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Introduction to supply chain management technologies 2nd


Introduction to
Supply Chain
Management
Technologies
Second Edition



Introduction to
Supply Chain
Management
Technologies
Second Edition

David Frederick Ross


CRC Press
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Contents
Preface.......................................................................................................... xiii
Acknowledgments.........................................................................................xix
Author...........................................................................................................xxi

  1. Supply Chain Management: Architecting the Supply Chain for

Competitive Advantage...........................................................................1
The Foundations of Supply Chain Management...........................................2
The Rise of Supply Chain Management........................................................5
Historical Beginnings..........................................................................5

Stages of SCM Development...............................................................6
Defining Supply Chain Management.........................................................11
Defining Logistics Management........................................................12
Defining Supply Chain Management................................................13
Redefining Supply Chain Management......................................................17
A New SCM Definition.....................................................................17
Redefining Supply Chain Components.............................................17
Channel Configuration.....................................................................20
Supply Chain Competencies.......................................................................23
Customer Management.....................................................................23
Supplier Management........................................................................25
Channel Alignment...........................................................................26
Supply Chain Collaboration..............................................................27
Operations Excellence.......................................................................29
Integrative Technologies....................................................................30
The Impact of SCM...........................................................................31
Summary and Transition............................................................................31
Notes..........................................................................................................33

v


vi  ◾  Contents

  2. Supply Chain Technology Foundations: Exploring the Basics.............35
The Importance of Information Technology...............................................37
Basics of Information Technology.....................................................37
Using Technology to Automate Knowledge..............................38
Using Technology to Create Knowledge...................................39
Using Technology to Integrate and Network Knowledge........ 40
Defining Integrative Information Technology...................................41
Enterprise Information Technology Basics..................................................41
Enterprise Technology Architecture.................................................. 42
Enterprise Business Architecture........................................................45
Inter-Enterprise Business Architecture...............................................49
New Technologies.......................................................................................53
New Generation of Technology Enablers...........................................53
Software-as-a-Service (SaaS)..............................................................55
Wireless Technology..........................................................................58
Global Trade Management Solutions.................................................61
Summary and Transition............................................................................62
Notes..........................................................................................................63

  3. Supply Chain System Foundations: Understanding Today’s

Technology Solutions............................................................................65
Business Information System Basics........................................................... 66
The Five Basic Functions of Information Systems..............................67
Principles of System Management.....................................................69
Enterprise Business Systems Foundations...................................................70
Evolution of Enterprise Business Systems (EBS)................................71
EBS System Components..................................................................72
Core Functional Areas of Operation.........................................72
Secondary Functional Areas of Operation................................76
EBS Networking and Integration Frameworks.........................80
Standard EBS Systems................................................................................83
Enterprise Resource Planning (ERP).................................................83
EBS Architecture for SCM................................................................87
EBS Benefits and Risks......................................................................89
EBS Choices..................................................................................... 90
Advent of Internet Business Technologies...................................................92
Defining Internet Business................................................................94
Evolution of Internet Business...........................................................95
I-Marketing..............................................................................97
e-Commerce Storefront............................................................98
e-Business Marketplaces.........................................................100
e-Collaboration Marketplaces.................................................104
Today’s e-Business Marketplaces—Summary..................................108


Contents  ◾  vii

Impact of e-Business on the Supply Chain.......................................109
Customer Service-Driven Elements........................................ 110
Supply Chain Operations-Driven Elements............................ 110
Summary and Transition..........................................................................112
Notes........................................................................................................ 114

  4. Technology-Driven Supply Chain Evolution: Building Lean,

Adaptive, Demand-Driven Supply Networks...................................... 117
The Lean Supply Chain............................................................................ 119
Anatomy of Lean Principles............................................................. 119
Defining Lean SCM........................................................................121
Six Components of Lean Supply Chains..........................................123
Lean Improvement Tools........................................................124
Process Standardization..........................................................124
Lean SCM Technologies.........................................................125
Cross-Enterprise Collaboration...............................................126
Lean SCM Implementation....................................................128
Demand Management............................................................130
The Impact of Lean SCM.......................................................131
Adaptive Supply Chains............................................................................133
Understanding Supply Chain Risk..................................................133
Advent of the Adaptive Supply Chain..............................................136
Components of Adaptive Supply Chain Management.....................138
Advantages of Adaptive Supply Chain Management....................... 141
Demand-Driven Supply Networks............................................................141
Defining Demand-Driven Supply Networks...................................142
Competencies of a DDSN............................................................... 145
Demand-Driven..................................................................... 145
Demand/Supply Visibility......................................................147
Adaptive Channel Management.............................................149
Lean Optimization.................................................................150
Supply Chain Collaboration................................................... 151
Fulfillment/Replenishment Flexibility.................................... 152
Advantages of Demand-Driven Supply Networks............................ 155
Summary and Transition.......................................................................... 155
Notes........................................................................................................ 157

  5. Customer and Service Management: Utilizing CRM to Drive

Value to the Customer.........................................................................159
Creating the Customer-Centric Supply Chain..........................................160
The Advent of Customer Relationship Management (CRM)........... 161
Mapping the Cluster of CRM Components....................................163
Understanding Today’s Customer Dynamics...................................166
Creating the Customer-Centric Organization..................................169


viii  ◾  Contents

Applying Technology to CRM.................................................................172
CRM and Internet Sales.................................................................. 174
Sales Force Automation (SFA)......................................................... 176
e-CRM Marketing..........................................................................178
Customer Service Management (CSM)........................................... 181
CRM and the Supply Chain.....................................................................185
Partner Relationship Management (PRM)......................................185
Electronic Bill Presentment and Payment (EBPP)............................188
CRM Analytics...............................................................................189
Implementing CRM........................................................................190
New Concepts in Customer Management Technologies...........................193
Emergence of Customer Experience Management...........................193
Merging CRM and CEM................................................................196
Redefining CRM Technologies to Embrace CEM...........................197
The Advent of Social Networking....................................................198
Defining the Content of Social Networking Technologies.............. 200
Summary and Transition..........................................................................202
Notes....................................................................................................... 204

  6. Manufacturing and Supply Chain Planning: Linking

Product Design, Manufacturing, and Planning to Increase
Productivities......................................................................................207
Manufacturing in the Age of the Global Enterprise..................................209
Demand-Driven Manufacturing...................................................... 211
Challenges to the Manufacturing Infrastructure.............................212
Outsourcing and Supplier Partnerships........................................... 214
Changing Performance Targets.......................................................216
The Future of Manufacturing.......................................................... 217
Impact of Technology on Manufacturing................................................. 218
Short History of Manufacturing Planning and Control Systems..... 219
Geography of Today’s Manufacturing Systems............................... 222
Manufacturing Planning....................................................... 222
Production and Process Management.....................................224
Product Design and Engineering............................................224
Plant Maintenance and Quality Management........................225
Product Life Cycle Management (PLM)................................ 226
Impact of Internet Networking Technologies........................ 228
Collaborative Product Commerce.............................................................231
Defining CPC.................................................................................231
Linking Supply Chain Design Capabilities......................................233
Detailing the Contents of CPC...................................................... 234
Managing Manufacturing Planning Functions.........................................236
Advanced Production and Scheduling Systems................................238


Contents  ◾  ix

Accurate Data.........................................................................238
Planning Timeframe..............................................................239
Planning Model......................................................................239
Schedule Management............................................................240
Supply Chain Optimization Tools...................................................241
Collaborative Planning, Forecasting, and Replenishment (CPFR)...... 244
Summary and Transition..........................................................................247
Notes........................................................................................................249

  7. Supplier Relationship Management: Integrating Suppliers into

the Value Chain...................................................................................251
Defining Purchasing and Supplier Relationship Management (SRM).....252
Defining the Purchasing Function...................................................253
Defining SRM.................................................................................255
Components of SRM.......................................................................258
Strategic Sourcing and Supply Chain Management................259
Applying Technology to the Management of SRM............... 260
SRM-Driven Infrastructures and Operations.........................261
The Internet-Driven SRM Environment...................................................262
e-SRM Structural Overview............................................................263
EBS Backbone Functions.................................................................265
e-SRM Services Functions.............................................................. 266
e-SRM Processing........................................................................... 268
e-SRM Technology Services............................................................272
Anatomy of the e-SRM Marketplace Exchange Environment..................274
Emergence of Today’s B2B Marketplace..........................................275
Foundations............................................................................276
Rise of Collaborative Commerce............................................276
Development of Networked Exchanges..................................276
Defining the Trading Exchange.......................................................277
Future of B2B e-Marketplaces........................................................ 280
Implementing e-SRM...............................................................................282
e-SRM Value Discovery...................................................................283
Infrastructure Analysis....................................................................283
Preparing for Organizational Change............................................. 284
Spend Analysis................................................................................ 284
Item/Service Analysis...................................................................... 284
e-SRM Technology Choices............................................................285
Performance Measurement............................................................. 286
Summary and Transition..........................................................................287
Notes........................................................................................................289


x  ◾  Contents

  8. Logistics Resource Management: Utilizing Technology to

Enhance Logistics Competitive Advantage.........................................293
Defining Logistics Resource Management (LRM)...................................294
Logistics Performance Management................................................297
Fulfillment Planning and Execution................................................299
Logistics Partnership Management..................................................301
Shipment Visibility..........................................................................302
Fulfillment Event Management.......................................................303
Dealing with Logistics Uncertainties...............................................305
Defining LRM in the Age of the Global Internet.................................... 306
Applying Internet Technologies to LRM.........................................307
Internet-Enabled LRM Technologies............................................... 311
Enterprise Performance Measurement.................................... 311
Warehouse Management........................................................312
Transportation Management.................................................. 315
Understanding the Third Party Logistics Network................................... 318
Role of the 3PL................................................................................ 319
Internet-Driven LSPs.......................................................................321
Today’s LSP Marketplace Challenges..............................................323
Choosing and Implementing an LSP Solution..........................................325
LSP Business Models.......................................................................326
Steps in LRM Strategy Development...............................................328
Summary and Transition..........................................................................330
Notes........................................................................................................332

  9. Developing SCM Technology Strategies: Creating the Game Plan

for the Successful Implementation of SCM Technologies...................335
Changing Views of Enterprise Strategy.....................................................336
Overview.........................................................................................338
The Primacy of Value Chains...........................................................339
Barriers to Internet-Driven SCM Technologies............................... 342
Preliminary Steps in SCM Technology Deployment Strategy.................. 346
Opening Issues in SCM Technology Strategy Development............347
Preliminary Steps............................................................................ 348
Developing the SCM Technology Strategy...............................................356
Constructing the Business Value Proposition.....................................357
Defining the Value Portfolio.............................................................358
Structuring the Scope of Collaboration............................................. 360
Ensuring Effective Resource Management........................................ 366
Pursuing Growth Management.........................................................369
Focus on Supply Chain Costs.................................................369
Focus on Supply Chain Value.................................................371
Design an Effective Performance Measurements Program......373


Contents  ◾  xi

Summary..................................................................................................379
Notes........................................................................................................381
Afterword.....................................................................................................383
Notes........................................................................................................386
Index............................................................................................................387



Preface
At the opening of the second decade of the twenty-first century, the revolutionary
changes brought about by the expansion of the Internet into all facets of business
had become distinctly mainstream. When work on the first edition of this book,
aptly entitled Introduction to e-Supply Chain Management, was begun in late 2001,
the world was in the process of financial retrenchment and growing doubt about
the ability of governments and businesses to prevent another financial “tech bubble” debacle, control the despicable greed of leaders of companies like Enron and
WorldCom, and mediate away the senseless violence of global terrorism. Almost a
decade later, the cycle of human error and folly seems to have repeated itself as the
“housing bubble,” the bankruptcy of once rock-solid financial institutions and the
awarding of outlandish bonuses for failure, and the wars in Iraq and Afghanistan
threaten global stability and cast a long specter over the confidence and trust people
once had in their public and business leaders. However, one thing has emerged
pointing to continuous progress against this backdrop of a seemingly cyclical view
of human affairs, and that is the explosive power of the Internet.
As the world moved past 9/11, the potential of the Internet, despite the false
starts as dot-com after dot-com company crashed, seemed to only grow stronger
and point to an entirely new way of conducting both business and personal life.
Over the ensuing years a “new economy,” despite all the hype, was indeed forming
based on the Internet’s ability not only to connect and informate but also to network communities of users who increasingly were taking responsibility for driving
intelligence about what companies should sell, what they wanted from their buying
experiences, how brand and company images were to be projected, and even the
direction enhancements and innovations were to take.
Something else was also emerging about how effortlessly and seamlessly the
use of the Internet was permeating the marketplace as well as the home. In 2003,
businesses on the cutting edge of Web technologies were prefixing everything
with an “e-”: there was e-business, e-commerce, e-procurement, e-sales, and so
forth. Software companies were quick to follow suit by linking applications to the
Internet with powerful new technology tools and marketing them as a means for
customers to gain access to the exciting new world of the Internet. In addition, new
xiii


xiv  ◾  Preface

business management concepts centered on Web-driven connectivity, messaging,
and ­collaboration became the foremost buzzwords capturing the imagination of
management gurus, consultants, and scholarly journals.
By 2010, however, the novelty and hype surrounding Internet-based applications had passed. The revolutionary aura had disappeared by mid-decade: just about
everyone had become so accustomed to using Web-based business functions in
their daily jobs and personal lives that the little “e-” prefix simply disappeared from
software company marketing brochures, scholarly and popular periodicals, and
common parlance. This did not mean, however, that the capabilities of Internetdriven technology had bottomed out. Advancements in connectivity and networking architectures continued to advance Internet capabilities, making them more
powerful and pervasive as well as easier to implement and use. In the end there was
no denying it: e-business had simply become just “business.”
The decision to revise the first edition had a lot to do with the demise of the
“e-” prefix. Organizations and universities using the book began to complain that
the stories about the environment of the early 2000s as well as the pervasive use
of the “e-” prefix were severely detracting from the effectiveness of what was still a
solid text. The decision to undertake a revision started first as an effort at removing
what had become an anachronism. As work began, however, it had become abundantly clear that subtle but deep changes had been occurring to the application of
the Internet to supply chain functions. The result was a wholesale restructuring
of chapters and updating of content. The overall mission of the book remained
the same: to provide a window into the concepts, techniques, and vocabulary of
the convergence of supply chain management (SCM) and the Internet, thereby
empowering executives involved in restarting a stalled economic environment and
returning public confidence in an era every bit as chaotic and destructive as post9/11 world of the first edition. However, the continuous advancement into what has
become known as 2.0 Web technologies required a deep review of the relevance of
what had been formerly said and the inclusion of new material on the cutting edge
of today’s SCM environment.
Each chapter in this book attempts to explore and elaborate on the many different
components of the combination of SCM and today’s Internet technologies. The first
chapter focuses on defining Web-enabled SCM and detailing its essential elements.
The argument that unfolds is that technology-driven SCM is a management model
that conceives of individual enterprises as nodes in a supply chain web, digitally connected, and collectively focused on the continuous evolution of new forms of customer value. The chapter offers a new supply chain model. Instead of a monolithic
pipeline for the flow of products and information, SCM is described as consisting of
three separate elements: the demand channel, the process value chain, and the value
delivery network. In addition, the chapter also introduces a concise view of the six
competencies constituting this new view of SCM. Among the topics discussed are
customer management, collaboration, operations excellence, integrative technologies,
channel alignment, and supplier management.


Preface  ◾  xv

Chapter 2 is concerned with exploring the foundations of supply chain technologies and is entirely new to the second edition. This chapter attempts to describe
in easily understood terms the technical foundation of today’s SCM systems. The
chapter begins by exploring how computer technologies have reshaped the way
companies utilize information to plan and control internal functions and create
interactive, collaborative relationships with their customers and trading partners
out in the supply channel network. Among the topics defined are the principles
of information processing, integration, and networking. Following, the chapter
focuses on an in-depth exploration of the basic architectural elements of today’s
enterprise information business systems. Included is a review of the three main
system components: enterprise technology architecture, enterprise business architecture, and inter-enterprise business architecture. The chapter continues with a
discussion of the elements for effective technology acquisition and current gaps
inhibiting the effective implementation of collaborative technologies in today’s
business environment. The chapter concludes with an analysis of today’s top new
technologies, including Software-as-a-Service (SaaS), wireless and radio frequency
identification (RFID), and global trade management (GTM).
Chapter 3 strives to remain close to the exposition of the e-business focus of the
first edition while greatly expanding on the coverage of the architecture of today’s
modern enterprise system. The chapter begins with an overview of the five basic
components constituting a business system. Among the elements discussed are the
utilization of the database, transaction management, management control, decision analysis/simulation, and strategic planning. Following, the chapter details the
principles of effective system management. The goal is to see how an enterprise business system (EBS) capable of effectively running an enterprise must have accountability, transparency, accessibility, data integrity, and control. Once these basics are
completed, the chapter proceeds to discuss the historical evolution and components
of today’s EBS. During the review, a detail of the repository of applications constituting today’s enterprize resource planning (ERP) and SCM software packages are
considered. The chapter concludes with a discussion of the various forms of connectivity made available by the Internet. Topics detailed are Web-based marketing,
e-commerce, e-business, and e-collaboration.
Chapter 4 is an entirely new chapter that seeks to explore the application of
information technologies to execute Lean, Adaptive, Demand-Driven Supply
Networks. The chapter explores how integrative technologies can provide organizations and their supply chains with access to demand and supply signals that
assist them to reduce the latency that grows in a supply channel from the point
a business, environmental, transactional, or out-of-bounds metric occurs to the
point that it reaches the final downstream node in the channel network. The speed
of receipt, processing, simulation, decision-making, and communication of eventresolution and then the ability of businesses and their supply channels to react to
optimize resources and reduce the threat of disruption to channel flows is at the
core of today’s SCM.


xvi  ◾  Preface

The concepts and computerized toolsets associated with customer relationship
management (CRM) are explored in Chapter 5. For the most part, chapter content
remains close to the first volume. It begins with an attempt to define CRM, detail
its prominent characteristics, and outline its primary mission. Next, the discussion
shifts to outlining a portrait of today’s customer. The profile that emerges shows
that customers are value driven, that they are looking for strong partnerships with
their suppliers, and that they want to be treated as unique individuals. Effectively
responding to today’s customer requires a customer-centric organization. The middle part of the chapter attempts to detail the steps for creating and nurturing such
an organization. The balance of the chapter is then focused on e-CRM technology applications, such as Internet sales, sales force automation, service, partnership
relationship management, electronic billing and payment, and CRM analytics. The
chapter concludes with new sections introducing two of today’s most important
customer management technologies: customer experience management (CEM) and
social networking.
Chapter 6 remains fairly close to the first edition, with minor updates to new
technologies introduced over the past decade. The chapter is concerned with exploring the application of SCM practices and Web-based tools to the management of
manufacturing. The discussion begins by reviewing the role of manufacturing in
the “age of the global enterprise.” Of particular interest is the discussion on the
availability of a bewildering array of technology tools to assist in the management
of almost every aspect of manufacturing from transaction control to Internetenabled product life cycle management. The chapter discusses one of today’s most
important drivers of productivity—the ability of manufacturing firms to architect collaborative relationships with business partners to synchronize through the
Internet all aspects of product design and time-to-market. The chapter concludes
with an analysis of today’s advanced manufacturing planning functions that seek to
apply the latest optimization and Web-based applications to interconnect and make
visible the demand and replenishment needs of whole supply network systems.
In Chapter 7, the functions of technology-driven purchasing and supplier relationship management (SRM) are explored. After a definition of purchasing has been
outlined, a possible definition of SRM is attempted. Similar to the CRM concept,
the strategic importance of SRM is to be found in the nurturing of continuously
evolving, value-enriching business relationships and is focused on the buy rather
than the sell side. The application of Web-based functions have opened an entirely
new range of SRM toolsets enabling companies to dramatically cut costs, automate
functions such as sourcing, request for quotation (RFQ), and order generation and
monitoring, and optimize supply chain partners to achieve the best products and
the best prices from anywhere in the supply network. The chapter concludes with a
full discussion of the anatomy of today’s e-sourcing system followed by an exploration of the e-sourcing exchange environment, today’s e-marketplace models, and
the steps necessary to execute a successful e-sourcing software implementation.


Preface  ◾  xvii

Chapter 8 is concerned with detailing the elements of logistics management in
the Internet Age. The discussion begins with a review of the function of logistics
and its evolution to what can be called logistics resource management (LRM). After
a detailed definition of the structure and key capabilities of LRM, the chapter
proceeds to describe the different categories of LRM available today and the array
of possible Web-based toolsets driving logistics performance measurement and
warehouse and transportation management. New to the discussion is a comprehensive review of warehouse management and transportation management software. Afterward, strategies for the use of third party logistics services are reviewed.
The different types of logistics service providers, the growth of Internet-enabled
providers, and the challenges of choosing a logistics partner that matches, if not
facilitates, overall company business strategies are explored in depth.
The final chapter is concerned with SCM technology strategies and implementation approaches. The bulk of this chapter constituted Chapter 4 in the first
edition. This chapter seeks to explore how companies can build effective marketwinning business strategies by actualizing the opportunities to be found in today’s
technology-driven supply chain. The discussion begins with an investigation of
how today’s dependence on supply chains has dramatically altered business strategy
development. Structuring effective business strategies require companies to closely
integrate the physical capabilities, knowledge competencies, and technology connectivity of their supply chain networks along side company-centric product, service, and infrastructure architectures. Building such a powerful technology-driven
SCM strategy requires that companies first of all energize and inform their organizations about the opportunities for competitive advantage available through the
convergence of SCM enablers and networking applications. As the chapter points
out, strategists must be careful to craft a comprehensive business vision, assess the
depth of current supply channel trading partner connectivity, and identify and
prioritize what initiatives must be undertaken to actualize new value-chain partnerships. The chapter concludes with a detailed discussion of a proposed SCM
technology strategy development model. The model consists of five critical steps,
ranging from the architecting of purposeful supply chain value propositions to
assembling performance metrics that can be used to ensure the proposed SCM
technology strategy is capable of achieving the desired marketplace advantage.



Acknowledgments
In the first edition of this book I wrote in the preface that writing a book on the
science of supply chain management technologies is like trying to hold quicksilver.
This lament proved to be much closer to the truth than I imagined. The novelty
that was e-business in 2002 had become distinctly “old hat” by the end of the
decade. Advancements in Web technologies and software architectures had simply
made the application of the Internet so easy, so seamless, that it had become invisible to users on all levels of the supply chain: “e-business” had simply evolved to
just “business.” Doubtless, many of the ideas and relevancy of the resources used
to create this book are destined with alarming quickness to be out-of-date as the
book moves past its publication date. Still, to begin with, I would sincerely like to
express my sincere thanks to the many students, professionals, and companies that
I have worked with over the past several years who have contributed their ideas and
experience.
I would especially like to thank the executive and editorial staff at CRC Press
for so eagerly welcoming the project. My sincerest sympathy goes out to the family,
friends, and colleagues of my friend and editor Ray O’Connell, who unexpectedly passed away in the middle of the project. Ray was always so supportive of my
projects and effortlessly guided them through to publication. Ray will be seriously
missed.
I would also like to thank the entire staff at the University of Chicago Library
for their help. Finally, I would like to express my thanks to my wife, Colleen, and
my son, Jonathan, for their support, encouragement, and understanding during the
many months this book was written.

xix



Author
A distinguished educator and consultant, David F. Ross, PhD, CFPIM has spent
over thirty-five years in the fields of production, logistics, and supply chain management. During his thirteen years as a practitioner, he held several line and staff
positions. For the past twenty-two years, Dr. Ross has been involved in ERP and
supply chain management education and consulting for several software companies. He has also been active teaching supply chain management courses on the
university level. He has taught for several years in the Master of Science in Supply
Chain Management program at Elmhurst College. He has also taught supply
chain management at Northwestern University’s Kellogg School of Management.
Currently, Dr. Ross is Senior Manager—Professional Development for APICS: The
Association for Operations Management where he is involved in courseware design
and operations management education.
Besides many articles and white papers, Dr. Ross has published several books
in logistics and supply chain management. His first book, Distribution Planning
and Control (Spencer, 1996), is used by many universities in their logistics and
supply chain management curriculums and is a foundation book for APICS’s
Certified in Production and Inventory Management (CPIM) and Certified
Supply Chain Professional (CSCP) programs. A second edition was published in
January 2004 and is one of six books on the current APICS’s “best seller” list. His
second book, Competing Through Supply Chain Management (Spencer, 1998), was
one of the first critical texts on the science of supply chain management. His third
book, Introduction to e-Supply Chain Management (CRC Press, 2003), merged the
concepts of e-business and supply chain management. This book has also been
adopted as a cornerstone text for APICS’s Certified Supply Chain Professional
(CSCP) program. His fourth book, The Intimate Supply Chain: Leveraging the
Supply Chain to Manage the Customer Experience (CRC Press, 2008), explores how
supply chains can be constructed to provide total value to the customer.

xxi



Chapter 1

Supply Chain
Management:
Architecting the
Supply Chain for
Competitive Advantage
Over the past dozen years, a wide spectrum of manufacturing and distribution
companies have come to view the concept and practice of supply chain management (SCM) as perhaps their most important strategic discipline for corporate
survival and competitive advantage. This is not to say that companies have been
unmindful of the tremendous breakthroughs in globalization, information technologies, communications networking, e-commerce, and the Internet exploding
all around them. It is widely recognized that these management practices and technology toolsets possess immense transformational power and that their ability to
continuously innovate the very foundations of today’s business structures have by
no means reached it catharsis.
SCM is important because companies have come to recognize that their capacity to continuously reinvent competitive advantage depends less on internal capabilities and more on their ability to look outward to their networks of business
partners in search of the resources to assemble the right blend of competencies that
will resonate with their own organizations and core product and process strategies.
1


2  ◾  Introduction to Supply Chain Management Technologies

Today, no corporate leader believes that organizations can survive and prosper isolated from their channels of suppliers and customers. In fact, perhaps the ultimate
core competency an enterprise may possess is not to be found in a temporary advantage it may hold in a product or process, but rather in the ability to continuously
assemble and implement market-winning capabilities arising from collaborative
alliances with their supply chain partners.
Of course, companies have always known that leveraging the strengths of business
partners could compensate for their own operational deficiencies, thereby enabling
them to expand their marketplace footprint without expanding their costs. Still, there
were limits to how robust these alliances could be due to their resistance to share market and product data, limitations in communication ­mechanisms, and inability to
network the many independent channel nodes that constituted their business channels. In addition, companies were often reluctant to form closer dependences for fear
of losing leverage when it came to working and negotiating with channel players.
Today, three major changes have enabled companies to actualize the power of
supply chains to a degree impossible in the past. To begin with, today’s technologies
have enabled the convergence of SCM and computerized networking toolsets capable
of linking all channel partners into a single trading community. Second, new SCM
management concepts and practices have emerged that continually cross-fertilize
technologies and their practical application. Finally, the requirements of operating
in a global business environment have made working in supply chains a requirement. Simply, those companies that can master technology-enabled SCM are those
businesses that are winning in today’s highly competitive, global marketplace.
This opening chapter is focused on defining today’s technology-driven SCM and
exploring the competitive challenges and marketplace opportunities that have shaped
and continue to drive its development. The chapter begins with an examination of why
SCM has risen to be today’s perhaps most critical business strategic paradigm. Next, a
short review of the evolution of SCM has been explored. Once the contours of SCM
have been detailed, the chapter offers a full definition of SCM. The argument that
unfolds is that the merger of today’s integrative information technologies and SCM
has enabled companies to conceive of themselves as linked entities in a virtual supply
chain web, digitally connected and collectively focused on the continuous evolution of
competitive advantage. Having established a working definition of technology-enabled
SCM, the balance of the chapter explores a new way of looking at the supply chain by
breaking it down into three separate components: the demand channel, the process value
chain, and the value delivery network. The chapter concludes with a detailed review of
the six critical competencies constituting the theory and practice of SCM.

The Foundations of Supply Chain Management
In today’s business environment, no enterprise can expect to build competitive
advantage without integrating their strategies with those of the supply chain systems


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