Supply Chains: A Manager's Guide

“An excellent summary of the state of supply chain management going into the twenty-first century. Explains the essential concepts clearly and offers practical, down-to-earth advice for making supply chains more efficient and adaptive. Truly a survival guide for executives as they struggle to cope with the increasing competition between supply chains.”

     —Christian Knoll, Vice President of Global Supply Chain Management, SAP AG

“Through real-world case studies and graphic illustrations, David Taylor clearly demonstrates the bottom-line benefits of managing the supply chain effectively. Although the book is written for managers, I recommend it for everyone from the executive suite to the shipping floor because they all have to work together to master the supply chain. But beware—you can expect many passionate employees demanding improvements in your company’s supply chain after reading this book!”

     —David Myers, President, WinfoSoft Inc., Former Board Member of Supply Chain Council

“A comprehensive, thoroughly researched, and well-designed book that gives managers the information they need in a highly readable form. I am already starting to use the techniques in this book to improve our international distribution system.”

     —Jim Muller, Vice President of Produce Sales, SoFresh Produce

“Supply chain management is a deceptively deep subject. Simple business practices combine to form complex systems that seem to defy rational analysis: Companies that form trading partnerships continue to compete despite their best efforts to cooperate; small variations in consumer buying create devastating swings in upstream demand, and so on. In his trademark fashion, Taylor clearly reveals the hidden logic at work in your supply chain and gives you the practical tools you need to make better management decisions. A must-read for every manager who affects a supply chain, and in today's marketplace there are few managers who are exempt from this requirement.”

     —Adrian J. Bowles, Ph.D., President, CoSource.net

“David Taylor has done it again. With his new book, David makes supply chain management easy to grasp for the working manager, just as he did with his earlier guides to business technology. If you work for a company that is part of a supply chain, you need this book.”

     —Dirk Riehle, Ph.D.

“David Taylor has done a masterful job of defining the core issues in supply chain management without getting trapped in the quicksand of jargon. This concise book is well written, highly informative, and easy to read.”

     —Marcia Robinson, President, E-Business Strategies, author of Services Blueprint: Roadmap

“Taylor has done a tremendous job of giving readers an intuitive grasp of a complicated subject. If you’re new to supply chains, this book will give you an invaluable map of the territory. If you're already among the initiated, it will crystallize your insights and help you make better decisions. In either case, you can only come out ahead by reading this book.”

     —Kevin Dick, Founder of Kevin Dick Associates, author of XML: A Manager’s Guide

“My motto for compressing data is ‘squeeze it til it gags.’ In the current business climate, that’s what you have to do to costs, and Taylor shows you many ways to squeeze costs out of your supply chain. He also writes with the same economy: This book contains exactly what you need to manage your supply chain effectively. Nothing is missing, and nothing is extra.”

     —Charles Ashbacher, President, Charles Ashbacher Technologies

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Today's fiercest business battles are taking place between competitors' supply chains, with victory dependent on finding a way to deliver products to customers more quickly and efficiently than the competition. For proof, just look to Dell and Amazon.com, both of which revolutionized their industries by changing how companies produce, distribute, and sell physical goods. But they're hardly alone. By revamping their supply chains, Siemens CT improved lead time from six months to two weeks, Gillette slashed $400 million of inventory, and Chrysler saved $1.7 billion a year.

It's a high-stakes game, and you don't have a lot of choice about playing: If your company touches a physical product, it's part of a supply chain--and your success ultimately hangs on the weakest link in that chain. In Supply Chains: A Manager's Guide, best-selling author David Taylor explains how to assemble a killer supply chain using the knowledge, technology, and tools employed in supply-chain success stories. Using his signature fast-track summaries and informative graphics, Taylor offers a clear roadmap to understanding and solving the complex problems of supply-chain management.

Modern manufacturing has driven down the time and cost of the production process, leaving supply chains as the final frontier for cost reduction and competitive advantage. Supply Chains: A Manager's Guide will quickly give managers the foundation they need to contribute effectively to their company's supply-chain success.

Author's Site

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Praise For Supply Chains: A Manager's Guide

"An excellent summary of the state of supply chain management going into the twenty-first century. Explains the essential concepts clearly and offers practical, down-to-earth advice for making supply chains more efficient and adaptive. Truly a survival guide for executives as they struggle to cope with the increasing competition between supply chains."

--Christian Knoll, Vice President of Global Supply Chain Management, SAP AG

"Through real-world case studies and graphic illustrations, David Taylor clearly demonstrates the bottom-line benefits of managing the supply chain effectively. Although the book is written for managers, I recommend it for everyone from the executive suite to the shipping floor because they all have to work together to master the supply chain. But beware--you can expect many passionate employees demanding improvements in your company's supply chain after reading this book!"

--David Myers, President, WinfoSoft Inc., Former Board Member of Supply Chain Council

"A comprehensive, thoroughly researched, and well-designed book that gives managers the information they need in a highly readable form. I am already starting to use the techniques in this book to improve our international distribution system."

--Jim Muller, Vice President of Produce Sales, SoFresh Produce

"Supply chain management is a deceptively deep subject. Simple business practices combine to form complex systems that seem to defy rational analysis: Companies that form trading partnerships continue to compete despite their best efforts to cooperate; small variations in consumer buying create devastating swings in upstream demand, and so on. In his trademark fashion, Taylor clearly reveals the hidden logic at work in your supply chain and gives you the practical tools you need to make better management decisions. A must-read for every manager who affects a supply chain, and in today's marketplace there are few managers who are exempt from this requirement."

--Adrian J. Bowles, Ph.D., President, CoSource.net

"David Taylor has done it again. With his new book, David makes supply chain management easy to grasp for the working manager, just as he did with his earlier guides to business technology. If you work for a company that is part of a supply chain, you need this book."

--Dirk Riehle, Ph.D.

"David Taylor has done a masterful job of defining the core issues in supply chain management without getting trapped in the quicksand of jargon. This concise book is well written, highly informative, and easy to read."

--Marcia Robinson, President, E-Business Strategies, author of ServicesBlueprint: Roadmap

"Taylor has done a tremendous job of giving readers an intuitive grasp of a complicated subject. If you're new to supply chains, this book will give you an invaluable map of the territory. If you're already among the initiated, it will crystallize your insights and help you make better decisions. In either case, you can only come out ahead by reading this book."

--Kevin Dick, Founder of Kevin Dick Associates, author of XML: AManager's Guide

"My motto for compressing data is 'squeeze it til it gags.' In the current business climate, that's what you have to do to costs, and Taylor shows you many ways to squeeze costs out of your supply chain. He also writes with the same economy: This book contains exactly what you need to manage your supply chain effectively. Nothing is missing, and nothing is extra."

--Charles Ashbacher, President, Charles Ashbacher Technologies

Sample Chapter(s)

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Index

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Preface

Supply chain failures can be devastating

In May 2001, Nike announced that it had lost sales in the preceding quarter because of problems in its supply chain. The amount of income lost was impressive: a cool $100 million. Three months later, Cisco Systems announced that it was writing down unusable inventory due to some confusion in its supply chain. The amount of its write-down was even more impressive: $2.2 billion. Isolated incidents? Only in terms of magnitude; supply chain failures are becoming increasingly common, and they are costing companies dearly. In addition to their impact on profits, problems in the supply chain have a devastating affect on stock prices, causing an average loss of $350 million in shareholder value with each reported incident. That's a steep price to pay for a single mistake.

Competition is shifting to supply chains

The flip side of this coin is that, as Dell and Wal-Mart demonstrate every day, getting the supply chain right can yield a tremendous competitive advantage, allowing new players to overthrow entrenched industry leaders. Why is the supply chain so important to success? Because it's the new frontier of business. Modern manufacturing has driven most of the excess time and cost out of the production process, so there is little advantage left to be gained on the shop floor. But supply chains are still notoriously wasteful and error-prone, and they offer huge opportunities for gaining competitive advantage. The result is a fundamental shift in the nature of competition. The fight for market dominance is no longer a battle between rival companies. The new competition is supply chain vs. supply chain.

Cooperation is the key to success

What makes this new competition so challenging is the level of cooperation it requires. To forge winning teams, companies have to tear down the barriers between the functional silos within their organizations, and they have to replace adversarial supplier relationships with a win-win collaboration across the chain. Bringing about this level of cooperation isn't easy, but the best companies are already doing it and they're starting to distance themselves from the rest of the pack.

Supply chains are every manager's business

As a byproduct of this new competition, supply chain management has escalated from a support function to a core competence that cuts across the entire company. Managing the chain can no longer be left to specialists; in the new competition, the supply chain is every manager's business. If your company touches a physical product as it moves toward the market, it's part of a supply chain, and it will succeed in the new competition only if you and your fellow managers understand how to make the chain as efficient and effective as it can be.

This is your guide to the new competition

This understanding can be hard to come by because supply chain management is a deep and technical subject. Most books on supply chains offer either simplistic formulas for success, in which a single solution fits every problem, or the kind of detailed analysis that only a practitioner could love. This book is my attempt to provide the balanced overview you need, giving you enough information to make intelligent decisions without dragging you into a morass of detail. If you're an experienced practitioner -- a transportation manager, say, or a logistics planner -- this book isn't for you. Otherwise, consider this your playbook for the new competition.

The book is organized around your needs

The book is organized into five parts of three chapters each. Part One lays out the business challenge, Part Two describes the tools you need to meet this challenge, and the remaining parts explain supply chain management at three levels: operations, planning and design. These last three parts all have the same structure, with one chapter each on demand, supply, and performance. This common structure provides a unique, nine-chapter matrix for understanding and solving supply chain problems. At the back of the book, you'll find sources for the facts cited in the text, some suggested readings, and a glossary of common terms.

The fast track makes your job easier

I assume you're busy and don't have a lot of time for reading, so I use something I call the fast track to help you absorb the material quickly. As you can see from this page, the fast track summarizes the key point of every paragraph. This is the fifth book I've written using this technique since I developed it fifteen years ago, and I continue to use it because loyal readers all over the world have threatened to shoot me if I don't. In fact, many managers have told me that the best thing about my books is they don't actually have to read them; they get everything they need by skimming the fast track and looking at the drawings. I'm never sure whether to be flattered or offended by this observation, but I continue to provide the text for those who want it.

You can read the book selectively

Feel free to jump around in the book. Part One is an executive briefing on chain-based competition; if all you need is the big picture, here it is. Part Two is an introduction to supply chain tools; depending on your needs, you can study it, skim it, or skip it. The matrix organization of the remaining parts allows you to tackle the material in slices, reading Part Four to learn about planning, say, or Chapters 7, 10 and 13 for a tour of demand management. Never mind that I've spent the last two years of my life working out the perfect order in which to present these ideas; if I can handle the idea of people skipping the text altogether I can handle the idea of your skipping around within it.

There's a glossary to help with the jargon

Like all technical disciplines, supply chain management has developed a jargon to help practitioners communicate with each other and keep outsiders at bay. To ease your way into the subject, I use specialized terms only as necessary and keep abbreviations to a minimum. But I also want to give you a working vocabulary in the subject, so I do introduce the appropriate as they come up, setting them in bold type and defining them in the glossary.

The Web site offers further information

In order to keep this guide as short as possible I've had to cut out some material, but you can find the leftover bits at www.supplychainguide.com. In addition to supplementing and updating the material in the book, the Web site provides links to software vendors, service providers, and other Internet resources. You will also find my current email address there in case you want to drop me a note about the book. I'd give it to you right here but I don't need the Viagra.

David A. Taylor, Ph.D.
San Mateo, California
May 2003

020184463XP06032003

Table of Contents

Acknowledgments.


Introduction.


About the Cover.

I. CHALLENGE.

II. SOLUTION.

III. OPERATION.

IV. PLANNING.

V. DESIGN.