Supply Chain Design and Management

Strategic and Tactical Perspectives

Manish Govil, Jean-Marie Proth

• Publisher: Academic Press
• Year: 2002
• Print ISBN: 9780122941511
• eBook ISBN: 9780080518183
• Topic: Business
• Subtopic: Operations
• Index: Business

Supply Chain Design and Management introduces the concept of a sharing mechanism that will ensure the sustainability of a supply chain by fair distribution of costs and benefits. This book provides a holistic view of the supply chain from product development, purchasing, manufacturing, distribution and storage, to retailing. The presentation of the enabling technologies in supply chain management will help companies better understand their options.§ Provides a step-by-step framework for designing supply chains at the strategic level§ Written for those who deal with the supply chains on a day-to-day basis as well as those new to the field§ Provides a synthesis of best practices for managing supply chains at the tactical level§ Provides a review of the state-of-the-art in enabling information technologies and business applications§ Explains the concepts with examples from the industry and simple mathematical formulations§ Is accessible to graduate students for an excellent understanding of how supply chains work and can join the industry armed with the knowledge of the workings of supply chains

1

INTRODUCTION

Developments in the field of production management since World War II have been limited to the improvement of activities related to production control and design in individual functional areas such as inventory management, planning and scheduling of manufacturing activities, modeling and evaluation of manufacturing systems, layout problems, group technology, system design approaches, and design and control of information flows, to quote only a few.

Despite competition among companies and an ever-changing market, the basic structure of manufacturing firms remained quite stable during this period. The most significant change was a tendency to increase automation, which affected neither the structure of the physical system (PS) nor the structure of the decision-making system (DMS). As a consequence, the problems researchers had to face did not evolve much during this period, except in the following aspects:

• The size of problems to be solved tended to increase due to increasing complexity of products as well as production systems.

• Time constraints became stronger due to competition.

• The number of tools available in production management exploded.

Although these tools were derived from a limited number of basic principles (MRP I, MRP II, TQM, JIT, etc.), the fact that they were developed independently from each other made a standardized approach quite impossible and thus handicapped the introduction of rationale in production management in most companies.

To summarize, the major economic changes that occurred in the 1950s first affected marketing strategies and then, in the 1980s and 1990s, affected production systems, calling for more automation without fundamentally perturbing the structures of DMSs and PSs.

Only recently have the pressure of the competitive market and new information technologies affected the structures of the production systems, calling for

• Integration of the activities that cover the whole spectrum of production from customers’ requirements to products: This leads to a new DMS structure.

• Increasing flexibility of the PS structures by applying, among others, the concept of independent but correlated functional units. These units are managed independently from each other but receive information and are subject to constraints that guarantee that their activities converge toward the same goal.

The supply chain paradigm is a way to deal with this new situation. However, it seems difficult not only to define this paradigm as a whole but also to clearly specify a general process to implement it.

Numerous articles and books have been written on the subject, and conferences related to production management often include sessions on supply chains. Their goals have been to explain how and why globalization has resulted in new behavior of the people involved in this market (i.e., each one of us) and to identify these new behaviors. Sometimes, the literature proposes limited and qualitative models of supply chains that analyze a specific behavior of such systems.

The ideas presented in most of the books to date are of utmost interest. Some of them emphasize the importance of logistics and present supply chains as an extension of logistics management. Others consider that customers’ perception of performances must be paramount and that, as a consequence, a successful supply chain is an organization that mainly focuses on improving the visibility of customers’ demands and disseminating information among the participants to the supply chain. The importance of human working flexibility for a successful supply chain is outlined by some authors, whereas cost reduction is the most important objective for others.

Here, we summarize the approaches from some of the books currently available that present supply chains from similar, but differing, points of view. William C. Copacino (1997) presents an overview of the evolution of logistics and supply chain management. Throughout the seven chapters of this book, the reader is invited to follow the birth and the growth of this new paradigm in the business community. The story starts in the middle of the 1980s and ends in the middle of the 1990s.

M. Christopher (1998) claims that logistics and supply chain management are the two components of modern management, and that it is through these components that “the twin goals of cost reduction and service enhancement can be achieved.” Note that in this approach, logistics is not a component of supply chains but a resource that makes it possible to implement a supply chain. This book is full of examples and suggestions and is one of the most interesting on the subject.

The book edited by John Gattorna (1998) is organized around the so-called Strategic Alignment Model. Gattorna claims that the ingredient that is missing in the current supply chain approaches is human behavior, which “generates and amplifies the pulses that reverberate through the supply chain.” Thus, from his point of view, it is necessary to introduce the Strategic Alignment Model that “brings together the external market’s dynamics, the firm’s strategic response(s) and the firm’s internal capability to execute this desired alignment, through the appropriate subcultures and leadership style(s) built into the organization.” The papers brought together in this book examine not only how to tailor logistics and products to the needs of customers, meet customer satisfaction and demand, and develop winning collaborations with competitors, but also how to master complex channel dynamics, enhance supply chain decision making, win new customers, use cultural capability to improve supply chains, etc. This book insists on the importance of human behavior in the functioning and evolution of supply chains.

Charles H. Fine (1998) studies the influence of the choices made when designing supply chains on company performances. To do this, he restricts himself to the study of the fastest evolving companies (i.e., the companies with the greatest “clock speed”), the goal being to study as many companies as possible. The author observes these companies as a biologist observes fruit flies. He is interested in the migration of power and value up and down in the supply chain and the speed of these changes depending on the clock speed of the systems under consideration. He also implicitly considers the invariants existing in the structure of a supply chain since he draws general conclusions from the observation of fast clock speed companies. This hypothesis is questionable to us and, as we will show in this book, we prefer to help managers choose their own structure by suggesting different possibilities derived from the information about the system and checking the consistency of the choices.

Philip B. Schary and Tage Skjott-Larsen (1995) present an approach of supply chains that takes into account the specificities of European companies; however, they refer constantly to North American situations. For these authors, a supply chain includes all the processes that add value to material and bring the final product to the customer at the lowest price. This is a general formulation, which is completed by outlining that supply chain is more than logistics: It is a supraorganization that includes and coordinates all the activities that lead from raw material to final product. The authors point out that cooperative arrangements between the firms that comprise a supply chain are of utmost importance for its success, but no precise checklist of the kinds of arrangements that should be considered is provided.

The conclusion that can be drawn when reading the existing literature is somewhat disappointing. On the one hand, a huge number of exciting ideas and examples are proposed to the reader; on the other hand, there is a lack of information on adapting these ideas to specific situations.

We first consider strategic issues facing a supply chain. It is difficult to forecast the consequences of a strategic decision made at a given point of a system on other parts of the system, especially when the supply chain includes different, independent companies. For instance, the consequences of a strategic decision made at the production level (increasing production capacity by buying new resources and increasing working hours) on inventories, suppliers, customers, logistics, human resources, and marketing are difficult to forecast in terms of revenue and cost. Even the mechanism that disseminates such a decision among the supply chain is difficult to analyze for managers, and they are often surprised by the unexpected side effects that arise after making such a decision. When several companies are involved in the supply chain, a strategic decision made by one of the partners to improve its own performance may have a negative impact on other partners. It is well-known that the global optimum in a complex system is not the concatenation of local optima. Thus, it is necessary to include in any strategic supply chain model a “sharing process.” Such a mechanism, which should be included in the design of any strategic supply chain model, is a process that adequately shares revenues and losses of the whole system among all the activities. It guarantees the consistency of the whole system by ensuring that the improvement to the efficiency of one of the partners is not at the cost of others.

Managers are calling for a toolbox that can help them design the strategic model of the supply chain in which they are involved. They want to mainly understand how their strategic decisions, and the ones of their partners, disseminate in the whole supply chain. They want to evaluate their commercial position in the supply chain by examining the rules that manage the sharing process and analyzing their consequences. They also want to use their strategic model to adapt their supply chain to the ever-changing market. Providing the basis of such a toolbox is the most important contribution of this book.

A definition of a supply chain is proposed in Chapter 2. The characteristics of such a system are also described in this chapter. Chapter 3 is dedicated to the objectives to be reached at the strategic level in order to meet the required characteristics. Chapter 4 discusses how the tactical-level decisions should follow from the strategic-level decisions and how that decision-making process should be designed for an effective supply chain. Chapter 5 discusses the role of product development strategy in the design of a supply chain. The current state of the art in technologies that can enable the practice of supply chain management is presented in Chapter 6. Chapter 7 presents our conclusions.

We deliberately do not consider supply chains as biologists who would like to analyze the existing systems of this type and extract their common characteristics and evaluate their behavior with regard to these characteristics. We want to take a step forward and prop...

Table of contents

• Cover image
• Title page
• Table of Contents
• ACADEMIC PRESS SERIES IN ENGINEERING
• Copyright
• Dedication
• FOREWORD
• Chapter 1: INTRODUCTION
• Chapter 2: DEFINITION OF A SUPPLY CHAIN
• Chapter 3: SUPPLY CHAIN AT THE STRATEGIC LEVEL
• Chapter 4: SUPPLY CHAIN AT THE TACTICAL LEVEL
• Chapter 5: PRODUCT DEVELOPMENT IN A SUPPLY CHAIN
• Chapter 6: ENABLING TECHNOLOGIES
• Chapter 7: CONCLUSION
• APPENDIX
• INDEX