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Critical Acclaim for Strategic Supply Chain ManagementCohen and Roussel effectively capture and communicate the critical elements and roadmap of world-class supply chain management.. Sen

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Critical Acclaim for Strategic Supply Chain Management

Cohen and Roussel effectively capture and communicate the critical elements and roadmap of world-class supply chain management Put into practice, this book will serve as a timeless tool for those looking to transform their organization’s supply chain into a sustainable competitive advantage

Jim Miller Vice President, Operations, Cisco Systems

The five core principles behind this book are deceptively simple Yet few supply chain practitioners have the authors’ depth and breadth of experience Cohen and Roussel take the topic far beyond the theoretical, offering numerous examples of how companies have adopted and adapted these principles Senior executives can use this book to structure a supply chain strategy that will result in immediate top- and bottom-line benefits

Geoffrey Moore Author, Crossing the Chasm, Inside the Tornado, Living on the Fault Line

Cohen and Roussel successfully balance the “why” with the “what” of supply chain management This practical book assembles the components of an effective supply chain in a clear, well-supported way Those who want to drive supply chain success would be well-served in reading this book and learning from its many examples

Dick Hunter Vice President, Dell Americas Operations, Dell, Inc.

It is rare to find a book that covers both the supply chain principles and the organizational and practical aspects so well Cohen and Roussel have given management and practitioners a most insightful treatment of the secrets to supply chain success

Hau Lee Thoma Professor of Operations, Information, and Technology,

Graduate School of Business, Stanford University

The authors successfully describe the many complex trade-offs that companies must consider in developing a winning supply chain strategy Consequently, their book is as relevant and useful to the company CEO and CFO as it is to the COO, who should use it as the “how-to” guide to develop an operations strategy for the corporation

Gary McIlraith Supply Chain Director, British Sky Broadcasting Ltd

Cohen and Roussel provide a valuable overview for any CEO who intends to make supply chain management a competitive advantage Whether you’re the

CEO of an established global company or the founder of a start-up, Strategic

Supply Chain Management can provide you with the guiding principles and a

roadmap to get your company moving in the right direction

Guerrino De Luca President and CEO, Logitech International

The authors have captured the essential elements of how a company can drive superior performance by positioning supply chain management as a core man-agement discipline The book creates a template for how you can align an orga-nization to transfer a winning strategy into meaningful results

Bill Cantwell Vice President, Supply Chain, Air Products and Chemicals, Inc.

Cohen and Roussel take a rich set of strategies and explain them in a way that a relative newcomer could understand, yet retain the necessary depth to benefit sea-soned professionals Throughout this book, the authors provide powerful methods for organizing and implementing supply chain improvements Their linkage of these strategies back to elements of the Supply-Chain Council’s SCOR model provides the practitioner with a thorough approach to drive tangible results The real-life examples are invaluable

Steven G Miller Chairman, Supply-Chain Council

The supply chain presents a significant opportunity for cost reduction and cus-tomer value creation This is the underpinning theme of this easy-to-read and practical book Cohen and Roussel have skillfully drawn from their extensive experience working with organizations in diverse industries to synthesize best practices in supply chain management Of the many books that discuss supply chain management, this is one of the better ones

Martin Christopher Professor, Cranfield University, United Kingdom

Finally, a practical guide that links the latest in supply chain management think-ing with relevant examples of how successful practitioners apply these principles

in the real world A must read for all supply chain professionals attempting to take their supply chain performance to the next level

David J McGregor Senior Vice President, NAFTA Logistics, BASF Corporation

Cohen and Roussel provide a disciplined, practical, and insightful approach to achieving a world-class supply chain structure Their book’s concepts are rele-vant to the many challenges corporations face today, and consistent with our experiences at HP This book is transformational, and should help any supply chain professional achieve excellence

Dick Conrad Senior Vice President, Global Operations, Supply Chain, HP

STRATEGIC SUPPLY

CHAIN MANAGEMENT

The Five Disciplines for Top Performance

SHOSHANAH COHEN

JOSEPH ROUSSEL

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DOI: 10.1036/0071454497

We dedicate this book to our families: to husband Collin and children Meredith and Riley for Shoshanah Cohen and to wife Jana and children Robert and Claire for Joseph Roussel Thank you for your loving support over the months of labor during

2003 We couldn’t have dedicated the time and energy

to writing this book without your understanding and

teamwork on the home front.

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C O N T E N T S

Foreword by Gordon Stewart and Mike Aghajanian ix

Acknowledgments xvii

ELI LILLY PROFILE: Supporting Product Lifecycles with Supply Chain

Management 1

Chapter 1

Core Discipline 1: View Your Supply Chain as a Strategic Asset 9

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

Chapter 2

Core Discipline 2: Develop an End-to-End Process Architecture 49

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

Chapter 3

Core Discipline 3: Design Your Organization for Performance 101

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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OWENS CORNING PROFILE: Reorganizing for “a Bright Future” 131

Chapter 4

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

Chapter 5

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

Chapter 6

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

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 cur-rent 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 per-spective on future challenges in the development of competitive, customer-facing 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 disci-pline of the late 1990s and how it has become the root of huge invest-ments 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 well-chosen 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 fur-naces One coal-pit is situated close to the furfur-naces 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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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 logis-tics, efficient inventory management, and delivery to point of use are sup-ply chain disciplines that are more than 150 years old For most readers, Ford Motor Company is a better-known example of the historical devel-opment 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 manage-ment 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 technologi-cally advanced products became a driving force in the story of supply chain