STRATEGIC SUPPLY MANAGEMENT STRATEGIC SUPPLY STRATEGIC SUPPLY MANAGEMENT PRINCIPLES, THEORIES and PRACTICE MANAGEMENT PRINCIPLES, THEORIES and PRACTICE ‘Cousins Et Al
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9780273651000_COVER.qxd 11/29/07 2:43 PM Page 1 PRINCIPLES, THEORIES STRATEGIC SUPPLY MANAGEMENT SUPPLY STRATEGIC STRATEGIC SUPPLY STRATEGIC SUPPLY MANAGEMENT PRINCIPLES, THEORIES AND PRACTICE MANAGEMENT PRINCIPLES, THEORIES AND PRACTICE ‘Cousins et al. have drawn from their extensive experience in industry, and crafted a book that provides deep contextual insights into why supply chains are the foundation for competitive strategy, the dynamics that drive economic change, and most importantly, the importance of relationships as the glue that keeps supply chains functioning properly. Executives and students will benefit from the frameworks, examples, and discussions in this book, which AND should be on everyone who has an interest in global competitiveness’ bookshelves.’ Rob Handfield, Bank of America University Distinguished Professor of Supply Chain Management, PRACTICE North Carolina State University Development of supply chain strategies has become a major growth industry in its own right; most organisations now see managing their supply chain as a key strategic issue. The main tenet of this book is that supply needs to be thought about as a dynamic strategic process, and not as a bureaucratic business function. Strategic Supply Management: principles, theories and practice traces the development of purchasing and supply management from its origins as a tactical commercial function into a key strategic business process. Integrating conceptual models, including the strategic supply wheel, with a host of practical examples, the authors illuminate the philosophy, concepts and techniques of supply management. They also contrast the traditional, conventional concepts of purchasing and supply management with new ideas, radical concepts, and examples of interesting practice. BENN LAWSON COUSINS PAUL Designed to provide a comprehensive course structure for teaching and studying this wide-ranging and constantly developing topic, this book guides the reader through the subject with clarity and logic. Whether used as a course textbook or a source of reference, students and practitioners will find the authors' comprehensive overviews of the topics indispensable. For a website to accompany this book visit www.pearsoned.co.uk/cousinslamming • • RICHARD LAMMING BRIAN SQUIRE Professor Paul Cousins The , Manchester Business School Professor Richard Lamming School of Management, University of Southampton Dr Benn Lawson School of Management and Economics, Queen’s University Belfast Dr Brian Squire The , Manchester Business School Cover image adapted with permission from Elsevier PAUL COUSINS• RICHARD LAMMING an imprint of www.pearson-books.com BENN LAWSON• BRIAN SQUIRE STRS_A01.qxd 19/11/2007 03:33PM Page i Strategic Supply Management ‘Cousins et al. have drawn from their extensive experience in industry, and crafted a book that provides deep contextual insights into why supply chains are the founda- tion for competitive strategy, the dynamics that drive economic change, and most importantly, the importance of relationships as the glue that keeps supply chains functioning properly. Executives and students will benefit from the frameworks, examples, and discussions in this book, which should be on the bookshelves of everyone who has an interest in global competitiveness.’ Rob Handfield Bank of America University Distinguished Professor of Supply Chain Management North Carolina State University Consulting Editor, Journal of Operations Management Director, Supply Chain Resource Cooperative STRS_A01.qxd 19/11/2007 03:33PM Page ii We work with leading authors to develop the strongest educational materials in management, bringing cutting-edge thinking and best learning practice to a global market. Under a range of well-known imprints, including FT Prentice Hall, we craft high quality print and electronic publications which help readers to understand and apply their content, whether studying or at work. To find out more about the complete range of our publishing, please visit us on the World Wide Web at: www.pearsoned.co.uk STRS_A01.qxd 19/11/2007 03:33PM Page iii Strategic Supply Management Principles, Theories and Practice Professor Paul Cousins Professor of Operations Management CIPS Professor of Supply Chain Management The , Manchester Business School Professor Richard Lamming Director School of Management, University of Southampton Dr Benn Lawson Senior Lecturer in Operations Management CIPS Research Fellow School of Management and Economics, Queen’s University Belfast Dr Brian Squire Lecturer in Operations and Supply Chain Management The , Manchester Business School STRS_A01.qxd 19/11/2007 03:33PM Page iv Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk First published 2008 © Paul Cousins, Richard Lamming, Benn Lawson and Brian Squire 2008 The rights of Paul Cousins, Richard Lamming, Benn Lawson and Brian Squire to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN: 978-0-273-65100-0 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library 10987654321 12 11 10 09 08 07 Typeset in 10/12.5pt Sabon by 35 Printed by Ashford Colour Press Ltd., Gosport The publisher’s policy is to use paper manufactured from sustainable forests. STRS_A01.qxd 19/11/2007 03:33PM Page v The authors would like to express their thanks to their families for help throughout the years. Joan and David Cousins, Julia, Tony, Ash and Elly PDC Leigh, Louise and Rosie Lamming RCL Norman and Dawn Lawson, Karen, Lauren, Kate and Corey BRL Cliff and Jill Squire BCS STRS_A01.qxd 19/11/2007 03:33PM Page vi STRS_A01.qxd 19/11/2007 03:33PM Page vii Contents List of figures xvii List of tables xx List of boxes xxi Preface xxii Acknowledgements xxiii Abbreviations xxvi Part 1 THE FUNDAMENTALS OF SUPPLY 1 Chapter 1 The supply challenge 3 Introduction 3 Structure of the book 3 Part 1: The fundamentals of supply 4 Part 2: Developing supply strategy 5 Part 3: Strategic issues in supply management 6 Part 4: Future directions 6 A note on terminology 6 Overview 7 Why should purchasing be seen as important to an organisation? 8 Summary 9 References 9 Endnotes 9 Chapter 2 The evolution of purchasing and supply management 10 Introduction 10 The evolution of purchasing 11 The 1940s–1960s: logistics 11 The 1970s: purchasing as an administrative function 11 The 1980s: purchasing as supply chain management 12 The 1990s: supply management and strategic decision making 13 Drivers of purchasing evolution 15 Political pressures 15 Economic pressures 16 Social pressures 17 Technological pressures 17 STRS_A01.qxd 19/11/2007 03:33PM Page viii viii Contents The role of the purchasing function 18 Implementing strategy 18 Supporting strategy 18 Driving strategy 18 Judging purchasing’s contribution to strategy 19 Stage 1: Passive 20 Stage 2: Independent 20 Stage 3: Supportive 20 Stage 4: Integrative 20 Empirical taxonomies of purchasing 21 Strategic purchasers 21 Capable purchasers 22 Undeveloped purchasers 22 Celebrity purchasers 22 Moving between phases 22 The scope of strategic supply management 23 Summary 24 Seminar questions 24 References 25 Endnotes 25 Chapter 3 The make–buy decision: a theoretical perspective 27 Introduction 27 The make–buy decision 28 The inadequacy of neoclassical economic theory 29 The transaction cost approach 30 Behavioural characteristics 31 Transaction characteristics 32 TCE and the make–buy decision 32 TCE criticisms 33 The capability approach 34 Inimitability 34 Non-substitutable 35 Immobile 35 Resource-based view and the make–buy decision 35 Summary 38 Seminar questions 39 References 40 Endnotes 42 Chapter 4 Sourcing strategies and supply chain configurations 43 Introduction 43 Supply base reduction 43 Sourcing strategies 47 STRS_A01.qxd 19/11/2007 03:33PM Page ix Contents ix Supply market complexity 48 Impact on business 49 Strategic directions for managing category spends 50 Supply structure and design 52 Single sourcing 52 Multiple sourcing 53 Delegated sourcing strategy 54 Parallel sourcing 55 Summary 57 Seminar questions 57 References 57 Further reading 58 Endnotes 58 Chapter 5 Strategic supplier selection 59 Introduction 59 Main stages of supplier selection 60 Step 1: Initial supplier qualification 60 Step 2: Agree measurement criteria 62 Cost criteria 64 Quality criteria 64 Delivery criteria 65 Flexibility criteria 66 Other criteria 66 Step 3: Obtain relevant information 67 Step 4: Make selection 68 Assign weights to criteria 70 Calculate criteria weights 71 Evaluate individual suppliers 72 Calculate supplier weights 72 Summary 73 Seminar questions 73 References 74 Endnotes 74 Chapter 6