ptg16425222 The Essentials of Supply Chain Management ptg16425222 This page intentionally left blank ptg16425222 The Essentials of Supply Chain Management New Business Concepts and Applications ptg16425222 Hokey Min James R. Good Chair in Global Supply Chain Strategy at Bowling Green State University Publisher: Paul Boger Editor-in-Chief: Amy Neidlinger Executive Editor: Jeanne Glasser Levine Development Editor: Natasha Wolmers Operations Specialist: Jodi Kemper Cover Designer: Chuti Prasertsith Managing Editor: Kristy Hart Project Editor: Elaine Wiley Copy Editor: Bart Reed Proofreader: Laura Hernandez Indexer: Tim Wright Senior Compositor: Gloria Schurick Manufacturing Buyer: Dan Uhrig © 2015 by Hokey Min For information about buying this title in bulk quantities, or for special sales opportunities (which may include electronic versions; custom cover designs; and content particular to your business, training goals, marketing focus, or branding interests), please contact our corporate sales department at [email protected] or (800) 382-3419. For government sales inquiries, please contact [email protected]. For questions about sales outside the U.S., please contact [email protected]. Company and product names mentioned herein are the trademarks or registered trademarks of their respec- tive owners. All rights reserved. No part of this book may be reproduced, in any form or by any means, without per- ptg16425222 mission in writing from the publisher. Printed in the United States of America First Printing June 2015 ISBN-10: 0-13-403623-9 ISBN-13: 978-0-13-403623-6 Pearson Education LTD. Pearson Education Australia PTY, Limited. Pearson Education Singapore, Pte. Ltd. Pearson Education Asia, Ltd. Pearson Education Canada, Ltd. Pearson Educación de Mexico, S.A. de C.V. Pearson Education—Japan Pearson Education Malaysia, Pte. Ltd. Library of Congress Control Number: 2015935040 This book is dedicated to my late father B. J. Min, my mother H.W. Seo, my wife Christine, and my son Alexander Snow. ptg16425222 This page intentionally left blank ptg16425222 Contents Acknowledgments .................................................................................xiii About the Author ....................................................................................xv Chapter 1 Principles of Supply Chain Management ...............................................1 Learning Objectives ...............................................................................................1 Evolution of the Supply Chain Concept ................................................................1 Total Systems Approach and Boundary Spanning ................................................6 Conceptual Foundations of Demand Chain, Value Chain, and Supply Chain ..................................................................................................8 Strategic Alliances and Partnerships ...................................................................10 ptg16425222 Organizational Learning from Strategic Alliances ..............................................17 Interfaces among Purchasing, Production, Logistics, and Marketing .................19 Theory of Constraints (TOC) for Supply Chain Management ...........................20 Change Management for Supply Chain Management ........................................22 Chapter Summary ................................................................................................25 Study Questions ...................................................................................................26 Zara’s Rapid Rise as a Cool Supply Chain Icon .................................................27 Bibliography ........................................................................................................31 Chapter 2 Supply Chain Strategy: The Big Picture ..............................................37 Learning Objectives .............................................................................................37 Strategic Dimensions ...........................................................................................37 Red Ocean versus Blue Ocean Strategy ..............................................................39 Strategic Supply Chain Planning Processes ........................................................40 Strategic Integration of Supply Chain Processes ................................................42 The “Victory” (Winning Strategy) Model...........................................................44 Push versus Pull Strategy ....................................................................................46 Typology of Supply Chain Strategy ....................................................................49 Internal Supply Chain Strategy Audits ................................................................51 External Supply Chain Strategy Audits...............................................................52 Contents    vii Chapter Summary ................................................................................................53 Study Questions ...................................................................................................54 Case: Dell, Inc.—Push or Pull? ...........................................................................54 Bibliography ........................................................................................................58 Chapter 3 Customer Service: The Ultimate Goal of Supply Chain Management .................................................................................61 Learning Objectives .............................................................................................61 Understanding Customer Expectations and Perceptions .....................................61 Customer Service Elements .................................................................................62 Building Customer Relationships ........................................................................67 Service Delivery Performance .............................................................................73 Formulating a Winning Customer Service Strategy in a Supply Chain .............79 Chapter Summary ................................................................................................81 Study Questions ...................................................................................................82 Case: Shiny Glass, Inc. ........................................................................................83 Bibliography ........................................................................................................86 Chapter 4 Demand Planning and Forecasting .......................................................89 Learning Objectives .............................................................................................89 ptg16425222 Demand Management ..........................................................................................89 Demand Forecasting ............................................................................................94 Sales and Operational Planning .........................................................................105 Collaborative Commerce ...................................................................................107 The Bullwhip Effect ..........................................................................................113 Chapter Summary ..............................................................................................116 Study Questions .................................................................................................118 Case: Seven Star Electronics: Demand Planning ..............................................119 Bibliography ......................................................................................................123 Chapter 5 Inventory Control and Planning .........................................................127 Learning Objectives ...........................................................................................127 The Principles of Inventory Management .........................................................128 Functions of Inventory ......................................................................................129 Types of Inventory ............................................................................................130 Inventory Classification .....................................................................................130 Independent Demand Inventory Control and Planning .....................................134 Dependent Demand Inventory Control and Planning .......................................147 Distribution Resource Planning .........................................................................155 viii    The Essentials of Supply Chain Management Just-In-Time Inventory Principles .....................................................................160 Basics of Cycle Counting ..................................................................................164 Vendor Managed Inventory ...............................................................................167 Chapter Summary ..............................................................................................168 Study Questions .................................................................................................169 Case: Sandusky Winery .....................................................................................170 Bibliography ......................................................................................................172 Chapter 6 Warehousing ..........................................................................................175 Learning Objectives ...........................................................................................175 Warehouses in Transition ..................................................................................176 Types of Warehouses ........................................................................................178 Types of Warehouse Leases ..............................................................................180 Warehousing Costs ............................................................................................181 Warehouse Network Design ..............................................................................183 Warehouse Layout .............................................................................................186 Warehouse Asset Management .........................................................................189 Material Handling ..............................................................................................190 Order Picking .....................................................................................................192 Warehouse Productivity ....................................................................................193 ptg16425222 Warehouse Security and Safety .........................................................................195 Warehouse Automation .....................................................................................196 Warehouse Workforce Planning ........................................................................197 Warehouse Management Systems .....................................................................198 Handling Returned Products and Reverse Logistics .........................................205 Chapter Summary ..............................................................................................209 Study Questions .................................................................................................210 Case: One Bad Apple and Thousands of Headaches ........................................211 Bibliography ......................................................................................................216 Chapter 7 Transportation Planning ......................................................................221 Learning Objectives ...........................................................................................221 Transportation as a Vital Link in the Supply Chain .........................................222 Central Place Theory .........................................................................................224 Transportation Regulations and Deregulations .................................................225 Legal Forms of Transportation ..........................................................................233 Carrier Management ..........................................................................................235 Surface Transportation ......................................................................................239 Water Carriers ....................................................................................................242 Contents    ix