Supply Chain Management

Supply Chain Management

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Prentice Hall

FINANCIAL TIMES

Supply Chain Management

A guide to best practice

ANDREW COX, PAUL IRELAND,

CHRIS LONSDALE, JOE SANDERSON

AND GLYN WATSON

Prentice Hall

FINANCIAL TIMES

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First published in Great Britain in 2003

© Andrew Cox, Paul Ireland, Chris Lonsdale,

Joe Sanderson and Glyn Watson 2003

The right of Andrew Cox, Paul Ireland, Chris Lonsdale,

Joe Sanderson and Glyn Watson to be identified as authors

of this work has been asserted by them in accordance

with the Copyright, Designs and Patents Act 1988.

ISBN 0 273 66270 8

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v

About the authors

Andrew Cox is Professor and Director of the Centre for Business Strategy and

Procurement at Birmingham Business School, University of Birmingham in the UK. He

is also Chairman and CEO of Robertson Cox Ltd a UK and US based consultancy.

Andrew can be contacted at: [email protected]

Paul Ireland is a research fellow in the Centre for Business Strategy and

Procurement at Birmingham Business School, University of Birmingham in the UK.

Paul can be contacted at: [email protected]

Chris Lonsdale is a lecturer in Supply Chain Management in the Department of

Commerce and the Centre for Business Strategy and Procurement at Birmingham

Business School, University of Birmingham in the UK.

Chris can be contacted at: [email protected]

Joe Sanderson is a lecturer in Supply Chain Management in the Department of

Commerce and the Centre for Business Strategy Land Procurement at Birmingham

Business School, University of Birmingham in the UK.

Joe can be contacted at: [email protected]

Glyn Watson is a lecturer in Supply Chain Management in the Department of

Commerce and the Centre for Business Strategy and Procurement at Birmingham

Business School, University of Birmingham in the UK.

Glyn can be contacted at: [email protected]

vii

Contents

List of figures ix

List of tables x

Preface xi

Supply chain management and ‘best practice’

sourcing 1

Introduction 3

The four basic sourcing options 4

Which of the options is ‘best practice’ for the buyer? 8

The key enablers of SCM implementation 9

Conclusions 12

References 13

Is supply chain management the best strategic

sourcing option? 15

Introduction 17

Selecting the right sourcing strategy 18

Internal investments and the make–buy decision 19

External investments and the four generic sourcing strategies 24

Selecting strategic sourcing options 27

Conclusions 34

References 35

Is supply chain management feasible operationally? 37

Introduction 39

Internal success factors 40

External success factors 51

Conclusions 62

References 63

1

2

3

viii

Contents

Implementing supply chain management initiatives 65

Introduction 67

The three competitive market and SCM strategy options 67

A framework for developing competitive market and SCM

strategies 71

Creating a physically efficient (lean) supply chain 75

Creating an innovative and market-responsive (agile)

supply chain 89

Market differentiation and cost leadership with an

innovative and process efficiency supply chain strategy 94

Conclusions: the conundrum of knowledge and understanding 97

References 99

Software and Internet tools for effective supply

chain management 101

Introduction 103

The theoretical benefit of software and Internet tools for

SCM initiative 103

The major e-sourcing software applications 107

The major Internet sourcing applications 110

A framework for analyzing the utility of software and

Internet-based tools and SCM initiatives 116

Conclusions 119

References 120

5

4

ix

Figures

1.1 The four sourcing options for buyers 5

1.2 The Power Matrix between buyers and suppliers 10

1.3 Internal opposition and support for SCM strategies 11

2.1 The 5-step model to proactive supply chain management 17

2.2 Calculating and allocating costs 27

2.3 Calculating post-contractual risk 31

2.4 Calculating the return 32

3.1 Customer portfolio framework: what type of customer is the buyer? 43

3.2 Knowing your enemies and your friends 50

3.3 The attributes of buyer and supplier power 54

3.4 The competence and congruence matrix 57

3.5 Hypothetical idealized power regimes in supply chains 59

3.6 The power regime for in-flight re-fuelling equipment 61

4.1 The three competitive market and supply chain strategy options 68

4.2 Functional and innovative demand profiles 72

4.3 Physically efficient and market-responsive supply chains 73

4.4 Matching supply chains with products/services 75

4.5 An example of big picture mapping 79

4.6 An example of process activity mapping 81

4.7 Strategies for cycle time reduction 92

4.8 Understanding the scope for successful implementation of market

and SCM strategies 98

5.1 Internal and external enterprise process flows 108

5.2 The e-enabled internal and external enterprise process flows 111

5.3 The operational use value of software and Internet-based applications 116

x

3.1 Actors involved in the organizational sourcing process 41

3.2 Key tools and techniques for SCM 42

3.3 Potential demand management problems 45

3.4 Rating the power of different functions involved in the sourcing process 49

Tables

xi

Preface

The work that has supported the production of this short practitioner volume has

been underway for a number of years. It began in the mid-1990s with the publication

of a book that challenged much of the received orthodoxy in procurement and supply

management in particular and business thinking in general.

Since the publication of that book – Business Success (1997) – the work of the

Centre for Business Strategy and Procurement in Birmingham Business School at the

University of Birmingham has been devoted to testing empirically the theoretical

arguments first outlined in that volume, and then latterly in two companion

volumes – Power Regimes (2000) and Supply Chains, Markets and Power (2002).

The latter two volumes were based on work that was generously supported by a

research grant from the Engineering and Physical Sciences Research Council (EPSRC)

(Project No: GR/L86395). This latest volume has been based on work into

‘Competitive Advantage through Supply Chain Management’ that has also been

generously supported by the EPSRC (Project No: GR/N34161/01). We would like to

express our gratitude to the EPSRC and also to the collaborating public and private

sector organizations involved in these two research projects. This is because many of

the findings outlined here could not have been made without the generous support –

both financial and time – that has been provided to the research team.

There will be a companion volume to this particular offering in the near future

exploring the link between types of buyer and supplier power structures and

alternative forms of relationship management. When this is completed we will

have finished the current empirical testing of our original hypotheses about the

ways practitioners can manage business-to-business relationships – whether they

are buyers or suppliers.

We hope that, if nothing else, this body of work will challenge our readers to

think logically about how to manage their business relationships and, hopefully,

provide them with some clues as to how they might maximize whatever valued

outcomes they desire from their business interactions with others.

vii

Contents

List of figures ix

List of tables x

Preface xi

Supply chain management and ‘best practice’

sourcing 1

Introduction 3

The four basic sourcing options 4

Which of the options is ‘best practice’ for the buyer? 8

The key enablers of SCM implementation 9

Conclusions 12

References 13

Is supply chain management the best strategic

sourcing option? 15

Introduction 17

Selecting the right sourcing strategy 18

Internal investments and the make–buy decision 19

External investments and the four generic sourcing strategies 24

Selecting strategic sourcing options 27

Conclusions 34

References 35

Is supply chain management feasible operationally? 37

Introduction 39

Internal success factors 40

External success factors 51

Conclusions 62

References 63

1

2

3