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Core Discipline 1: View Your Supply Chain as a Strategic Asset 9
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Five Key Configuration Components 10 Four Criteria of a Good Supply Chain Strategy 20 Next-Generation Strategy 36 AUTOLIV PROFILE: Applying Rocket Science to the Supply Chain 39
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Core Discipline 2: Develop an End-to-End Process Architecture 49
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Four Tests of Supply Chain Architecture 50 Architectural Toolkits 66 Top Three Levels of the SCOR Model 70 Five Processes for End-to-End Supply Chain Management 78 Next-Generation Processes 88 AVON PROFILE: Calling on Customers Cost-Effectively 91
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Core Discipline 3: Design Your Organization for Performance 101
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Organizational Change Is an Ongoing Process 102 Evolution of the Supply Chain Organization 108 Guiding Principles for Organizational Design 111 Gaining Respect for the Supply Chain Discipline 122 Next-Generation Organizational Design 128
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CONTENTS
OWENS CORNING PROFILE: Reorganizing for a Bright Future 131
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Core Discipline 4: Build the Right Collaborative Model 139
Collaboration Is a Spectrum 143 Finding the Right Place on the Spectrum 147 The Path to Successful Collaboration 148 Next-Generation Collaboration 164 U.S. DEPARTMENT OF DEFENSE PROFILE: Making the Tail Smaller and the Tooth Stronger 169
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Core Discipline 5: Use Metrics to Drive Business Success 185
Why Measure 186 Managing Performance with Metrics 188 Which Metrics 205 Case in Point: Performance Management at 3Com 210 Next-Generation Performance Management 213 GENERAL MOTORS PROFILE: Driving Customer Satisfaction 217
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A Roadmap to Change 229
Advanced Systems Aren t Enough 230 Characteristics of the Next Generation 232 Developing a Roadmap 236 SEAGATE TECHNOLOGY PROFILE: Real-Time Response to Demand 249 Appendix A: Source and Methodology for Benchmarking Data 259 Appendix B: The Supply Chain Maturity Model 273 Appendix C: Comparison of Characteristics for Levels 2 and Level 3 SCOR Metrics 279 Notes 301 Index 307
F O R E W O R D
In many ways this book is overdue. It is the book that we at PRTM wanted
to write almost a decade ago, and yet at that time we merely would have been speculating about the future development of supply chain management as a core management discipline. For instance, we very likely would have underestimated the impact of information technology and ignored some emerging best practices. This book is the result of a 15-year history of research, benchmarking, and client results in this discipline at PRTM and an equivalent level of experience by the authors, PRTM partners Shoshanah Cohen (Mountain View, California) and Joseph Roussel (Paris, France). In this book we set out to offer readers our understanding of the current state of supply chain management theory and practice based on our experience and observations from engagements on supply chain projects at over 600 organizations. We also offer profiles of recent transformative supply chain initiatives at major companies and the U.S. Department of Defense (the largest supply chain in the world). Finally, we offer our perspective on future challenges in the development of competitive, customerfacing supply chains. This book focuses rightly on the present and the future; it is here in the Foreword that we hope to provide some historic perspective on how supply chain management came to be the dominating management discipline of the late 1990s and how it has become the root of huge investments in enterprise resource planning (ERP) and advanced planning and scheduling (APS) systems implementations in almost every major global corporation. We can trace the origins of good supply chain management discipline to the late 1800s. The following extract dates from Bremner s Industries of Scotland (1869):
Gartsherrie Ironworks are the largest in Scotland. . . . More than 1,000 tonnes of coal are consumed every 24 hours; and, as showing how wellchosen is the site of the works, it may be mentioned that 19/20ths of the coal required is obtained within a distance of half-a-mile from the furnaces. One coal-pit is situated close to the furnaces. . . . The coal from this pit is conveyed to the furnaces by means of a self-acting incline. Most of the ironstone was at one time obtained from pits in the neighborhood, but
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FOREWORD
now it has to be brought from a distance of two to twenty miles; and a complete system of railways connects the pits with the works. . . . The establishment is also connected with the great railway systems of the country, and possess additional facilities for transport in a branch of the Monklands Canal, which has been carried through the centre of the works. . . . A great proportion of the manufactured iron is sent out by the canal. The furnaces, sixteen in number, stand in two rows, one on each side of the canal. . . . A constant supply of coal and ironstone can be reckoned upon, and therefore only a small stock is kept at the works. The mineral trains are worked with unfailing regularity, and their cargoes are deposited conveniently for immediate use.
From this description of an integrated supply chain infrastructure in Victorian Scotland we learn that integrated inbound and outbound logistics, efficient inventory management, and delivery to point of use are supply chain disciplines that are more than 150 years old. For most readers, Ford Motor Company is a better-known example of the historical development of efficient supply chain and manufacturing practices. The history of Henry Ford s manufacturing innovation is widely known, as are the productivity gains achieved on the Model T assembly line, but what may be less well understood is how the supply chain that supported Model T production was developed. Ford s division of labor approach to Model T production created the need for both industrial engineers and material planners to ensure that the right material was delivered to the manufacturing line in the right quantities at the right time. The efficiencies gained by the division of labor in mass production were enabled by the creation of a new management discipline: the discipline of procuring and delivering parts directly to the assembly line. As Womack, Jones, and Ross explain in their 1991 book, The Machine That Changed the World:
Henry Ford was still very much an assembler when he opened Highland Park. He bought his engines and chassis from the Dodge Brothers, then added a host of items from a host of other firms to make a complete vehicle. By 1915 Ford had taken all these functions in house and was well on the way to achieving vertical integration. . . . Ford wanted to produce the entire car in one place and sell it to the world. But the shipping systems of the day were unable to transport high volumes of finished automobiles economically without damaging them. . . . By 1926 Ford automobiles were assembled in more than 36 cities in the United States and in 19 foreign countries.
The problem of efficiently satisfying global demand for technologically advanced products became a driving force in the story of supply chain
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