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For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit www.com/highered to search by ISBN#, author, title, or keyword for materials in your areas of interest. Principles of Supply Chain Management A BALANCED APPROACH 3e JOEL D. WISNER University of Nevada, Las Vegas • KEAH-CHOON TAN University of Nevada, Las Vegas • G. KEONG LEONG University of Nevada, Las Vegas Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States Principles of Supply Chain Management, © 2012, 2009 South-Western, a part of Cengage Learning Third edition ALL RIGHTS RESERVED.
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For your course and learning solutions, visit www.com Purchase any of our products at your local college store or at our preferred online store www.com Printed in the United States of America 1 2 3 4 5 6 7 15 14 13 12 11 To CJ, Hayley and Blake. WISNER To Shaw Yun, Wen Hui and Wen Jay. KEAH-CHOON TAN To Lin and Michelle. KEONG LEONG Brief Contents Preface xv Acknowledgements xvii About the Authors xviii Part 1 Supply Chain Management: An Overview 1 Chapter 1 Introduction to Supply Chain Management 3 Part 2 Supply Issues in Supply Chain Management 35 Chapter 2 Purchasing Management 37 Chapter 3 Creating and Managing Supplier Relationships 73 Chapter 4 Ethical and Sustainable Sourcing 99 Part 3 Operations Issues in Supply Chain Management 131 Chapter 5 Demand Forecasting 133 Chapter 6 Resource Planning Systems 165 Chapter 7 Inventory Management 207 Chapter 8 Process Management—Lean and Six Sigma in the Supply Chain 249 Part 4 Distribution Issues in Supply Chain Management 297 Chapter 9 Domestic U.
and Global Logistics 299 Chapter 10 Customer Relationship Management 343 Chapter 11 Global Location Decisions 375 Chapter 12 Service Response Logistics 401 Part 5 Integration Issues in Supply Chain Management 445 Chapter 13 Supply Chain Process Integration 447 Chapter 14 Performance Measurement Along the Supply Chain 481 On the Companion Website Cases in Supply Chain Management Student and Instructor Materials iv Contents Preface xv Acknowledgements xvii About the Authors xviii Part 1 Supply Chain Management: An Overview 1 Chapter 1 Introduction to Supply Chain Management 3 Introduction 5 Supply Chain Management Defined 6 The Importance of Supply Chain Management 9 The Origins of Supply Chain Management in the U. 12 The Foundations of Supply Chain Management 15 Supply Elements 15 Operations Elements 17 Logistics Elements 19 Integration Elements 21 Current Trends in Supply Chain Management 22 Expanding (and Contracting) the Supply Chain 23 Increasing Supply Chain Responsiveness 24 The Greening of Supply Chains 25 Reducing Supply Chain Costs 26 Summary 28 Key Terms 28 Discussion Questions 28 Internet Questions 29 Appendix 1.1: The Beer Game 30 Beer Game Questions and Exercises 34 Part 2 Supply Issues in Supply Chain Management 35 Chapter 2 Purchasing Management 37 Introduction 39 A Brief History of Purchasing Terms 39 The Role of Supply Management in an Organization 40 The Financial Significance of Supply Management 42 The Purchasing Process 43 The Manual Purchasing System 43 Electronic Procurement Systems (e-Procurement) 47 Small Value Purchase Orders 49 Sourcing Decisions: The Make-or-Buy Decision 53 Reasons for Buying or Outsourcing 54 v vi Contents Reasons for Making 54 Make-or-Buy Break-Even Analysis 55 Roles of Supply Base 57 Supplier Selection 57 How Many Suppliers to Use 60 Reasons Favoring a Single Supplier 60 Reasons Favoring Multiple Suppliers 61 Purchasing Organization 61 Advantages of Centralization 62 Advantages of Decentralization 62 International Purchasing/Global Sourcing 63 Reasons for Global Sourcing 64 Potential Challenges for Global Sourcing 64 Countertrade 65 Procurement for Government/Nonprofit Agencies 65 Characteristics of Public Procurement 66 Summary 68 Key Terms 68 Discussion Questions 69 Internet Questions 70 Spreadsheet Problems 70 Chapter 3 Creating and Managing Supplier Relationships 73 Introduction 75 Developing Supplier Relationships 75 Building Trust 76 Shared Vision and Objectives 76 Personal Relationships 76 Mutual Benefits and Needs 76 Commitment and Top Management Support 77 Change Management 77 Information Sharing and Lines of Communication 77 Capabilities 78 Performance Metrics 78 Continuous Improvement 81 Key Points 81 Supplier Evaluation and Certification 82 The Weighted Criteria Evaluation System 84 ISO 9000 87 ISO 14000 88 Supplier Development 89 Supplier Recognition Programs 91 Supplier Relationship Management 92 Summary 97 Key Terms 97 Discussion Questions 97 Contents vii Chapter 4 Ethical and Sustainable Sourcing 99 Introduction 100 Ethical and Sustainable Sourcing Defined 102 Ethical Sourcing 102 Sustainable Sourcing 105 Developing Ethical and Sustainable Sourcing Strategies 109 Supply Base Rationalization Programs 111 Ethical and Sustainable Supplier Certification Programs 112 Outsourcing Products and Services 113 Insourcing 114 Co-sourcing 114 Early Supplier Involvement 115 Vendor Managed Inventories 116 Supplier Co-location 117 Strategic Alliance Development 117 Negotiating Win-Win Strategic Alliance Agreements 119 Use of E-Procurement Systems 121 Rewarding Supplier Performance 123 Benchmarking Successful Sourcing Practices 124 Using Third-Party Supply Chain Management Services 125 Assessing and Improving the Firm’s Own Sourcing Function 126 Summary 128 Key Terms 128 Discussion Questions 128 Internet Questions 130 Part 3 Operations Issues in Supply Chain Management 131 Chapter 5 Demand Forecasting 133 Introduction 135 Demand Forecasting 136 Forecasting Techniques 137 Qualitative Methods 137 Quantitative Methods 138 Forecast Accuracy 147 Useful Forecasting Websites 150 Collaborative Planning, Forecasting and Replenishment 150 Software Solutions 156 Forecasting Software 156 CPFR Software 161 Summary 162 Key Terms 162 Discussion Questions 162 Spreadsheet Problems 163 viii Contents Chapter 6 Resource Planning Systems 165 Introduction 166 Operations Planning 167 The Aggregate Production Plan 168 The Chase Production Strategy 169 The Level Production Strategy 171 Master Production Scheduling 173 Master Production Schedule Time Fence 174 Available-to-Promise Quantities 175 The Bill of Materials 178 Material Requirements Planning 181 Terms used in Material Requirements Planning 182 Capacity Planning 185 Capacity Strategy 186 Distribution Requirements Planning 187 The Legacy Material Requirements Planning Systems 187 Manufacturing Resource Planning 189 The Development of Enterprise Resource Planning Systems 190 The Rapid Growth of Enterprise Resource Planning Systems 192 Implementing Enterprise Resource Planning Systems 193 Advantages and Disadvantages of Enterprise Resource Planning Systems 195 Enterprise Resource Planning System Advantages 195 Enterprise Resource Planning System Disadvantages 197 Enterprise Resource Planning Software Applications 197 Enterprise Resource Planning Software Providers 199 Summary 201 Key Terms 201 Discussion Questions 202 Internet Questions 203 Spreadsheet Problems 203 Chapter 7 Inventory Management 207 Introduction 208 Dependent Demand and Independent Demand 210 Concepts and Tools of Inventory Management 210 The Functions and Basic Types of Inventory 211 Inventory Costs 211 Inventory Investment 212 The ABC Inventory Control System 213 Radio Frequency Identification 217 Inventory Models 222 The Economic Order Quantity Model 222 The Quantity Discount Model 227 Contents ix The Economic Manufacturing Quantity Model 228 The Statistical Reorder Point 234 The Continuous Review and the Periodic Review Inventory Systems 239 Summary 242 Key Terms 242 Discussion Questions 242 Internet Questions 243 Problems 243 Spreadsheet Problems 245 Chapter 8 Process Management—Lean and Six Sigma in the Supply Chain 249 Introduction 250 Lean Production and the Toyota Production System 251 Lean Thinking and Supply Chain Management 255 The Elements of Lean 257 Waste Reduction 257 Lean Supply Chain Relationships 260 Lean Layouts 261 Inventory and Setup Time Reduction 262 Small Batch Scheduling 263 Continuous Improvement 266 Workforce Commitment 266 Lean Systems and the Environment 267 The Origins of Six Sigma Quality 268 Comparing Six Sigma and Lean 270 Lean Six 271 Six Sigma and Supply Chain Management 271 The Elements of Six Sigma 273 Deming’s Contributions 274 Crosby’s Contributions 274 Juran’s Contributions 274 The Malcolm Baldrige National Quality Award 276 The ISO 9000 and 14000 Families of Management Standards 279 The DMAIC Improvement Cycle 280 Six Sigma Training Levels 281 The Statistical Tools of Six Sigma 281 Flow Diagrams 281 Check Sheets 282 Pareto Charts 282 Cause-and-Effect Diagrams 284 Statistical Process Control 285 Summary 293 Key Terms 293 x Contents Discussion Questions 293 Internet Questions 295 Problems 295 Part 4 Distribution Issues in Supply Chain Management 297 Chapter 9 Domestic U. and Global Logistics 299 Introduction 301 The Fundamentals of Transportation 302 The Objective of Transportation 302 Legal Forms of Transportation 303 The Modes of Transportation 304 Intermodal Transportation 309 Transportation Pricing 310 Transportation Security 312 Transportation Regulation and Deregulation in the U.