exercises 400
Appendix 13A: Optimal Level of Product Availability
Appendix 13B: An Intermediate Evaluation
403
403
Appendix 13C: Expected Profit from an Order
404
Appendix 13D: Expected Overstock from an Order
Appendix 13E: Expected Understock from an Order
405
406
Appendix 13F: Simulation Using Spreadsheets 406
Part V
Designing and Planning Transportation Networks
Chapter 14 TRANSPORTATION IN A SUPPLY CHAIN 409
14.1 The Role of Transportation in a Supply Chain 409
14.2 Modes of Transportation and Their Performance
Characteristics 411
14.3 Transportation Infrastructure and Policies 415
14.4 Design Options for a Transportation Network
14.5 Trade-Offs in Transportation Design 423
14.6 Tailored Transportation 432
14.7 The Role of IT in Transportation
418
434
14.8 Risk Management in Transportation 435
14.9 Making Transportation Decisions in Practice 436
14.10 Summary of Learning Objectives 436
Discussion Questions 437 Exercises 437 Bibliography
CASE STUDY: Designing a Sustainable Distribution Network for
Euro-Grain 438
Part VI
438
Managing Cross-Functional Drivers in a Supply Chain
Chapter 15 SOURCING DECISIONS IN A SUPPLY CHAIN 440
15.1 The Role of Sourcing in a Supply Chain 440
15.2 In-House or Outsource 442
15.3 Third-and Fourth-Party Logistics Providers 448
15.4 Using Total Cost to Score and Assess Suppliers 451
15.5
15.6
15.7
15.8
Supplier SelectionAuctions and Negotiations 453
Contracts, Risk Sharing, and Supply Chain Performance
Design Collaboration 467
The Procurement Process 469
15.9 Designing a Sourcing Portfolio: Tailored Sourcing 471
15.10 Risk Management in Sourcing 472
15.11 Making Sourcing Decisions in Practice 473
456
Contents
15.12 Summary of Learning Objectives
Discussion Questions 475
Bibliography 476
474
Exercises 475
Chapter 16 PRICING A N D REVENUE M A N A G E M E N T IN A SUPPLY
CHAIN 4 7 8
16.1 The Role of Pricing and Revenue Management in a Supply
Chain 478
16.2 Pricing and Revenue Management for Multiple Customer
Segments 480
16.3 Pricing and Revenue Management for Perishable Assets 487
16.4 Pricing and Revenue Management for Seasonal Demand 493
16.5 Pricing and Revenue Management for Bulk and Spot
Contracts 493
16.6 Using Pricing and Revenue Management in Practice 495
16.7 Summary of Learning Objectives 497
Discussion Questions 497
Bibliography 499
Exercises 498
Chapter 17 INFORMATION TECHNOLOGY IN A SUPPLY
CHAIN 500
17.1 The Role of IT in a Supply Chain 500
17.2 The Supply Chain IT Framework
17.3
17.4
17.5
17.6
502
Customer Relationship Management 503
Internal Supply Chain Management 504
Supplier Relationship Management 505
The Transaction Management Foundation 506
17.7 The Future of IT in the Supply Chain
17.8 Risk Management in IT 508
17.9 Supply Chain IT in Practice 509
17.10 Summary of Learning Objectives
Discussion Questions
510
507
510
Bibliography
510
Chapter 18 SUSTAINABILITY A N D THE SUPPLY CHAIN 512
18.1 The Role of Sustainability in a Supply Chain 512
18.2 The Tragedy of the Commons 514
18.3 Key Metrics for Sustainability
516
18.4 Sustainability and Supply Chain Drivers
517
18.5 Closed-Loop Supply Chains 520
18.6 Summary of Learning Objectives 520
Discussion Questions
Index
522
521
Bibliography
521
