Foreword by Gordon Stewart and Mike Aghajanian ix
ELI LILLY PROFILE: Supporting Product Lifecycles with Supply Chain
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
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
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
OWENS CORNING PROFILE: Reorganizing for “a Bright Future” 131
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
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
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
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.
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.
The problem of efficiently satisfying global demand for technologically advanced products became a driving force in the story of supply chain management as a core management discipline. During the 50 years of mass production as the main feature of the industrial landscape (1920–1970), the pursuit of quality and materials and labor efficiency dominated management thinking.
It was at this stage of development of the global industrial landscape that PRTM came on the scene in 1976. At our beginnings, we worked primarily with the emerging high-technology sector to address its problems of high-volume production, rapid innovation, and globalization. The challenges faced by our clients forced our consultants to leverage and integrate many of the disciplines of the time in both innovative and practical ways. For example, we realized early on that MRPII, just-in-time (JIT) manufacturing, kanban, statistical process control, total quality management, and process management all could be brought together intelligently to yield a superior result. In the mid-1980s, under the topic of “operations strategy” in a series of executive seminars that PRTM conducted on behalf of the then-fledgling American Electronics Association, we talked about a cross-functional set of integrated processes that we called supply chain management.
In 1986 we conducted a client-sponsored study of the global manufacturing strategies of almost 100 major high-tech manufacturers. (The study was refreshed in 1989–1990 and was titled, “The Emergence of the Globally Integrated Corporation.”) It concluded that we were entering an age of global integration between major economic regions and identified the competitive importance of what are now thought of as core supply chain processes.
In 1988 George Stalk, Jr., published a seminal article entitled, “Time—The Next Source of Competitive Advantage,” in Harvard Business Review. Stalk’s article added the dimension of time to the other processmanagement dimensions of cost and quality. And by 1989 the empirical and conceptual bases for competitive, customer-focused, cross-functional supply chain management were in place.
These disparate threads of emerging practice came together in one significant client project of PRTM. In 1989–1990, Rick Hoole, a PRTM director, began work with Fred Hewitt of Xerox Corporation to examine the opportunities that might be available to Xerox through globally integrated cross-functional process management. The joint PRTM-Xerox project team concluded that there were four core supply chain processes that Xerox needed to manage—plan, source, make, and deliver. Xerox then formed a project team to deliver results based on the findings of the study and realized benefits amounting to 2 percent of revenue over the course of the next few years.
Another “early adopter” of supply chain management as a discipline was Digital Equipment Corporation (DEC). It contracted with PRTM in 1991 to launch the first of what became a series of “integrated supply chain performance” benchmarking studies sponsored by IBM, DEC, Xerox, Lotus Development Corporation, and NCR. To ensure that this study did not simply become a compendium of functional metrics, PRTM sought to create a new set of truly cross-functional supply chain metrics. It is remarkable to reflect that it was just 13 years ago that the activity-based definition of total supply chain management cost was first designed and the now-widespread metric of cash-to-cash cycle time was created.