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S Upply C Hain M Anagement B Est P Ractices ffirs.qxp 9/18/06 8:52 AM Page i S UPPLY C HAIN M ANAGEMENT B EST P RACTICES | DAVID BLANCHARD JOHN WILEY & SONS, INC. ffirs.qxp 9/18/06 8:52 AM Page iv ffirs.qxp 9/18/06 8:52 AM Page i S UPPLY C HAIN M ANAGEMENT B EST P RACTICES | DAVID BLANCHARD JOHN WILEY & SONS, INC. ffirs.qxp 9/18/06 8:52 AM Page ii This book is printed on acid-free paper. ࠗ∞ Copyright © 2007 by David Blanchard. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978–750–8400, fax 978–646–8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201–748–6011, fax 201–748–6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services, or technical support, please contact our Customer Care Department within the United States at 800–762–2974, outside the United States at 317–572–3993 or fax 317–572–4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our Web site at http://www.wiley.com. Library of Congress Cataloging-in-Publication Data: Blanchard, David, 1958- Supply chain management : best practices / David Blanchard. p. cm. Includes bibliographical references and index. ISBN-13: 978-0-471-78141-7 (cloth : alk. paper) ISBN-10: 0-471-78141-X (cloth : alk. paper) 1. Business logistics. I. Title. HD38.5.B476 2007 658.5—dc22 2006017526 Printed in the United States of America 10987654321 ffirs.qxp 9/18/06 8:52 AM Page iii To Nancy, Julia, and Grace ffirs.qxp 9/18/06 8:52 AM Page iv ftoc.qxp 9/18/06 9:02 AM Page v Contents Preface xi Acknowledgments xv PART I INTRODUCTION TO SUPPLY CHAIN MANAGEMENT 1. If Supply Chain Is the Answer, Then What’s the Question? 3 You Knew This Job Was Dangerous When You Took It 3 The Big Picture 6 The Supply Chain’s Back Story 8 Roadblocks on the Supply Chain Path 11 Separating the Good from the Best 13 2. Anatomy of a Supply Chain 17 Automotive: Building Customer Loyalty for the Long Term 18 Chemicals: Finding the Right Supply Chain Formula 20 Consumer Packaged Goods:The Moment of Truth 22 Food and Beverage: Cutting Out the Middleman 24 High-Tech/Electronics: Zero Latency 26 Pharmaceuticals: Fighting Counterfeiters with RFID 28 Retail: Optimizing the Inventory 30 3. Supply Chain Metrics: Measuring Up to High Standards 33 How to Prevent a Supply Chain Heart Attack 34 What Makes a Supply Chain Leader? 36 Learn the SCOR 44 v ftoc.qxp 9/18/06 9:02 AM Page vi vi Contents PART II TRADITIONAL CORE PROCESSES OF SUPPLY CHAIN MANAGEMENT 4. Planning and Forecasting: Headed for the Future 55 A Bias against Good Plans 58 From Soup to S&OP 59 No Time Like the Real Time 61 The Truth Plays Out 62 End-to-End Integration 64 The First Shall Be First 65 A Happy Ending 68 5. Procurement: Go Right to the Source 69 Giving Procurement Its Due 70 Managing the Changes 71 Keep Your Friends Close and Your Suppliers Closer 73 Looking Backward to See Forward 74 Working for Every Penny 76 Ensuring a Healthy Supply Chain 77 The War on Complexity 79 It Seemed Like a Good Idea at the Time 81 An Online Car Wreck 83 6. Manufacturing: Supply Chain on the Make 85 A Direct Line to Supply Chain Success 87 Better Decisions for the Customer 89 A Leaner Shade of Blue 91 Lean, Mean Flying Machine 92 Learning to Share 93 Lean Principles 95 Nearly Perfect 97 Collaborating on Product Designs 100 7. Transportation: Logistics a la Mode 103 Riding the Roads 105 Regulations and Deregulation 106 Fuel for Thought 108 A Capacity for Change 109 Know Thyself, and Thy Carrier, Too 111 How to Achieve Sustainable Savings 112 Collaboration Is a Two-Way Street 114 ftoc.qxp 9/18/06 9:02 AM Page vii Contents vii A Carrier by Any Other Name 116 Automate to Consolidate 117 8. Distribution and Warehousing: Going with the Flow 121 Virtual Inventory 123 Cross-Docking, Compliance, and Collaboration 125 Where the Rubber Meets the Load 127 Can You Hear Me Now? 129 Turn, Turn, Turn 131 Half-Full or Half-Empty? 132 How to Better Manage Your Warehouse 134 9. Site Selection: Location, Location, Location 137 Striking the Proper Balance 139 A Site for Sore Eyes 141 Finding the Right Place 143 A Look at Gillette’s Distribution Network 145 Cost versus Service 146 Match Your Network to Your Business Strategy 147 How Much Is Too Much? 149 Weighing the Intangibles 150 Quality over Quantity 151 10. Globalization: It’s a Not-So-Small World 155 Playing by Somebody Else’s Rules 157 Develop a Global Vision 158 Friendly Nations 160 Take a Look for Yourself 162 “Low Cost” Sometimes Means “Poor Service” 164 Living in a Flat World 166 Keeping an Eye on China 167 The Need for Supply Chain Visibility 169 Unclogging West Coast Congestion 171 11. Customer Service: Keeping the Customer Satisfied 173 The Perfect Order 174 The High Cost of Imperfection 176 One Good Return Deserves Another 177 ftoc.qxp 9/18/06 9:02 AM Page viii viii Contents Supply Chain in Reverse 179 Managing the Relationship 182 Money in the Bank 184 Supply Chain at Your Service 186 A Culture of Customer Satisfaction 187 PART III SUPPLY CHAIN STRATEGIES 12. 3PLs: When You’d Rather Not Do It Yourself 193 A Shift to the Supply Chain Side 194 Letting Somebody Else Do It 195 Supply Chain Essentials and Nonessentials 197 Finding Your Core Competency 199 Square Pegs and Round Holes 201 Think Strategically 202 The Financial Impact of Outsourcing 203 Staying in Touch 204 Going Beyond the 3PL Model 206 Outpacing the Competition 208 13. Collaboration: Extending the Enterprise 209 Mutually Beneficial Relationships 211 Winning Small Victories 212 A Better Way to Sell Mouthwash 213 A Nine-Step Program for CPFR 216 Great Expectations, So-So Results 217 More Reliability and Better Service 220 Challenges in Supplier Management 222 How to Get the Most Out of a Relationship 223 14. Security: Seeking Shelter from Supply Chain Storms 227 “It’ll Never Happen Here” 228 Customs-Trade Partnership Against Terrorism 231 Getting Countries to Talk to Each Other 232 Sometimes Low-Tech Is as Good as High-Tech 234 Taking Responsibility for Your Supply Chain 235 ftoc.qxp 9/18/06 9:02 AM Page ix Contents ix Securing the Supply Chain 237 Taking Steps toward Effective Compliance 239 Supply Chains at Risk 241 15. RFID: A Game of Tags 245 The ABCs of RFID 246 Proactive Replenishment 248 In Search of Payback 250 Tagging Till the Cows Come Home 251 Work the Bugs Out 254 A Matter of Privacy 255 No Need to Be Passive 257 16. The Supply Chain Profession: What Keeps You Up at Night? 261 Talent Search 263 Hiring Problem Solvers 264 Training the Next Generation 266 Optimizing the Workforce 268 What Keeps You Up at Night? 270 Gray Matters 272 The Secret to Supply Chain Success 273 Notes 277 Index 293 ftoc.qxp 9/18/06 9:02 AM Page x fpref.qxp 9/18/06 9:02 AM Page xi Preface With a title like Supply Chain Management Best Practices, there’s not much mystery in what this book is about. Throughout its 16 chapters, this book will identify some of the best supply chains in the world, describe in detail what it means to have a “best-in-class” supply chain, and offer suggestions—in the form of best practices—on how to build a world-class supply chain. This book is largely told through the experiences of supply chain practitioners and experts. The companies and the people referred to in this book are real, as are their accomplishments (and, in some cases, their failures). What sets this book apart from other supply chain books is that I have taken a journalist’s approach to the subject, rather than an academic’s or a consultant’s. As the editor-in-chief of Logistics Today magazine (www.logisticstoday.com), the leading supply chain publication in the field, I had access to supply chain professionals at companies of all sizes, in dozens of different industries.
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