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Supply Chain Management [Paperback] by Narayan Rangaraj,G. Raghuram,Mandyam S... PDF

551 Pages·2008·42.498 MB·English
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SSSSSuuuuupppppppppplllllyyyyy CCCCChhhhhaaaaaiiiiinnnnn MMMMMaaaaannnnnaaaaagggggeeeeemmmmmeeeeennnnnttttt fffffooooorrrrr CCCCCooooommmmmpppppeeeeetttttiiiiitttttiiiiivvvvveeeee AAAAAdddddvvvvvaaaaannnnntttttaaaaagggggeeeee CCCCCooooonnnnnccccceeeeeppppptttttsssss &&&&& CCCCCaaaaassssseeeeesssss ABOUT THE AUTHORS Narayan Rangaraj is Professor of Industrial Engineering and Operations Research at the Indian Institute of Technology, Bombay since 1990. He is a Ph.D. from the Johns Hopkins University and a B.Tech from IIT Bombay. He has worked in areas of transport operations management, inventory and other aspects of supply chain management, and applications of operations research techniques to various sectors. His recent areas of work are railway operations, containerisation, the aviation sector and pricing/revenue management. G Raghuram is Indian Railways Chair Professor in Rail Transport and Infrastructure Management at the Indian Institute of Management, Ahmedabad. He has been on the faculty there since 1985. He is a Ph.D. from Northwestern University, PGDM from IIM-Ahmedabad and holds a B. Tech degree from IIT-Madras. He has specialised in logistics and supply chain management, and infrastructure and transportation systems. His areas of research, consultancy, case studies and publications include railways, ports and shipping, air and road sector, service organisations and issues in logistics and supply chain management. Raghuram has taught at Northwestern University and Tulane University, USA. He has been a visiting faculty at universities in USA, Canada, Yugoslavia, Singapore, UAE and several institutions in India. He has consulted for over 95 organisations in the area of Logistics and Supply Chain Management, and Infrastructure Development. Also, he has published over 30 papers and written over 100 case studies. Mandyam M Srinivasan is the Ball Corporation Distinguished Professor of Business at the University of Tennessee, Knoxville, USA. He has taught at this university since 1992. He has a Ph.D. from Northwestern University, a PGDM from IIM- Bangalore, and an M Tech degree from IIT-Madras. Srinivasan has many years of experience in the automobile industry. He has consulted with, and trained senior executives from numerous U.S. Fortune 500 organisations on how to build and manage lean supply chains. He has also trained senior executives in India, Germany, Taiwan, Sweden, Singapore, China, Mexico and Romania. Srinivasan has published over forty papers in peer-reviewed journals and has written many articles for trade journals and magazines. He received the Franz Edelman Award for Achievement in Operations Research from the Institute for Operations Research and Management Sciences in 2006. He is the Editor of IIE Transactions on Design & Manufacturing. SSSSSuuuuupppppppppplllllyyyyy CCCCChhhhhaaaaaiiiiinnnnn MMMMMaaaaannnnnaaaaagggggeeeeemmmmmeeeeennnnnttttt fffffooooorrrrr CCCCCooooommmmmpppppeeeeetttttiiiiitttttiiiiivvvvveeeee AAAAAdddddvvvvvaaaaannnnntttttaaaaagggggeeeee CCCCCooooonnnnnccccceeeeeppppptttttsssss &&&&& CCCCCaaaaassssseeeeesssss Narayan Rangaraj Indian Institute of Technology, Bombay G Raghuram Indian Institute of Management, Ahmedabad Mandyam M Srinivasan University of Tennessee, USA Tata McGraw-Hill Publishing Company Limited NEW DELHI McGraw-Hill Offices New Delhi New York St Louis San Francisco Auckland Bogotá Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal San Juan Santiago Singapore Sydney Tokyo Toronto TataMcGraw-Hill Published by Tata McGraw-Hill Publishing Company Limited, 7 West Patel Nagar, New Delhi 110 008. Supply Chain Management for Competitive Advantage: Concepts & Cases Copyright © 2009, by Tata McGraw-Hill Publishing Company Limited. No part of this publication may be reproduced or distributed in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise or stored in a database or retrieval system without the prior written permission of the publishers. The program listings (if any) may be entered, stored and executed in a computer system, but they may not be reproduced for publication. This edition can be exported from India only by the publishers, Tata McGraw-Hill Publishing Company Limited. ISBN (13): 978-0-07-022163-5 ISBN (10): 0-07-022163-4 Managing Director: Ajay Shukla General Manager—Publishing (B&E/HSSL and School): V Biju Kumar Editorial Manager—B&E: Tapas K Maji Junior Editorial Executive: Hemant K Jha Junior Editorial Executive: Rajneesh Roy Executive (Editorial Services): Anubha Srivastava Senior Production Manager: Manohar Lal Senior Production Assistant: Neelangshu Santra General Manager—Marketing (Higher Education & School): Michael J. Cruz Asst. Product Manager: Vijay Sarathi Jagannathan Controller—Production: Rajender P Ghansela Asst. General Manager—Production: B L Dogra Information contained in this work has been obtained by Tata McGraw-Hill, from sources believed to be reliable. However, neither Tata McGraw-Hill nor its authors guarantee the accuracy or completeness of any information published herein, and neither Tata McGraw-Hill nor its authors shall be responsible for any errors, omissions, or damages arising out of use of this information. This work is published with the under- standing that Tata McGraw-Hill and its authors are supplying information but are not attempting to render engineeringor other professional services. If such services are required, the assistance of an appropriate professional should be sought. Typeset at Text-o-Graphics, B1/56 Arawali Apartment, Sector 34, Noida 201301 and printed at Avon Printers, Plot No. 16, Main Loni Road, Jawahar Nagar Industrial Area, Shahdara, Delhi 110 094 Cover Design: K Anoop Cover printed at: Rashtriya Printers RYRQBRYFRXDBR Preface This book is positioned to serve two audiences: the MBA and senior student in a business programme, and the professional working in industry who wishes to gain a deeper understanding of supply chain management and logistics especially in an Indian context. The book thus provides an overview of concepts as well as intensive material for analysis and training in the area that has come to be known as Supply Chain Management. The topics covered are far reaching in practical scope. A special feature of the book is the collection of detailed cases. All cases are situated in the Indian business environment, as it makes a transition from traditional business practices to new ones in an arena of global competition. This attempts to fill a stated gap in the academic and business literature in the area. The cases are all drawn from real organisations and many are presented with actual data and descriptions that provide a realistic picture of issues in supply chain management. The conceptual material in the book presents a set of integrative viewpoints on the area. Chapter 1 discusses the drivers of supply chain management, such as technology, and increased consumer power in a global market. The chapter discusses how supply chain management practices have evolved over time to cope with these drivers and highlights organisations that have benefited from better supply chain management. Chapter 2 analyses the dynamics in a supply chain, and shows how lead time reduction and better information management are vital to supply chain performance. The importance of big picture thinking is underscored in this chapter. Chapter 3 talks about supply chain design and presents a roadmap for designing and managing the lean supply chain. It discusses how the design can be adapted based on the products managed by the supply chain. The role of performance measurements is highlighted in Chapter 4. This chapter uses a case to demonstrate how organisations within the supply chain can benefit by shared metrics. Chapter 5 discusses supply chain efficiencies and the benefits gained by applying lean principles. Manufacturing is presented as the primary driver of benefits in value addition in material processing and transformation. The implications of this emphasis on supply chain efficiencies on other parts of the supply chain are explored. From a single supply chain player’s point of view, upstream and downstream interface management are taken up in a symmetric manner in Chapters 6 and 7. A special focus of the book is to look at transportation and transfer of material between supply chain entities in vi Preface the language of SCM, in Chapter 8. Chapter 9 presents the pervasive role of modern information technology in supply chain management and finally, Chapter 10 presents a range of quantitative tools and techniques that are used in different facets of decision making in this area. The cases are then presented and are intended to be read as stand alone pieces of analysis and as a tool for integrated learning. The very essence of supply chain management is a holistic, multi-actor, multi-departmental view of decision making and the cases reflect that concern. In some cases, a particular sub-area of decision making can be isolated, but in general, the scope of analysis and decision making has to be inferred and proposed in an open way. This delimiting of the scope of analysis in a coherent manner is part and parcel of the learning objectives of the course. We have instructor suggestions and teaching notes as support for many of the cases, to be provided through the publisher. We also provide a teaching plan for some typical course offerings in this area. As a guide to students, a brief overview of each case, and some questions for analysis and an approach is suggested. A case positioning matrix helps in selection of cases for reading, and puts them in context. We emphasise that in our opinion, the cases, although extensive, need to be read in their entirety and instructors and students need to absorb the business logic and propose areas of analysis and appropriate techniques from a wide selection. This breadth of vision and judgement in selection is part of the training that distinguishes a true supply chain manager from a routine application oriented view of highly specific techniques within artificial functional boundaries. The case material, while dealing with Indian companies, does have global conceptual validity in the general concerns of supply chain management. However, in appropriate places, the specific conditions of the Indian sub-continent in terms of business practices and overall ethos, and of infrastructural realities are emphasised upon. Finally, the book provides some links to contemporary developments in the area and can even serve as the starting point for some applied research. Apart from its use as a textbook and as a guide to practitioners, it is of some value to researchers as well. NARAYAN RANGARAJ G RAGHURAM MANDYAM M SRINIVASAN Acknowledgements I wish to acknowledge a number of people for their help and contributions: Suchir Sinha, Sanjeev George, Manik Bahadur, Tilak Raj Singh, Piyush Verma and Manish Singh for some of the exercises and collection of material and references, N. Hemachandra and Jayendran Venkateswaran for professional inputs and Deepa Hari for personal support during the writing of the book. Narayan Rangaraj I thank the following co-authors of the cases for allowing us to use the material for publication in this book: Tathagata Bandyopadhyay Bibek Banerjee Faculty, IIMA Faculty, IIMA Nishchal Chudasama Anusha Dhasarathy Research Associate, IIMA PGP Student, IIMA Rekha Jain Abraham Koshy Faculty, IIMA Faculty, IIMA D Kumar S Manikutty Faculty, Railway Staff College, Faculty, IIMA Vadodhara Dilip Mathew Saral Mukherjee Research Associate, IIMA Faculty, IIMA Preeti Monippally Rohit Pathak PGP Student, IIMA PGP Student, IIMA Malavika Pillai R N Prasad PGP Student, IIMA Faculty, Railway Staff College, Vadodhara Rohithari Rajan Neeraj Sisodia PGP Student, IIMA Research Associate, IIMA Chetan Soman Faculty, IIMA The organisations that have rendered direct support in the material development efforts include: Rajashree Cement, Grasim Industries and South Central Railway Titan Industries Limited CONCOR Spices Board of India viii Acknowledgements Bayer CropScience Limited FoodWorld Airfreight Limited and four others (who choose to remain anonymous) Laxmi Transformers Western Oil Limited Farmaid Tractors Limited Seth Dhaniram We acknowledge the research assistance for case writing provided by: Premlata Agarwal Anita Basalingappa Sushma Choudhary Ameesh Dave Kapil Jain Sunil Jaryal Vishal Kashyap Darshana Padia Biswajyoti Pal Parvathy Raman Shivani Shukla We also thank Macmillan India Ltd for permitting us to print the cases Laxmi Transformers and Airfreight Limited, and Vikalpa, the Journal for Decision Makers, for the case Chilli in Soup (A). G. Raghuram I thank the College of Business Administration at the University of Tennessee, Knoxville, for supporting this book project, and Cengage Learning (formerly Thomson Learning) for permission to use material from two chapters in my book, Streamlined: 14 Principles for Building and Managing the Lean Supply Chain, published by Cengage in 2004. I wish to thank Dr. James Reeve for permission to use the Integrity Motors case, and Dr. Kenneth Gilbert for his keen insights, support, and encouragement. Mandyam M Srinivasan The authors wish to thank Milind Padalkar for his co-writitng of Chapter 9. They also wish to thank and N. Kumar and N. Chandrasekaran, both associated with the CII Institute of Logistics in Channai at the time, who played a big role in bringing them (the authors) together to work on this book and thereby provided the physical and mental space that sparked this joint initiative. The authors also acknowledge the help provided by Tapas Maji, Anubha Srivastava and Hemant Jha of TMH. Authors Contents Preface v Acknowledgements vii List of Abbreviations xiii List of Cases xv Decision Areas and Positioning of Cases xvi Chapter 1. An Overview of Supply Chain Management 2 Introduction 3 1.1 Ownership of the Supply Chain 4 1.2 Supply Chain Drivers 4 1.3 Supply Chains in the Producer-Centric Era 6 1.4 Financial Management and Return on Investment 10 1.5 Supply Chains in the Customer-Centric Era 12 1.6 Examples of Well-run Supply Chains 15 Summary 32 References 33 Exercises 33 Chapter 2. Understanding Supply Chain Dynamics 36 Introduction 37 2.1 Supply Chain Dynamics in Action 38 2.2 The Bullwhip Effect 40 2.3 The Impact of Lead Times 46 2.4 Inventory Management and Supply Chain Dynamics 49 2.5 Offshoring and Outsourcing: on Supply Chain Dynamics and Costs 52 2.6 Lessons Learned 54 Conclusions 57 References 58 Exercises 58 x Contents Chapter 3. Designing the Supply Chain 60 Introduction 61 3.1 Some Issues in Supply Chain Design 62 3.2 Steps for Designing and Managing Lean Supply Chains 63 Conclusions 87 References 88 Exercises 89 Chapter 4. Performance Measurement 90 Introduction 91 4.1 Measuring Supply Chain Performance 92 4.2 The Prisoner’s Dilemma 94 4.3 The Integrity Motors Case 96 4.4 Evolving Supply Chain Metrics 105 4.5 Performance Monitoring 108 4.6 Competences and Performance 117 Conclusions 118 References 118 Exercises 119 Chapter 5. SCM Effectiveness and Lean Thinking 120 Introduction 121 5.1 The Toyota Production System 122 5.2 Creating Flow: The Tools and Techniques of Lean Thinking 124 5.3 Continuous Improvement and the Pursuit of Perfection 149 Conclusions 150 References 151 Exercises 151 Chapter 6. SCM Across Organisations: Upstream Interface 154 Introduction 155 6.1 Procurement 157 6.2 Strategic Issues in Procurement: Sourcing 157 6.3 Operational Issues in Procurement: Purchasing 161 6.4 Items of Procurement 162 6.5 Contracts 164

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