Brief Contents

Preface xvi
Acknowledgments xix
About the Authors xx

Part 1 Supply Chain Management: An Overview 1

Chapter  1 Introduction to Supply Chain Management 3

Part 2 Supply Issues in Supply Chain Management 39

Chapter  2 Purchasing Management 41
Chapter  3 Creating and Managing Supplier Relationships 95
Chapter  4 Ethical and Sustainable Sourcing 133

Part 3 Operations Issues in Supply Chain Management 171

Chapter  5 Demand Forecasting 173
Chapter  6 Resource Planning Systems 213
Chapter  7 Inventory Management 271
Chapter  8 
Process Management—Lean and Six Sigma
in the Supply Chain 321

Part 4 Distribution Issues in Supply Chain Management 379

Chapter  9 Domestic U.S. and Global Logistics 381
Chapter 10 Customer Relationship Management 437
Chapter 11 Global Location Decisions 467
Chapter 12 Service Response Logistics 507

Part 5 Integration Issues in Supply Chain Management 557

Chapter 13 Supply Chain Process Integration 559
Chapter 14 Performance Measurement Along Supply Chains 601
Appendix 1 Areas Under the Normal Curve 635
Appendix 2 Answers to Selected End-of-Chapter Problems 636

On the Companion Website

Student and Instructor Materials

iv

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 Contents
Preface xvi
Acknowledgments xix
About the Authors xx

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 10
The Origins of Supply Chain Management in the United States 13
The Foundations of Supply Chain Management 16
Supply Elements 16
Operations Elements 18
Logistics Elements 19
Integration Elements 22
Current Trends in Supply Chain Management 24
Use of Supply Chain Analytics 24
Improving Supply Chain Sustainability 25
Increasing Supply Chain Visibility 26
Summary 27
Key Terms 27
Discussion Questions 27
Essay/Project Questions 29
Cases 29
Appendix 1.1
The Beer Game 31
Additional Resources 35
Endnotes 35

Part 2 Supply Issues in Supply Chain Management 39

Chapter 2 Purchasing Management 41
Introduction 44
A Brief History of Purchasing Terms 44
The Role of Supply Management in an Organization 45

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vi Contents

The Financial Significance of Supply Management 47

The Purchasing Process 50
The Manual Purchasing System 50
Electronic Procurement Systems (e-Procurement) 53
Small-Value Purchase Orders 56
Sourcing Decisions: The Make-or-Buy Decision 59
Reasons for Buying or Outsourcing 61
Reasons for Making 62
Make-or-Buy Break-Even Analysis 63
Roles of the Supply Base 64
Supplier Selection 65
Supplier Diversity 66
The Total Cost of Ownership Concept 67
How Many Suppliers to Use 69
Reasons Favoring a Single Supplier 69
Reasons Favoring Multiple Suppliers 70
Purchasing Organization 71
Advantages of Centralization 71
Advantages of Decentralization 72
Global Sourcing 72
Reasons for Global Sourcing 73
Potential Challenges for Global Sourcing 74
International Trade Law and Commercial Terms 75
Procurement in Government and Nonprofit Agencies 79
Characteristics of Public Procurement 79
Summary 81
Key Terms 81
Discussion Questions 82
Essay/Project Questions 83
Spreadsheet Problems 83
Cases 87
Additional Resources 91
Endnotes 92

Chapter 3 Creating and Managing Supplier Relationships 95

Introduction 97
Developing Supplier Relationships 100
Building Trust 101
Shared Vision and Objectives 101
Personal Relationships 102
Mutual Benefits and Needs 102
Commitment and Top Management Support 102

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 Contents vii

Change Management 102

Information Sharing and Transparent Communications 103
Relationship Capabilities 103
Performance Metrics 104
Continuous Improvement 106
Monitoring Supplier Relationships 107
Key Takeaways 108
Managing Supplier Relationships During the COVID-19
Pandemic 108
Supplier Evaluation and Certification 110
The Weighted Criteria Evaluation System 111
External Certifications 112
ISO 9000 112
ISO 14000 113
Supplier Development 114
Supplier Recognition Programs 115
Supplier Relationship Management 116
Summary 119
Key Terms 119
Discussion Questions 119
Problems 120
Essay/Project Questions 121
Cases 122
Endnotes 128

Chapter 4 Ethical and Sustainable Sourcing 133

Introduction 135
Ethical and Sustainable Sourcing Defined 136
Ethical Sourcing 136
Sustainable Sourcing 141
Developing Ethical and Sustainable Sourcing Strategies 143
Ethical and Sustainable Sourcing Initiatives 147
Ethical and Sustainable Supplier Certification Programs 147
Supply Base Rationalization Programs 148
Outsourcing Products and Services 149
Early Supplier Involvement 149
Vendor Managed Inventories 150
Strategic Alliance Development 151
Negotiating Win–Win Strategic Alliance Agreements 153
Rewarding Supplier Performance 154
Benchmarking Successful Sourcing Practices 156
Assessing and Improving the Firm’s Sourcing Function 158

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viii Contents

Summary 159
Key Terms 159
Discussion Questions 159
Essay/Project Questions 161
Cases 161
Additional Resources 166
Endnotes 166

Part 3 Operations Issues in Supply Chain Management 171

Chapter 5 Demand Forecasting 173
Introduction 175
The Importance of Demand Forecasting 176
Demand Forecasting Techniques 178
Qualitative Methods 178
Quantitative Methods 179
Cause-and-Effect Models 186
Forecast Performance 188
Demand Sensing 190
Demand Planning During the COVID-19 Pandemic and
Beyond 192
Useful Forecasting Websites 193
Forecasting Software 194
Artificial Intelligence and Machine Learning in Demand
Forecasting 197
Cloud-Based Forecasting 198
Summary 200
Key Terms 200
Discussion Questions 200
Problems 201
Essay/Project Questions 204
Cases 204
Endnotes 210

Chapter 6 Resource Planning Systems 213

Introduction 216
Operations Planning 216
The Aggregate Production Plan 218
The Chase Production Strategy 219
The Level Production Strategy 221
The Mixed Production Strategy 222

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 Contents ix

The Master Production Schedule 222

Master Production Schedule Time Fence 223
Available-to-Promise Quantities 224
The Bill of Materials 227
The Material Requirements Plan 230
Terms Used in Material Requirements Planning 231
An Example of MRP Computation without Net Requirements and
Planned Order Receipts 232
An Example of MRP Computation with Net Requirements and
Planned Order Receipts 236
Capacity Planning 238
Capacity Strategies 239
The Distribution Requirements Plan 239
The Legacy Material Requirements Planning Systems 242
Manufacturing Resource Planning 242
The Development of Enterprise Resource Planning Systems 243
The Rapid Growth of Enterprise Resource Planning Systems 245
Implementing Enterprise Resource Planning Systems 246
Advantages and Disadvantages of Enterprise Resource Planning
Systems 250
Enterprise Resource Planning System Advantages 250
Enterprise Resource Planning System Disadvantages 250
Enterprise Resource Planning Software Applications 251
Summary 253
Key Terms 253
Discussion Questions 254
Essay/Project Questions 255
Spreadsheet Problems 256
Cases 264
Additional Resources 269
Endnotes 269

Chapter 7 Inventory Management 271

Introduction 273
Dependent Demand and Independent Demand 275
Concepts and Tools of Inventory Management 275
The Functions and Basic Types of Inventories 276
Inventory Costs 276
Inventory Investment 277
The ABC Inventory Control System 280
Radio Frequency Identification 284
Inventory Models 289
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x Contents

The Economic Order Quantity Model 289

The Quantity Discount Model 294
The Economic Manufacturing Quantity Model 296
The Statistical Reorder Point 301
The Continuous Review and the Periodic Review Inventory
Systems 304
Summary 307
Key Terms 307
Discussion Questions 307
Essay/Project Questions 308
Computation/Spreadsheet Problems 309
Cases 314
Endnotes 319

Chapter 8 
Process Management—Lean and Six Sigma in the Supply
Chain 321
Introduction 323
Lean Production and the Toyota Production System 324
Lean Thinking and Supply Chain Management 327
The Elements of Lean 327
Waste Elimination 328
Lean Supply Chain Relationships 330
Lean Layouts 331
Inventory and Setup Time Reduction 333
Small Batch Production Scheduling 335
Continuous Improvement 338
Workforce Commitment 338
Lean Systems and the Environment 339
The Origins of Six Sigma Quality 340
Comparing Six Sigma and Lean 342
Lean Six Sigma 343
Six Sigma and Supply Chain Management 344
The Elements of Six Sigma 344
Deming’s Contributions 345
Crosby’s Contributions 346
Juran’s Contributions 346
The Malcolm Baldrige National Quality Award 347
The ISO 9000 and 14000 Families of Management Standards 350
The DMAIC Improvement Cycle 351
Six Sigma Training Levels 352
The Statistical Tools of Six Sigma 353
Flow Diagrams 353

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 Contents xi

Check Sheets 353

Pareto Charts 354
Cause-and-Effect Diagrams 354
Statistical Process Control 356
Summary 364
Key Terms 364
Discussion Questions 364
Essay/Project Questions 366
Problems 367
Cases 369
Additional Resources 375
Endnotes 375

Part 4 Distribution Issues in Supply Chain Management 379

Chapter 9 Domestic U.S. and Global Logistics 381
Introduction 384
Transportation Fundamentals 385
The Objective of Transportation 385
Legal Forms of Transportation 386
The Five Modes of Transportation 387
Intermodal Transportation 392
Transportation Pricing 393
Transportation Security 395
Transportation Regulation and Deregulation
in the United States 396
Warehousing and Distribution 401
The Importance and Types of Warehouses 401
Risk Pooling and Warehouse Location 404
Lean Warehousing 407
The Impacts of Logistics on Supply Chain Management 408
Third-Party Logistics (3PL) Services 408
Other Transportation Intermediaries 412
Environmental Sustainability in Logistics 413
Logistics Management Software Applications 415
Transportation Management Systems 415
Warehouse Management Systems 417
Global Trade Management Systems 417
Global Logistics 418
Global Freight Security 418
Global Logistics Intermediaries 418
Foreign-Trade Zones 419
The United States–Mexico–Canada Agreement 420
Reverse Logistics 421
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xii Contents

The Impact of Reverse Logistics on the Supply Chain 422

Reverse Logistics and the Environment 422
Summary 422
Key Terms 423
Discussion Questions and Exercises 424
Essay/Project Questions 425
Problems 425
Cases 426
Additional Resources 429
Endnotes 429

Chapter 10 Customer Relationship Management 437

Introduction 439
Customer Relationship Management Defined 440
Key Tools and Components of Crm 443
Segmenting Customers 443
Predicting Customer Behaviors 445
Customer Value Determination 446
Personalizing Customer Communications 447
Automated Sales Force Tools 447
Managing Customer Service Capabilities 449
Designing and Implementing A Successful Crm Program 452
Creating the CRM Plan 453
Involving CRM Users from the Outset 454
Selecting the Right Application and Provider 454
Integrating Existing CRM Applications 455
Establishing Performance Measures 456
Training for CRM Users 457
Trends in Crm 457
The Customer Experience 457
Artificial Intelligence 458
Mobile CRM 458
Use of Social Media 458
Summary 459
Key Terms 459
Discussion Questions and Exercises 459
Essay and Project Questions 461
Problems 461
Cases 461
Additional Resources 465
Endnotes 465

Chapter 11 Global Location Decisions 467

Introduction 469
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 Contents xiii

Global Location Strategies 470

Critical Location Factors 471
Regional Trade Agreements and the World Trade Organization 472
Competitiveness of Nations 475
The World Economic Forum’s 12 Pillars of Competitiveness 477
Government Taxes and Incentives 478
Currency Stability 479
Environmental Issues 479
Access and Proximity to Markets 481
Labor Issues 481
Access to Suppliers 482
Logistics Issues 482
Utility Availability and Cost 483
Quality-of-Life Issues 483
Right-to-Work Laws 484
Land Availability and Cost 484
Facility Location Techniques 485
The Weighted-Factor Rating Model 485
The Break-Even Model 486
Business Clusters 487
Sustainable Development and Facility Location 489
Additive Manufacturing and Its Impact on Facility Location 491
COVID-19 and Its Impact on Global Location Strategies 493
Summary 495
Key Terms 495
Discussion Questions 495
Essay/Project Questions 496
Problems 497
Cases 498
Endnotes 502

Chapter 12 Service Response Logistics 507

Introduction 509
An Overview of Service Operations 510
Service Productivity 511
Global Service Issues 513
Service Strategy Development 514
The Service Delivery System 515
Service Location and Layout Strategies 516
Supply Chain Management in Services 520
Service Quality and Customers 522
The Primary Concerns of Service Response Logistics 522
Managing Service Capacity 523
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xiv Contents

Managing Queue Times 527

Managing Distribution Channels 537
Managing Service Quality 542
Summary 545
Key Terms 545
Discussion Questions 545
Essay/Project Questions 547
Problems 548
Cases 550
Additional Resources 553
Endnotes 554

Part 5 Integration Issues in Supply Chain Management 557

Chapter 13 Supply Chain Process Integration 559
Introduction 561
The Supply Chain Management Integration Model 562
Identify Critical Supply Chain Trading Partners 562
Review and Establish Supply Chain Strategies 564
Align Supply Chain Strategies with Key Supply
Chain Process Objectives 564
Develop Internal Performance Measures
for Key Process Effectiveness 569
Assess and Improve Internal Integration
of Key Supply Chain Processes 570
Develop Supply Chain Performance Measures
for the Key Processes 571
Assess and Improve External Process Integration
and Supply Chain Performance 571
Extend Process Integration to Second-Tier
Supply Chain Partners 572
Reevaluate the Integration Model Annually 574
Obstacles to Process Integration Along the Supply Chain 574
The Silo Mentality 575
Lack of Supply Chain Visibility 576
Lack of Trust 577
Lack of Knowledge 578
Activities Causing the Bullwhip Effect 579
Managing Supply Chain Risk and Security 581
Managing Supply Chain Risk 582
Managing Supply Chain Security 586
Summary 589
Key Terms 589
Discussion Questions 590
Essay/Project Questions 591
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 Contents xv

Cases 592
Endnotes 597

Chapter 14 Performance Measurement Along Supply Chains 601

Introduction 603
Viewing Supply Chains as a Competitive Force 605
Understanding End Customers 605
Understanding Supply Chain Partner Requirements 606
Adjusting Supply Chain Member Capabilities 607
Traditional Performance Measures 608
Use of Organization Costs, Revenue, and Profitability
Measures 608
Use of Performance Standards and Variances 609
Productivity and Utilization Measures 610
World-Class Performance Measurement Systems 612
Developing World-Class Performance Measures 612
Supply Chain Performance Measurement Systems 614
Supply Chain Environmental Performance 614
Triple Bottom Line Performance 616
The Balanced Scorecard 618
Web-Based Scorecards 620
The Scor Model 621
Summary 623
Key Terms 624
Discussion Questions 624
Problems 626
Essay/Project Questions 626
Cases 627
Additional Resources 632
Endnotes 632
Appendix 1
Areas Under the Normal Curve 635
Appendix 2
Answers to Selected End-of-Chapter Problems 636
Glossary 644
Author Index 654
Subject Index 655

On the Companion Website

Student and Instructor Materials
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