by David Jacoby
2 This phrase comes from an e-mailed meeting announcement (June 9th 2008).
3 Quayle, Michael, ed., Purchasing and Supply Chain Management: Strategies and Realities, Idea Group Publishing, 2006.
4 Simchi-Levi, David, Designing and Managing the Supply Chain, McGraw-Hill, 2004, p. x.
5 The organisation adopted its original acronym “APICS” as a proper name and added the tagline “the Association for Operations Management”.
6 For example, Carreira, Bill, “Lean Six Sigma is … almost like a religion for which the goal is perfection, which is nearly impossible,” Lean Six Sigma that Works: Powerful Tools for Dramatically Reducing Waste and Maximizing Profits, AMACOM/American Management Association, 2005, p. 3.
7 Interview with the author, May 13th 2008.
8 For further background on MRP systems, see Orlicky, Joseph, Orlicky’s Material Requirements Planning, McGraw-Hill, 1994.
9 “Memorable Quotes by Defense Secretary Donald Rumsfeld”, by Daniel Kurtzman. Available online at: About.com, http://politicalhumor.about.com/cs/quotethis/a/rumsfeldquotes.htm (accessed January 11th 2009).
10 Reid, R. Dan and Sanders, Nada R., Operations Management: An Integrated Approach, Wiley, 2007.
11 Poirier, Charles and Bauer, Michael, E-Supply Chain: Using the Internet to Revolutionize Your Business, Berrett-Koehler, 2001, p. 3.
12 Vitasek, Kate, “What Makes a Lean Supply Chain”, Supply Chain Management Review, October 2005.
13 Ptak, Carol, ERP Tools for Integrating the Supply Chain, CRC Press, 2000.
14 Eliyahu Goldratt describes the drum-buffer-rope concept in many of his business novels, such as Necessary but Not Sufficient: A Theory of Constraints Business Novel, North River Press Publishing Corporation, 2000.
15 Cohen, Shoshanah, and Roussel, Joseph, Strategic Supply Chain Management: The Five Disciplines for Top Performance, McGraw-Hill, 2005.
4 Why CEOs need supply chain management today
1 In a 2008 interview with the author for an Economist Intelligence Unit white paper, “Thinking big: Midsize companies and the challenges of growth”, February 2006.
2 Friedman, Thomas L., The World Is Flat: A Brief History of the Twenty-First Century, Farrar, Straus and Giroux, 2005.
3 Heinrich, Claus and Simchi-Levi, David, “Do IT Investments Really Pay Off?,” Supply Chain Management Review, May/June 2005.
4 This set of tools was used in Poirier, Charles C. and Quinn, Francis J., “Survey of Supply Chain Progress: Still Waiting for the Breakthrough”, Supply Chain Management Review, November 2006.
5 Cleveland, Douglas, “The Role of Services in the Modern U.S. Economy,” US Department of Commerce Office of Service Industries policy memo, January 1999.
6 “How Will Western Manufacturers Survive: The Art of High-Cost Sourcing”, Boston Strategies International White Paper, 2008.
7 “Benchmarking Your Supply Chain Savings”, Boston Strategies International webinar, August 2007.
8 Jackson, Bill and Winkler, Conrad, “Building the Advantaged Supply Network”, Supply Chain Management Review, May/June 2005.
9 Sahin, Funda, Robinson, E. Powell and Gao, L., as quoted in Mentzer, John T., Myers, Matthew B. and Stank, Theodore P. (eds), Handbook of Global Supply Chain Management, Flow Coordination and Information Sharing in Supply Chains: Review, Implications, and Directions for Future Research, Sage, 2006, p. 505.
10 Hugos, Michael, Essentials of Supply Chain Management, Wiley, 2006.
11 Robert Metcalfe (born 1946) co-invented Ethernet and founded a US computer network infrastructure company, 3Com.
12 “The Transportation Challenge”, National Chamber Foundation, 2008. International logistics analysis prepared by Boston Strategies International under contract for Cambridge Systematics.
13 Presentation by Barry Akbar, general director of APL-NOL (Vietnam) to the Sixth ASEAN Ports and Shipping Conference in Ho Chi Minh City, Vietnam, June 2008.
14 “ADB Loan to Boost Rail Links Between Vietnam and China”. Available online at: ChinaGate.com (accessed May 21st 2008).
15 “A Week of East–West Economic Corridor (August 27th–September 1st 2007) – The Big ASEAN Economic Event in Vietnam”, VinaTrade USA, July 28th 2007. Available online at: www.vietnam-ustrade.org/cgi-bin/anmviewer.asp?a=641&z=45/ (accessed May 20th 2008).
16 WorldTravelGuide.net, www.worldtravelguide.net/country/303/internal_travel/South-East-Asia/Vietnam.html (accessed January 11th 2009).
17 Boston Strategies International analysis of data from Global Insight.
18 Brueckner, Jan and Spiller, Pablo, “Economies of Traffic Density in the Deregulated Airline Industry”, Journal of Law and Economics 37(2), October 1994, pp. 379–415.
19 “The Transportation Challenge”, National Chamber Foundation, 2008.
5 Setting the right supply chain strategy
1 Porter, op. cit.
2 Boston Strategies International, 2008.
3 Michael Treacy and Fred Wiersema developed an alternative generic business strategy triangle in The Discipline of Market Leaders: Choose Your Focus, Dominate Your Market, Perseus Books, 1995. They identified operational efficiency (low cost), product leadership (innovation) and customer intimacy (niche) as successful generic strategies.
4 These definitions come from SCOR level 1 metrics; in Cohen and Roussel, op. cit.
5 Author’s analysis of Top 100 Retailers’ data from Kalish, Ira, PricewaterhouseCoopers, as published by Siam Future Development, www.siamfuture.com/RetailBusCenter/RetailIndus/Top100.asp (accessed May 17th 2005).
6 Rationalisation: competing on low cost
1 Economist Intelligence Unit white papers that conclude that cost is a major competitive dimension include: The New Face of Purchasing; Thinking Big: Midsize Companies and the Challenges of Growth; Courting the Consumer: Creating Dynamic Brands in Retail and Consumer Goods; and Business 2010: Retailing – Embracing the Challenge of Change.
2 The companies that were considered to focus on cost management include Airbus, Alcoa, BHP Billiton, BNSF, Boeing, BP, British American Tobacco, CSX, ExxonMobil, FedEx, General Motors, Herman Miller, HP, IBM, Philips, Royal Dutch Shell and Sud-Chemie.
3 The supply chain cost framework here integrates viewpoints from various authors, including this author’s. Handfield and Nichols in particular cover supply chain cost in their work Supply Chain Redesign, op. cit., p. 29. See also Cohen and Roussel, op cit.
4 This list draws on Cohen and Roussel, op. cit., p. 190, as well as Handfield, op. cit., p. 29.
5 Ferrin, Bruce C. and Plank, Richard E., “Total Cost of Ownership Models: An Exploratory Study”, Journal of Supply Chain Management 38(3), Summer 2002, p. 18.
6 Boston Strategies International webcast, “On the Cutting Edge: How Industry Leaders are Planning to Transform Supply Relationships over the Next Five Years”, August 21st 2007.
7 These examples are from the mid-1990s. See Moore, Nancy Y., Baldwin, Laura H., Cramm, Frank and Cook, Cynthia R., Implementing Best Purchasing and Supply Management Practices 2002: Lessons from Innovative Commercial Firms, RAND, 2002.
8 Moore et al., op. cit.
9 Poirier, Charles, “At the Tip of Transformation”, Food Logistics, April 15th 2001, p. 56.
10 According to a Northeastern University and Accenture study conducted by Robert Lieb and cited in Blanchard, David, Supply Chain Management Best Practices, John Wiley & Sons, 2007.
11 Based on “Outsourcing: the Sydney Airport Experience”, by Krishan Tangri, manager – airport facilities and planning, presented at an International Quality and Productivity Center (IQPC) Airport Asset Management Conference in Kuala Lumpur in 2006.
12 Carreira, Bill, Lean Manufacturing That Works, op. cit.
13 Duffy, Mike, “How Gillette Cleaned up its Supply Chain”, Supply Chain Management Review, April 2004.
14 Schutz, John D., “Yellow Freight Targets Regional Competitors ‘Newest’ Regional Leader?”. Available online at: MyYellow.com (undated).
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15 Based on “The Pooling Concept”, by David Harman, CEO of Unitpool, paper presented to the IATA World Cargo Symposium, Rome, 2008.
16 Economist Intelligence Unit, The New Face of Purchasing, 2005.
17 The 13 forms are: 1 invoice; 2 packing list; 3 certificate of origin; 4 house waybill; 5 house manifest; 6 master air waybill; 7 export goods declaration; 8 customs release export; 9 flight manifest; 10 export cargo declaration; 11 import cargo declaration; 12 import goods declaration; 13 customs release import.
18 Eggers, Christophe, “Postal Air Waybill Pilot Test” presentation to the IATA World Cargo Symposium, Rome, March 2008.
19 Leger, Frederic and Kentfield, Ian, “Setting the Standards”, presentation to the IATA World Cargo Symposium, Rome, March 2008.
20 Syridis, Constantin, “Message Improvement Programme (MIP): What Have We Learned and What Can You Do?”, presentation to the IATA World Cargo Symposium, Rome, March 2008.
21 Chin, Jeffrey, “Implementing RFID to Create a Visible Supply Chain Network”, presentation to the 6th Annual ASEAN Ports and Shipping Conference, Bangkok, Thailand, 2007.
7 Synchronisation: competing on reliability
1 According to the author’s analyses of data from the US Bureau of Economic Analysis.
2 Author’s analysis of data from Thomson Reuters.
3 “International, Supply Chain and Freight Drive 4th Quarter Results for UPS”, UPS press release, January 30th 2008.
4 Vitasek, op.cit.
5 Carroll, Brian, Lean Performance ERP Project Management: Implementing the Virtual Supply Chain, St Lucie Press, 2002.
6 Halverson, Richard, “Logistical Supremacy Secures the Base – But Will it Translate Abroad?”, Discount Store News, December 5th 1994.
7 Economist Intelligence Unit, The New Face of Purchasing, p. 11.
8 Christopher, Martin, Logistics and Supply Chain Management, pp. 226–8.
9 Sheffi, Yossi, “Maxing the Gain: The Key is Delaying the Point of Differentiation”, Chief Executive, August/September 2005, p. 62.
10 “TNT Steps up China–Germany RFID Trial”, RFID World, December 21st 2005.
11 Womack, J.P., Jones, D.T. and Roos, D., The Machine that Changed the World, Macmillan, 1990; Christopher, op. cit., pp. 226–8.
12 Billington, Corey and Johnson, Blake, “Creating and Leveraging Options in the High Technology Supply Chain”, in Harrison, Terry, Lee, Hau and Neale, John, The Practice of Lean Supply Chain Management: Where Theory and Application Converge, Springer, 2004.
13 TruServ Corporation press release, May 2002, as reported on Logic-Tools website. See www.ilog.com/products/supplychain/ (accessed August 22nd 2008).
14 Fugate, Brian, Sahin, Funda and Mentzer, John T., “Supply Chain Management Coordination Mechanisms”, Journal of Business Logistics 27(2), 2006, pp. 129–61.
15 Moran, Felipe Villegas, “Causes of the Bullwhip Effect”, in Carranza Torres and Moran, op. cit.
16 The other methods were: requesting upstream (RUS), ordering downstream (OUT), constraints management (CSI), unadjusted replenishment (SRS) and demand sharing (FDC). Constraints management methods reduced bullwhip more but required higher inventory levels.
17 Poirier, Charles C. and Reiter, Stephen E., Supply Chain Optimization: Building the Strongest Total Business Network, Berrett-Koehler, 1996, p. 41.
18 Fawcett, Stanley, “Supply Chain Trust is Within”, Supply Chain Management Review, March 2004.
19 The field of forecasting is vast and there are many books on the subject, so the purpose of this section is to introduce the main approaches. For a more detailed understanding of operational forecasting methods (exponential smoothing, curve fitting, etc), a handbook on forecasting is recommended.
20 This list is adapted from material in Lam, James, Enterprise Risk Management: From Incentives to Controls, Wiley, 2003.
21 Christopher, op. cit., pp. 250–51.
22 Author’s phone interview with Bruce Crain, former senior vice-president, July 28th 2005.
23 This list is a selection adapted from Elkins, Deborah, Handfield, Robert B. and Craighead, Christopher W., “18 Ways to Guard Against Disruption”, Supply Chain Management Review, January/February 2005.
8 Customisation: competing on customer intimacy
1 Wal-Mart, for example, does not follow a customisation strategy (because differentiation between customers would run counter to everyday low prices, and it is profitable; however, EDLP and customisation are not mutually exclusive).
2 The word “customerisation” was coined by Jerry Wind and Arvind Rangaswamy in “Customerization: The Second Revolution in Mass Customization”, paper published by Penn State e-Business Research Center, 1999.
3 Economist Intelligence Unit, Personalisation: Transforming the Way Business Connects, 2007.
4 Ibid.
5 Delivery capability means delivery throughout seasonal peaks and even weather conditions that could cause stock-outs. If a product cannot be changed quickly enough where necessary, a company will divert it en route to make sure it is shipped to where demand is strongest.
6 The companies adopting a customisation strategy, which included Netflix, Nokia, Plaxo, Popular Telephony, Siemens, Starbucks and UPS, were compared with their peer group averages.
7 Billington and Johnson, op. cit.
8 Peppers, Donald and Rogers, Martha, Managing Customer Relationships: A Strategic Framework, Wiley, 2004.
9 In Baran, Roger J., Galka, Robert and Strunk, Daniel P., Principles of Customer Relationship Management, South-Western College 2007.
10 Economist Intelligence Unit, Business 2010: Retailing: Embracing the Challenge of Change, July 2005.
11 “Loyalty card costs Tesco £1bn of profits – but is worth every penny,” The Independent, October 10th 2003.
12 “Hotels Take ‘Know Your Customer’ to New Level,” Wall Street Journal Business, February 7th 2006. Available online at: http://online.wsj.com/article/SB113927947660466836.html (accessed April 2nd 2009).
13 “Yahoo! Selects Rapt’s Price Optimization Software for Its Global Business,” Rapt press release October 17th 2005. Available online at: www.rapt.com/news/051017_YahooRelease.html (accessed November 20th 2006).
14 Bartels, Nancy, “The Price is Right: Airlines and Hotels Have Done it for Years; now Manufacturers are Discovering the Benefits of Optimized Pricing”, Manufacturing Business Technology. Available online at: www.mbtmag.com/printversion.asp?page=www.mbtmag.com/curr (accessed November 20th 2006).
15 SkyChain and all the associated modules and systems are specified by Emirates SkyCargo, developed by Emirates Group IT and marketed externally by Mercator.
16 Economist Intelligence Unit, Personalisation, op. cit.
17 Peppers and Rogers, op. cit.
18 MRP originally stood for materials requirements planning, and was associated with a production planning algorithm pioneered by J.A. Orlicky that was embedded widely in software in the period 1970–2000. When its scope grew to include a broader view of production management including the real-world manufacturing, logistical, purchasing and financial constraints affecting the ability to deliver on schedule, the abbreviation MRP II, which stood for manufacturing resources planning, emerged and MRP became known as one of the software components of MRP II.
19 Economist Intelligence Unit, Personalisation, op. cit.
20 Baran et al., op. cit.
21 Peppers and Rogers, op. cit.
9 Innovation: competing on revitalisation
1 Ferrari, Robert and Parker, Robert, “Digging for Innovation”, Supply Chain Management Review, November 2006.
2 “The World’s Most Innovative Companies”, BusinessWeek, April 17th 2008; based on Boston Strategies International analysis of the companies, using data from Thomson Reuters.
3 Economist Intelligence Unit, Innovation: Transforming the Way Business Creates, May 2007.
4 In the survey, innovators were defined as those companies that reduced their new product
introduction and delivery cycle times by more than 50% over the three-year period spanning 2006, 2007 and 2008.
5 70% of sales are from products that are less than one year old at innovating companies, compared with 43% at other companies.
6 64% of innovators’ SKUs are less than a year old, compared with 41% at other companies.
7 Innovators introduce new products in 5.2 months, compared with 11.2 months at other companies.
8 “Get Creative!”, BusinessWeek Online, August 1st 2005.
9 Harvard Business Review on Supply Chain Management, Harvard Business School Press, 2006.
10 Economist Intelligence Unit, Courting the Consumer: Creating Dynamic Brands in Retail and Consumer Goods, 2005.
11 Economist Intelligence Unit, Foresight 2020: Economic, Industry and Corporate Trends, 2006.
12 Forward branding should not be confused with a concept called “back-end branding” that Rashid Shaikh of Nypro is developing.
13 Cargille, Brian and Fry, Chris, “Design for Supply Chain: Spreading the Word Across HP”, Supply Chain Management Review, July/August 2006.
14 Heinrich, Claus and Simchi-Levi, David, “Do IT Investments Really Pay Off?,” Supply Chain Management Review, May/June 2005.
10 Organising, training and developing staff
1 Strategy and Structure: Chapters in the History of the American Industrial Enterprise, MIT Press, 1962.
2 Cohen and Roussel, op. cit.
3 Companies were considered to be pursuing a rationalisation strategy if they said that their primary supply chain strategy was “minimising material acquisition and operating costs” or, secondarily, “minimising inventory throughout the pipeline”. The other choices were “optimising pricing and customer promising to maximise profit”, “improving customer interfaces to improve sales revenue and margin” and “integrating all of the above strategies simultaneously”.
4 According to a survey by the author. Companies were considered to be pursuing a synchronisation strategy if they said that their primary supply chain strategy was “minimising material acquisition and operating costs” or, secondarily, “minimising inventory throughout the pipeline”. The other choices were “optimising pricing and customer promising to maximise profit”, “improving customer interfaces to improve sales revenue and margin” and “integrating all of the above strategies simultaneously”.