David Jacoby - Guide to Supply Chain Management

GUIDE TO SUPPLY CHAIN MANAGEMENT

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GUIDE TO SUPPLY CHAIN MANAGEMENT

David Jacoby

David Jacoby

THE ECONOMIST IN ASSOCIATION WITH
PROFILE BOOKS LTD and PublicAffairs

Copyright The Economist Newspaper Ltd, 2009

First published in 2009 by Profile Books Ltd. in Great Britain.

Published in 2014 in the United States by PublicAffairs, a Member of the Perseus Books Group

All rights reserved.

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The greatest care has been taken in compiling this book. However, no responsibility can be accepted by the publishers or compilers for the accuracy of the information presented.Where opinion is expressed it is that of the author and does not necessarily coincide with the editorial views of The Economist Newspaper.

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Text copyright David Jacoby, 2009

Library of Congress Control Number: 2014932066

ISBN 978-1-61039-514-4 (EB)

First Edition

List of figures

Appendix

List of tables

Acknowledgements

I would like to thank the companies which have given permission for their experiences in supply chain management to be used in this book, including: American Honda, APL, APM Terminals, Atherton Trust, BASF, Beretta, BNSF, Boston Warehouse Trading Company, Brown Shoe, Cabur, Carolina Biological, Charles River Laboratories, CLP Power, Cochlear, CSX, CVS, Dana Farber, DB Schenker, Dreams, DSTS/Grupo CTT, FedEx, FMC, Fulham, Futuris Automotive, General Motors, Hasbro, IBM, Incyte Corporation, Interswitch, Iron Mountain, JDA Software, John Deere, Life Fitness, M&C Specialties Co, MacGregor, MTR Foods, Netflix, New York City Housing Authority (NYCHA), Nypro, Plaxo, Popular Telephony, Port Said, Qatar Fuel, Road Runner Sports, Royal Ahold, Royal Philips, Saudi Aramco, Savi Networks, Siemens, Stanley Works, Sydney Airport, Thoresen Thai Agencies Public Company, Tiffany & Co, Volvo China, Wikipedia and Wilhelmsen Ships Service. In addition, Alcoa, Cabot, Cabur, Galeries Lafayette, Georgia Pacific, Jabil Circuit, McDonalds, Nokia, PepsiCo and Qualcomm are some of the companies that contributed to white papers and briefings I have written for the Economist Intelligence Unit, on which this book draws.

I would also like to express my gratitude to a number of authors for allowing the reproduction of their charts, citations and examples, including: Lewis Dartnell, University College London; James Greene, Purdue University (who sadly passed away while the book was being written); Robert Handfield, North Carolina State University; Douglas Lambert, Ohio State University; Michael Maccoby, The Maccoby Group; John Mentzer, University of Tennessee; John Sterman and Stephen Miles, Massachusetts Institute of Technology (MIT); Charles Poirier, CSC; and Robert Rudzki (Greybeard). Thanks also to Janelle Heineke, Department of Operations Management, Boston University, and Jerry Wind, Wharton School, for their advice, clarifications and permissions.

Thanks are also owed to those at the following institutions for their contributions to the body of knowledge: APICS (the Association for Operations Management), the Institute for Supply Management, the Council of Supply Chain Management Professionals, the Supply Chain Council and the American Society for Transportation and Logistics. Several organisations have helped stimulate debate about important supply chain ideas through their conferences, and for this recognition is due to Transport Events, IQPC Worldwide and the International Air Transport Association (IATA).

Special thanks go to consultants at Boston Strategies International who supported my effort to write this book despite their already full workload. Fei Rong gathered and analysed numerous benchmarks; Matt Fixler analysed survey data; Erik Halbert and Luis Gondelles researched and organised case-study material; Betul Altintas, Rob Casper, Bruna Figueiredo, Katy Weener and Patrick Yang provided much appreciated encouragement.

Finally, Jessica, Weston, Brent, Camille and my extended family deserve enormous credit for their tireless patience, understanding and support of this and other projects that compete for my time.

If you have suggestions for improvements to future editions of this guide, please send them to me at .

Introduction

T he term supply chain management (SCM) entered the public domain when Keith Oliver, a consultant at Booz Allen Hamilton, used it in an interview with the Financial Times in 1982. The term was slow to take hold and the lexicon was slow to change. It gained currency in the mid-1990s, when a flurry of articles and books came out on the subject. In the late 1990s it rose to prominence as a management buzzword, and operations managers began to use it in their titles with increasing regularity.

The Council of Logistics Management hotly debated changing its name to the Council of Supply Chain Management in 2002, but rejected the idea at the time because many experts disagreed on the definition of SCM. Joel Sutherland, the board chair of the organisation at the time, said: Surveys turned up hundreds of definitions. He pointed out that the term was too broad and unclear, and could not be managed or measured. He said: Logistics is part of the supply chain process as the Earth is part of the universe. While we know the weight, the speed of rotation and the composition of the Earth, Sutherland pointed out that the universe is infinite in size and is expanding, and that 95% of it is made of a type of matter or energy that we cannot see or understand. After spending two more years developing an acceptable definition of SCM and deciding on a new name, the Council of Logistics Management ended up renaming itself in 2005 the Council of Supply Chain Management Professionals (CSCMP), but its official definition of SCM left many ambiguities unresolved by describing the set of disciplines that are evoked by the term rather than defining exactly what SCM is.