sburcing and supply chain...
TRANSCRIPT
SbURCING AND SUPPLY CHAIN MANAGEMENT
Fourth Edition
Robert B. Handfield North Carolina State University
Robert M. Monczka Arizona State University and CAPS Research
Larry C. Giunipero Florida State University
James L. Patterson Western Illinois University
~.. SOUTH-WESTERN I (ENGAGE Learning-
Australia. Brazil. Japan • Korea. Mexico. Singapore. Spain. United Kingdom • United States
iv
Brief Contents
Preface xxiii
( 1 Introduction 1
Chapter 1 Introduction to Purchasing and Supply Chain
Management 2
Purchasing Operations and Structure 35
Chapter 2 The Purchasing Process 36
Chapter 3 Purchasing Policy and Procedures 85
Chapter 4 Supply Management Integration for Competitive
Advantage 110
Chapter 5 Purchasing and Supply Chain Organization 153
3 Strategic Sourcing 187
Chapter 6 Supply Management and Commodity Strategy
Development 188
Chapter 7 Supplier Evaluation and Selection 233
Chapter 8 Supplier Quality Management 271
Chapter 9 Supplier Management and Development: Creating a
World-Class Supply Base 306
Chapter 10 Worldwide Sourcing 343
4 Strategic Sourcing Process 381
Chapter 11 Strategic Cost Management 382
Chapter 12 Purchasing and Supply Chain Analysis: Tools and
Techniques 423
Chapter 13 Negotiation 459
Chapter 14 Contract Management 496
Chapter 15 Purchasing Law and Ethics 538
Part Critical Supply Chain Elements 583
Chapter 16 Chapter 17 Chapter 18
Chapter 19
Lean Supply Chain Management 584
Purchasing Services 621
Supply Chain Information Systems and Electronic
Sourcing 665
Performance Measurement and Evaluation 705
Brief Contents v
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6 Future Directions 741 Chapter 20 Purchasing and Supply Strategy Trends 742
Cases 769 Case 1 Avion, Inc. 770 Case 2 The Global Sourcing Wire Harness Decision 773 Case 3 Managing Supplier Quality: Integrated Devices 776 Case 4 Negotiation-Porto 779 Case 5 Purchasing Ethics 780 Case 6 InsourcinglOutsourcing: The FlexCon Piston
Decision 783
Index 795
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Contents
Preface xxiii
1 Introduction 1 Chapter 1 Introduction to Purchasing and Supply Chain
Management 2 '
A New Competitive Environment 5
Why Purchasing Is Important 6
Understanding the Language of Purchasing and Supply Chain Management 8 '
Purchasing and Supply Management 8 Supply Chains and Value Chains 10 Supply Chains Illustrated 12
Achieving Purchasing and Supply Chain Benefits 15
The SUPP'ly Chain Umbrella 15 Management Activities 15
Four Enablers of Purchasing and Supply Chain Management 17
Capable Human Resources 19 Proper Organizational Design 19 Real-Time and Shared Information Technology Capabilities 20 Right Measures and Measurement Systems 21
The Evolution of Purchasing and Supply Chain Management 21
Period 1: The Early Years (1850-1900) 22 Period 2: Growth of Purchasing Fundamentals (1900-1939) 22 Period 3: The War Years (1940-1946) 23 Period 4: The Quiet Years (1947-Mid-1960s) 23 Period 5: Materials Management Comes of Age (Mid-1960s-Late 1970s) 24 Period 6: The Global Era (Late 1970s-1999) 25 Period 7: Integrated Supply Chain Management (Beyond 2000) 25
Looking Ahead 26
Good Practice Example: Taking an Entrepreneurial Approach to Purchasing at Babson College 26
Contents
2 Purchasing Operations and Structure 35 Chapter 2 The Purchasing Process 36
Purchasing Objectives 38 Objective 1: Supply Continuity 38
" Objective 2: Manage the Purchasing Process , Efficiently and Effectively 39
Objective 3: Develop Supply Base Management 39 Objective 4: Develop Aligned Goals with Internal Functional Stakeholders 40 Objective 5: Support Organizational Goals and Objectives 40 Objective 6: Develop Integrated Purchasing Strategies That Support Organizational Strategies 40
Purchasing Responsibilities 41 Evaluate and Select Suppliers 41 Actas the Primary Contact with Suppliers 42 Determine the Method of Awarding Purchase Contracts 42
E-Procurement and the Procure to Pay Process 42 Forecast and Plan Requirement 44 Needs Clarification: Requisitioning 46 Supplier Identification and Selection 54 Approval, Contract, and Purchase Order Preparation 58 Receipt and Inspection 65 Invoice Settlement and Payment 67 Records Maintenance 68 Continuously Measure and Manage Supplier Performance 68 Re-engineering the Procure to Pay Process 68
Types of Purchases 69 Raw Materials 70 Semifinished Products and Components 70 Finished Products 70 Maintenance, Repair, and Operating Items 70 Production Support Items 71 Services 71 Capital Equipment 71 Transportation and Third-Party Purchasing 73
Improving the Purchasing Process 74 On line Requisitioning Systems from Users to Purchasing 74 Procurement Cards Issued to Users 74
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Electronic Purchasing Commerce through the Internet 75 Longer-Term Purchase Agreements 75 Online Ordering Systems to Suppliers 75 Purchasing Process Redesign 77 Electronic Data Interchange 77 Online Ordering through Electronic Catalogs 77 Allowing Users to Contact Suppliers Directly 78
Good Practice Example: Sourcing Process at Federal Express 78 Conclusion 82
Chapter 3 Purchasing Policy and Procedures 85
Policy Overview 87 What Are the Advantages and Disadvantages of Policies? 87 What Makes for an Effective Policy? 88
Purchasing Policies-Providing Guidance and Direction 89
Policies Defining the Role of Purchasing 89 Policies Defining the Conduct of Purchasing Personnel 91 Policies Defining Social and Minority Business Objectives 94 Policies Defining Buyer-Seller Relationships 98 Policies Defining Operational Issues 100
Purchasing Procedures 103 Purchasing Procedural Areas 105
Good Practice Example: Best Practices in Diverse Supplier Development 106 .
Conclusion 108
Chapter 4 Supply Management Integration for Competitive Adva ntage 110
Integration: What Is It? 114
Internal Integration 116 Supply Management's Internal Linkages 116
External Integration 121 Supply Management's External Linkages 121 Collaborative Buyer-Seller Relationships 122 Advantages of Closer Buyer-Seller Relationships 122 Obstacles to Closer Buyer-Seller Relationships 123 Critical Elements for Supplier Relationship Management 125
Contents
The Critical Role of Cross-Functional Sourcing Teams 127
Benefits Sought from the Cross-Functional Team Approach 128 Potential Drawbacks to the Cross-Functional Team Approach 130 When to Form a Cross-Functional Team 131 Improving Sourcing Team Effectiveness 132
Integrating Supply Management, Engineering, and Suppliers to Develop New Products and Services 137
Common Themes of Successful Supplier Integration Efforts 137 Supplier Integration into Customer Order Fulfillment 143 Supplier Suggestion Programs 143 Buyer-Seller Improvement Teams 144 On-Site Supplier Representative 145 Potential Benefits of On-Site Supplier Representatives 146
Good Practice Example: Caterpillar Works with Delco to Achieve Mutually Beneficial Outcomes 148
Conclusion 150
Chapter 5 Purchasing and Supply Chain Organization 153 Purchasing's Position within the Organizational Structure 156
Factors Affecting Purchasing's Position in the Organizational Hierarchy 156 To Whom Does Purchasing Report? 157
Organizing the Purchasing Function 158. Specialization within Purchasing 158 Purchasing Department Activities 161 Separating Strategic and Operational Purchasing 163
Placement of Purchasing Authority 164 Factors Influencing Centralized/Centrally Led or Decentralized Structures 166 Advantages of Centralized/Centrally Led Purchasing Structures 167 Advantages of Decentralized Purchasing 169 A Hybrid Purchasing Structure 170
Organizing for Supply Chain Management 174 A Supply Chain Management Structure 175
Using Teams as Part of the Organizational Structure 175
Creating the Organization of the Future 178
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Good Practice Example: Air Products and Chemicals Organizes to Meet Global Challenges 182
Conclusion 184
Strategic Sourcing 187 Chapter 6 Supply Management and Commodity Strategy
Development 188
Aligning Supply Management and Enterprise Objectives 190
Integrative Strategy Development 192 Translating Supply Management Objectives into Supply Management Goals 193
What Is a Category Strategy? 195 Conducting a Spend Analysis 196 Spend Analysis Spreadsheet 198
Category Strategy Development (Strategic Sourcing) 203
Step 1: Build the Team and the Project Charter 204 Step 2: Conduct Market Research on Suppliers 204 Step 3: Strategy Development 210 Step 4: Contract Negotiation 215 Step 5: Supplier Relationship Management 217
Types of Supply Management Strategies 218 Supply Base Optimization 218 Supply Risk Management 218 Global Sourcing 220 Longer-Term Supplier Relationships 220 Early Supplier Design Involvement 221 Supplier Development 221 Total Cost of Ownership 221
E-Reverse Auctions 221 Evolving Sourcing Strategies 222
Phase 1: Basic Beginnings 223 Phase 2: Moderate Development 224 Phase 3: Limited Integration 224 Phase 4: Fully Integrated Supply Chains 225 Observations on Supply Management Strategy Evolution 225
Good Practice Example: Commodities Forecasting: It's All in Your Head 226
Conclusion 230
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Contents
Chapter 7 Supplier Evaluation and Selection 233 The Supplier Evaluation and Selection Process 236
Recognize the Need for Supplier Selection 236 Identify Key Sourcing Requirements 237 Determine Sourcing Strategy 237 Identify Potential Supply Sources 238 Sourcing Alternatives 243 Limit Suppliers in Selection Pool 244 Determine the Method of Supplier Evaluation and Selection 245 Select Supplier and Reach Agreement 247
Key Supplier Evaluation Criteria 248 Management Capability 249 Employee Capabilities 249 Cost Structure 250 Total Quality Performance, Systems, and Philosophy 251 Process and Technological Capability 251 Environmental Regulation Compliance 251 Financial Stability 252 Production Scheduling and Control Systems 253 E-Commerce Capability 254 Supplier's Sourcing Strategies, Policies, and Techniques 254 Longer-Term Relationship Potential 254
Developing a Supplier Evaluation and Selection Survey 255
Step 1: Identify Supplier Evaluation Categories 256 Step 2: Assign a Weight to Each Evaluation Category 257 Step 3: Identify and Weigh Subcategories 258 Step 4: Define a Scoring System for Categories and Subcategories 258 Step 5; Evaluate Supplier Directly 259 Step 6: Review Evaluation Results and Make Selection Decision 259 Step 7: Review and Improve Supplier Performance Continuously 261
Supplier Selection 261 Critical Issues 261
Reducing Supplier Evaluation and Selection Cycle Time 262
Tools and Approaches 263
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Good Practice Example: Eaton Corporation Wins Purchasing Medal of Excellence through Supplier Management 264
Conclusion 268
Chapter 8 Supplier Quality Management 271
Overview of Supplier Quality Management 273 What Is Supplier Quality? 273 Why Be Concerned with Supplier Quality? 275
Factors Affecting Supply Management's Role in Managing Supplier Quality 276
Supplier Quality Management Using a Total Quality Management Perspective 278
Defining Quality in Terms of Customers and Their Requirements 279 Deming's 14 Points 279 Pursuing Quality at the Source 283 Stressing Objective Rather Than Subjective Measurement and Analysis 284 Emphasizing Prevention Rather Than Detection of Defects 285 Focusing on Process Rather Than Output 285 Basics of Process Capability 287 Striving for Zero Defects 288 Cost of Quality 289 Establishing Continuous Improvement as a Way of Life 289 Making Quality Everyone's Responsibility 290
Pursuing Six Sigma Supplier quality 292
Using ISO Standards and MBNQA Criteria to Assess Supplier Quality Systems 294
ISO 9000:2000 Registration 294 ISO 14000 Standards 296 The Malcolm Baldrige National Quality Award 296
Good Practice Example: Supplier Certification at Alcoa 298
Conclusion 302
Chapter 9 Supplier Management and Development: Creating a World-Class Supply Base 306
Supplier Performance Measurement 308 Supplier Measurement Decisions 309 Types of Supplier Measurement Techniques 311
Rationalization and Optimization: Creating a Manageable Supply Base 316
Contents
Advantages of a Rationalized and Optimized Supply Base 317 Possible Risks of Maintaining Fewer Suppliers 319 Formal Approaches to Supply Base Rationalization 320 Summary of Supplier Rationalization and Optimization 322
Supplier Development: A Strategy for Improvement 324
A Process Map for Supplier Development 325 Supplier Development Efforts That Sometimes Don't Work 327
Overcoming the Barriers to Supplier Development 328
Buyer-Specific Barriers 328 Buyer-Supplier Interface Barriers 331 Supplier-Specific Barriers 332 Lessons Learned from Supplier Development 334
Good Practice Example: Supplier Measurement Helps FedEx Manage a Worldwide Supply Base 336
Conclusion 339
Chapter 10 Worldwide Sourcing 343
Worldwide Sourcing Overview 347· Why Source Worldwide? 348 Barriers to Worldwide Sourcing 350
Progressing from Domestic Buying to International Purchasing 353
Information about Worldwide Sources 353 Supplier Selection Issues 355 Cultural Understanding 356 Language and Communication Differences 356 Logisticallssues 357 Legallssues 357 Organizational Issues 361 Countertrade Requirements 362 Costs Associate~d with International Purchasing 364 Currency Risk 367
Progressing from International Purchasing to Global Sourcing 369
Factors Separating Successful from LessSuccessful Global Sourcing Efforts 370 Global Sourcing Benefits 374 Future Global Sourcing Trends 375
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Good Practice Example: Air Products Manages Worldwide Sourcing 376
Conclusion 378
4 Strategic Sourcing Process 381 Chapter 11 Strategic Cost Management 382
A Structured Approach to Cost Reduction 385
Price Analysis 390 Market Structure 391 Economic Conditions 391 Pricing Strategy of the Seller 392 Market-Driven Pricing Models 393 Using the Producer Price Index to Manage Price 397
Cost Analysis Techniques 399 Cost-Based Pricing Models 400 Product Specifications 400 Estimating Supplier Costs Using Reverse Price Analysis 401 Break-Even Analysis 404
Total Cost of Ownership 408 Building a Total Cost of Ownership Model 408 The Importance of Opportunity Costs 409 Important Factors to Consider When Building a TCO Model 411 Example of a TCO Model 412
Collaborative Approaches to Cost Management 412 Target Pricing Defined 413 Cost-Savings Sharing Pricing Defined 414 Prerequisites for Successful Target and Cost-Based Pricing 414 When to Use Collaborative Cost Management Approaches 415 An Example of Target Pricing and Cost-Savings Sharing 416
Good Practice Example: A Computer Manufacturer Brings in the Voice of the Customer and the Voice of the Factory 417
Conclusion 420
Chapter 12 Purchasing and Supply Chain Analysis: Tools and Techniques 423
Project Management 425 Defining Project Success 426 Project Phases 426
Contents
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Project Planning and Control Techniques 430 Rules for Constructing a Project Management Network 431 Project Management Example: Sourcing Strategy 433 Project Management with Time Estimates 435
Learning-Curve Analysis 438 Components of the Learning or Experience Curve 438 When to Use the Learning Curve 439 Learning Curve /IIustrated 441 Learning-Curve Problem 442
Value AnalysisNalue Engineering 442 Who Is Involved in Value Analysis? 444 Tests for Determining Value in a Product or Service 445 The Value Analysis Process 445
Quantity Discount Analysis 447. Quantity Discount Analysis /IIustrated 447
Process Mapping 447 Process Mapping Illustrated 451
Good Practice Example: Lean Takes Off at Cessna 454
Conclusion 457
Chapter 13 Negotiation 459
What Is Negotiation? 461
Negotiation Framework 464 Identify or Anticipate a Purchase Requirement 464 Determine If Negotiation Is Required 464 Plan for the Negotiation 467 Conduct the Negotiation 468 Execute the Agreement 469
Negotiation Planning 470 Develop Specific Objectives 470 Analyze Each Party's Strengths and Weaknesses 470 Gather Relevant Information 471 Recognize Your Counterpart's Needs 471 Identify Facts and Issues 472 Establish a Position on Each Issue 472 Develop the Negotiation Strategy and Accompanying Tactics 473 Brief Other Personnel 474 Practice the Negotiation 474
Power in Negotiation 474
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Sources of Negotiation Power 475
Concessions 476 Negotiation Tactics: Trying to Reach Agreement 478
Win-Win Negotiation 481
Good Practice Example: Mack Trucks Uses Negotiation to Rev Up Its Sourcing Process 482
International Negotiation 485 Selected Countries 487
The Impact of the Internet on Negotiations 490 Good Practice Example: Texas Instruments Provides Its Procurement Professionals with Comprehensive Global Negotiation Skills and Enhanced Cultural Understanding 491
Conclusion 492
Chapter 14 Contract Management 496
Introduction 499
Elements of a Contract 501
How to Write a Contract 506
Types of Contracts 507 Fixed-Price Contracts 507 Cost-Based Contracts 509 Considerations When Selecting Contract Types 512
Long-Term Contracts in Alliances and Partnerships 513
Benefits of Long-Term Contracts 513 Risks of Long-Term Contracts 515 Contingency Elements of Long-Term Contracts 517
Nontraditional Contracting 518 IT Systems Contracts 518 Minority- and Women-Owned Business Enterprise Contracts 520 Consulting Contracts 521 Construction Contracts 523 Other Types of Contracts 524
Settling Contractual Disputes 526 Legal Alternatives 526 Arbitration 528 Other Forms of Conflict Resolution 528
Good Practice Example: The Top Ten Most Frequently Negotiated Terms Reveal Continued Focus on Failure 532
Conclusion 535
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Contents
Chapter 15 Purchasing Law and Ethics 538
Legal Authority and Personal Liability of the Purchasing Manager 541
Laws of Agency 541 Legal Authority 542 Personal Liability 542
Contract Law 544 Essential Elements of a Contract 544 The Purchase Order-Is It a Contract? 547 Cancellation of Orders and Breach of Contract 549 Damages 551 Acceptance and Rejection of Goods 552 Honest Mistakes 553
The Uniform Commercial Code 554 Purchasing Law before the UCC 554 Warranties 556 Transportation Terms and Risk of Loss 559 Seller's and Buyer's Rights 560
Patents and Intellectual Property 561
Other Laws Affecting Purchasing 565 Laws Affecting Antitrust and Unfair Trade Practices 565 Laws Affecting Global Purchasing 566
Purchasing Ethics 567 Risks of Unethical Behavior 568 Types of Unethical Purchasing Behavior 569 Influence and Ethics 571 ISM Professional Code of Ethics 571 Supporting Ethical Behavior 573
Corporate Social Responsibility 574 Good Practice Example: Eaton's CEO Talks Openly about Ethics 577 Conclusion 579
5 Critical Supply Chain Elements 583 Chapter 16 Lean Supply Chain Management 584
Understanding Supply Chain Inventory 587 Types of Inventory 587 Inventory-Related Costs 588 Inventory Investment-Asset or Liability? 590
The Right Reasons for Investing in Inventory 593 Avoid Disruptions in Operational Performance 593 Support Operational Requirements 594
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Support Customer Service Requirements 594
Hedge against Marketplace Uncertainty 594
Take Advantage of Order Quantity Discounts 595
The Wrong Reasons for Investing in Inventory 596
Poor Quality and Material Yield 596
Unreliable Supplier Delivery 596
Extended Order-Cycle Times from Global
Sourcing 597 Inaccurate or Uncertain Demand Forecasts 597
Specifying Custom Items for Standard
Applications 598 Extended Material Pipelines 598
Inefficient Manufacturing Processes 599
Creating the Lean Supply Chain 600
The J IT Perspective of Waste 601 The JIT Perspective on Inventory 602
Just-in-Time Purchasing 604
Just-in-Time Transportation 605
Just-in-Time Kanban Systems 606
Approaches for Managing Inventory Investment 607
Achieve Perfect Record Integrity 608
Improve Product Forecasting 609
Standardize and Simplify Product Design 610
Leverage Companywide Purchase Volumes 612
Use Suppliers for On-Site Inventory
Management 612 Reduce Supplier-Buyer Cycle Times 612
Delivering the Perfect Customer Order 613
Material Requirements Planning System 614
Distribution Resource Planning System 614
Supply Chain Inventory Planners 615
Automated Inventory Tracking Systems 615
Good Practice Example: Managing Low-Value
Inventory for High-Value Savings at Lockheed 615
Conclusion 618
Chapter 17 Purchasing Services 621
Transportation Management 623
Deregulation of Transportation and Supply
Management's New Role 625
A Decision-Making Framework for Developing a
Transportation Strategy 626
Performance-Based Logistics 640
Outsourcing Logistics to Third-Party Logistics
Providers 642 Select Providers 642
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Gain Access to Critical and Timely Data 644 Develop Systems Visibility to Material' Shipments 644 Develop Closer Relationships with Fewer Providers 644 Establish Companywide Contracts 645
Purchasing Services and Indirect Items 646 Internal Methods of Managing Indirect Spend 648 External Methods of Managing Indirect Spend 650 Enabling Tactics and Strategies 650
Sourcing Professional Services 653 Have a Clearly Defined Scope 653 Move to a Centralized Procurement Structure 654 Develop a Professional Services Database 654 Develop a Sound Procedure for Evaluation and Selection of Consultants 655 Optimize the Supply Base 656 Develop a Standardized Contract 656 Monitor Results 656 Develop Policy Compliance 657
Service Supply Chain Challenges 657
Good Practice Example: Bank of America's Document Management Services 658
Conclusion 661 Chapter 18 Supply Chain Information Systems and Electronic
Sourcing 665
Evolution of E-SCM Systems 668
An Overview of the E-Supply Chain 669 Supply Chain Information Flows 669
Drivers of New Supply Chain Systems and Applications 675
Internal and External Strategic Integration 675 Globalization and Communication 675 Data Information Management 675 New Business Processes 676 Replacement of Legacy Systems 676 Strategic Cost Management 676
Enterprise Resource Planning Systems 676 Implementing ERP Systems 678
Purchasing Databases and Data Warehouses 681
Technology for Electronic Communication between Buyers and Sellers 683
Electronic Data Interchange 683 EDI and the Internet 685
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E-Sourcing Suites 686
E-Sourcing Basics 687 E-Sourcing Models 687
Supplier Relationship Management 687 Spend Analysis 688 Contract Management and Compliance 692 Supplier Performance Measurement and Control 693 Total Cost Reporting 693
E-Sourcing and Supply: Fully Integrated Systems 694
What Is Information Visibility? 694 Dell's Information Visibility System: The Benchmark 697 Benefits of Information Visibility 697
Good Practice Example: Deploying Information Visibility Systems at a Tier 1 Automotive Company 698
Conclusion 701
Chapter 19 Performance Measurement and Evaluation 705
Purchasing and Supply Chain Performance Measurement and Evaluation 708
Why Measure Performance? 709 Problems with Purchasing and Supply Chain Measurement and Evaluation 709
Purchasing and Supply Chain Performance Measurement Categories 711
Price Performance Measures 713 Cost-Effectiveness Measures 715 Revenue Measures 716 Quality Measures 716 Time/Delivery/Responsiveness Measures 717 Technology or Innovation Measures 718 Physical Environment and Safety Measures 719 Asset and Integrated Supply Chain Management Measures 719 Administration and Efficiency Measures 720 Governmental and Social Measures 722 Internal Customer Satisfaction Measures 722 Supplier Performance Measures 722 Strategic Performance Measures 722
Developing a Performance Measurement and Evaluation System 724
Determine Which Performance Categories to Measure 724
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Develop Specific Performance Measures 724 Establish Performance Objectives for Each Measure 727 Finalize System Details 728 Implement and Review System Performance and Measures 728
Performance Benchmarking: Comparing Against the Best 729
Benchmarking Overview 729 The Benchmarking Process 731 Balanced Scorecard for Purchasing and Supply 733
A Summary of Purchasing Measurement and Evaluation Characteristics 733
System Characteristics 734 Human Resource Characteristics 735
Good Practice Example: Using Measurement to Drive Continuous Supply Chain Improvement at Accent Industries 735
Conclusion 737
6 Future Directions 741 Chapter 20 Purchasing and Supply Strategy Trends 742
Expanding the Mission, Goals, and Performance Expectations 744
Developing Category Strategies Will Become Broader and More Complex 746
Strategy Formulation and Selection 748 Outsourcing of Non-Core Competencies. 749 Concluding Observations 749
Developing and Managing Suppliers as a Truly Extended Part of the Organization 750
Improving Supplier Relationships 751 Concluding Observations about Supply Base Management 752
Designing and Operating Multiple Supply Networks to Meet Customer Requirements 753
Concluding Observations 753
Leveraging Technology Enablers Takes on Additional Focus 754
Linking Collaboration Tools to Product Life Cycle Management 754 Concluding Observations 756
Collaborating Internally and Externa 11 Iy Will Grow in Strategic Importance 756
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Obtaining Innovation 757 Concluding Observations 757
Attracting, Developing, and Retaining Supply Management Talent Will Become a Key Differentiator for Success 757
Current and Future Supply Management Skills 758 Cross-Functional Skills and Teaming 758 Cross-Cultural Skills 760 "Soft-Side" Skills 760 Concluding Observations 760
Managing and Enabling the Future Supply Management Organization and Measurement Systems 761
Measuring Supply Management Performance 762 Concluding Observations 763
Twelve High-Impact Sourcing and Supply Chain Strategies for 2009-2015 763 Good Practice Example: Cessna Transforms to Achieve Leading-Edge Sourcing and Supply Status 764 Conclusion 766
Cases 769 Case 1 Case 2 Case 3 Case 4
Case 5 Case 6
Avion, Inc. 770
The Global Sourcing Wire Harness Decision 773
Managing Supplier Quality: Integrated Devices 776
Negotiation-Porto 779 Negotiation Session Requirements 779
Purchasing Ethics 780
Insourcing/Outsourcing: The FlexCon Piston Decision 783
Index 795
Index
Page numbers in italics refer to exhibits.
A ABC Europe Prortuction, 353 Aberdeen Reseat\:h, 198 Accelerated Vendor Inventory Delivery
(AVID) system, 615-617, 616 Accent Industries, 735-736 Accenture, 72,196 Acceptance, contractual, 60-61, 545-
546 Acceptance of goods, 552-553 Accessibility variable, 631-632 Accountability, 648-649 Accounting, backflush, 67 Accounting department, 61, 119 Accounts payable, 119, 652 Acknowledgments, 49 Actual authority, 542, 543 Actual price compared to plan, 713, 713 Actual prices to market index, 713-714 Administration and efficiency
measures, 720-721 Administration and support group, 161 Administrative budget, 720-721 Administrative costs in supply base, 318 Advanced supply planning, 695 Agency law, 541-542, 543 Agents, 541-542, 543, 543, 546, 551 AIAG (Automotive Industry Action
Group),685 Airbus, 189, 428, 666 Air Cargo Deregulation Act, 625 Air carriers, 634-635 Air Passenger Deregulation Act, 625 Air Products and Chemicals, 182-183,
376-377 Alcoa, 298-300, 301 Allen-Edmonds Shoe Corporation, 261 Alliances, 15, 529, 643
long-term contracts in, 513-518 Allowable cost, 715 Allstate, 657 Amazon.com, 51, 439, 440, 592, 592-
593,593,687 AMEA (American Manufacturing
Engineering Association), 240 American Airlines, 461 American Arbitration Association, 528 American Grocers, 540 American Manufacturing Engineering
Association (AMEA), 240 American Production and Inventory
Control Society (APICS), 240 American Society for Quality Control
(ASQC),240 "America's Top Organizations for
Multicultural Business Opportunities," 95
Ammer, Dean, 24 Annual contracts, 524
Annual Survey of Manufacturers, 402-403
Anti-boycott legislation, 566 Anticipatory breach, 550 Antitrust concerns, 125, 565-566 APICS (American Production and
Inventory Control Society), 240 Apparent authority, 542, 543 Apple Computer, 15, 100, 112-113,
119,745 Appraisal costs, 289 Arbitration, 506, 556 Arbitration clauses, 528 Ariba Buyer system, 79-80 ASQC (American Society for Quality
Control), 240 Asset and integrated supply chain
management measures, 719-720 Assurance of supply, 514, 514 A. T. Kearney, 661, 744, 756 ATS (Automated Targeting System), 636 AT&T, 71, 95 Attitudes, managerial, 335 Authority
defective material policies and, 101 legal, 542, 543 limits of, 574 placement of, 164-172, 171 policies on, 89-91 purchasing responsibilities, 41-42
Automotive Group, 267 Automotive Industry Action Group
(AIAG),685 Authority principle, 480 Auto fax systems, 77 Automated Targeting System (ATS), 636 Automation
at Babson College, 27, 29 of inventory tracking systems, 615 oflow-value purchases, 65,66 of requisition! sourcing process, 649 See also E-procurement
AVID (Accelerated Vendor Identity Delivery) system, 615-617, 616
B B2B,160,254,685 Babbage, Charles, 22 Babineaux, Mike, 486 Babson College, 26-31 Backdoor buying, 39 Backflush accounting, 67 Balanced scorecards, 733, 734 Balestrero, Greg, 428-429 Baltic Exchange Dry Index, 202 Bane~i,Anirvan,227, 389 Bank of America, 658-660 Bar codes, 49-50 Barfield, J on, 266 Bargaining zones, 472
Barnes, David, 497-499 Bartech Group, 266 Barter, 362-363 Batch updating, 693 BATNA (best alternative to a
negotiated agreement), 462 Baxter International, 7 Bayer, 651 Becker Group L.L.c., 291 Behavior and worldwide sourcing, 356 Behavior motivation and direction, 709 Benchmarking, 209, 729-733, 732 Beroe, 205 Best alternative to a negotiated
agreement (BATNA), 462 Best and final offers, 478, 479 Best practices
in consulting contracts, 521 leadership in diverse supplier
development, 106-107 minority supplier development,
96-97 in spend analysis, 197 supplier integration, 137-143,
138, 140 Bhote, Keki, 279, 320 Bidding, competitive
at Babson College, 27, 29 electronic, 58 policies on, 99 purchased items comparison and, 103 supplier selection by, 54-55, 216 See also Reverse auctions (e-RAs)
Bidding, expressive, 689 Big R, 125, 126-127 Bill of material files, 614' Bills oflading, 66-67, 559 Birkins, Rod, 672 Black & Decker, 67 Black Belts, 292 Black box design, 140, 140 Blanket purchase orders, 61-63, 62, 75,
78,525 Blizzard, Ronald, 759 Bloom, H., 157 BMVV, 142,332,429 Boeing, 189,219,262,275,438,666 Boilerplate contract terms and
conditions, 548-549 Bosch,748 Bose Corporation, 366 Bottleneck commodities, 213 Boulware, Lemuel R., 478 Boulwarism, 478 Boycotts, 566 Bradshaw, Carlton VV., 451 Brainstorming, 446 Brandeis, Louis, 93 Brazil,487 Breach of contract, 550-551, 553
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796 Index
Break-even analysis, 404-408, 407 Carrying costs, 589, 589 intellectual property and, 563 Brenntag North America, 241-243 Carson, Scott, 189 negotiation in, 487 Bribery, 568 Cash discounts, 397 project management and, 428-429 Bridging solutions, 482 Catalogs toy quality and, 272 Briefings on negotiation, 474 electronic,77-78 worldwide sourcing and, 352-353, British Airways, 276 online, 525 359,360 Brokers for transportation, 628-629 reducing complexity in, 54 Chinnici, Fran, 3-4 Brown, Louis, 500 supplier-managed e-catalogs, 652 Chopra, S., 670, 673 Brown, Mark, 709 Categorical system, 311-312 Chrysler, 7, 262, 275, 510, 714, 754
, .. Budgeting, 650-651, 720-721 Category, defined, 190 Cialdini, Robert, 480
\ Bungo, Mike, 267 Category strategy development CIF (cost, insurance, and freight), 560 Burns, Mike, 227-228,389 overview, 203, 203 Cisco, 70, 157 Business Directory of Hong Kong, 353 contract negotiation, 215-217 CISG (UN Convention for the Business modeling and complexity market research on suppliers, International Sale of Goods),
decisions, 611-612 204-210,207 360,566 Business models for e-sourcing, 687 portfolio analysis, 211,212-213 Citizenship, corporate, 94 Business processes and e-SCM supplier evaluation, 213-215 Clarity, 724-725
systems, 676 supplier relationships management, Clauses in contracts, 502 Business strategy and organizational 217-218 Clayton Antitrust Act (1914), 565
structure, 167 team building and project charter, Clean Air Act (1990), 97, 214, 251 Business to business (B2B) platforms, 254 204 CLM (Council ofLoglstics Business unit strategies, 192, 195 trends,746-750 Management), 285 Buy-back, 363 See also Strategy development and Closed-loop systems, 605 Buy.com, 440 category management Code of conduct at Caterpillar, 102. Buyer-seller relationships Caterpillar, 102, 148-149 See also Ethics
advantages of closer relationships, Caucus tactic, 479 Coercive power, 475 122-123 Census of U.S. Manufacturers, 205 Colgate-Palmolive, 170
collaborative, 122 Center for Advanced PurchaSing Collaboration obstacles, 123-125 Studies (CAPS), 157,648,650, in buyer-seller relationships, 122, 123 Suncor Energy example, 124 661,731,744,754,756,760,763 in cost management, 412-417, 415, traditional vs. collaborative Center for Advanced Supply 417
characteristics, 123 Management Studies, 209 negotiation and, 466 See also Supplier relationship Centers of Excellence, 78 trends,754-755,756-757
management (SRM) systems; Centralized structure Collins & Aikman Corp., 510-511 Supplier relationships Con-way example, 172-173 Co-location
Buyer's rights, 561 defined, 164 of buyer and supplier personnel, Buying channels, reducing complexity factors influenCing, 166-169 141-142, 145
in,54 history of, 165 with internal customers, 180, 181 Buying function, 161 trends, 761 quality and, 290-291 Buy-side systems, 687 worldwide sourcing and, 360, Commercial law, 544
C 361,371 Commitment management, 120
Certified Professional in Supply Commodities
CAD (computer aided design), 141, Management (CPSM) designa- bottleneck, 213
254,351,746 tion, 28 cost management and, 388
Cadbury Schweppes, 575 Certified Purchasing Manager (C.P.M.) critical, 212, 325-326
Calderon, Roy, 250 designation, 3 global markets, shifting, 389
Camp, Robert, 731 Cessna Aircraft Co., 454-456,764-765 leverage, 213
Cancellation of orders, 549-550 Change, resistance to, 125, 351 price analysis and, 397
Canon, 70 Change management, 169 price forecasting, 226-229
Capability variable, 631 Change notices, 67 price information sources, 398
Capital equipment purchase, 71-73 Charge-back costs, 101 routine, 212
Capital-intensive plant and equipment, Chemical industry, 97 Commodity coding for indirect spend,
466 Cheung Shu-Hung, 352 652
CAPS Research, 731 Chicago and Northwestern Rail- Commodity rotation, 574
Carbon Disclosure Project (CDP), 575 road,22 Commodity strategies, 192
Cardinal Health, 585-586 Chief executive officers (CEOs), 80, Commodity strategy development. See
Carrier selection, 638, 638-640 107,158,180,193 Strategy development and
Carrier types Chief financial officers (CFOs), 196 category management
air carriers, 634-635 Chief procurement officers, 180 Commodity teams, 195-196,263-264,
common carriers, 639 Chief purchasing officers (CPOs), 156, 652-653
contract carriers, 639 157-158, 166 Common carriers, 639, 640
exempt carriers, 640 China Common costs, 364-365
motor carriers, 633 Brenntag North America and, 242 Common law, 562
private carriers, 639-640 conflicts of interest and, 578 Communication
rail carriers, 633-634 Gap and, 93 e-SCM systems and, 675
water carriers, 635-636 GM and, 748 negotiation and, 462
See also Transportation heparin from, 7 performance measurement and, 709
quality and, 279 worldwide sourcing and, 356,
371-373 Communications
ED! and, 77 external linkages, 121 internal linkages, 116-118, 117
teams and, 129 Companywide purchase volumes,
leveraging, 61,7 Compensation trlding, 363
Competency stair!ase approach, 322
Competent parties, 546 Competition, perfect, 391 Competition pricing model, 397
Competitive advantage collaboration and, 757 organizational design and, 155
procure to pay cycle and, 43
supplier development and, 335
supply networks and, 753 Competitive bargaining. See Win-lose
negotiation Competitive bidding. See Bidding,
competitive Competitive environment, 5-6
Competitors as suppliers, 262
Complexity, reducing, 54 Complexity management, 611-612
Component market uncertainty, 512
Computer aided design (CAD), 141,
254,351,746 Concealed damages, 66 Concessions, 476-478, 477, 479
Concurrent processes, 450 Conditions and instructions, 60
Confidentiality, 123 Confidentiality agreements, 142,564,
565 Confirming order requisitions, 49
Conflict of interest issues, 100
Conflict resolution. See Dispute resolution
Conflicts of interest, financial, 570-571
Connelly, Peter, 226-227, 389
Consequential damages, 552 Consideration, 546 Consignment, 612 Consistency principle, 480 Consolidation, 167-168,648
Consortiums, 650 Construction contracts, 523-524
Consultant evaluation and selection,
655-656 Consulting contracts, 521-523
Contacts with suppliers, policies on, 92
Container Security Initiative (CSI), 635
Content-enabled analytics, 696
Continuity, supply, 38-39 Continuous improvement
in Deming's 14 points, 281-282
kmzen, 281, 330, 331,439-440
supplier quality and, 275 trends, 745 as way of life, 289-290, 290
Continuous measurement of supplier
performance, 68 Contract carriers, 639, 640
Contracted services process, 27, 30
Contract management and compliance
modules, 692-693 Contract price, 64 Contracts
overview, 499-501 breach of contract, 550-551, 553
buyer-seller relationships and, 123
cancellation of orders, 549-550 clauses, 499, 502-504, 506-507, 508,
513,514,516,517-518,522-523,
524,528,548,553,558,656 construction contracts, 523-524
consulting contracts, 521-523
cost-based, 64-65, 509-511
currency adjustment clauses, 368
damages, 551-552 determining methods of awarding, 42
development of, 544-546 dispute resolution, 506, 510-511,
526, 526-532 e-commerce contracts, 501, 525-526
electronic manufactUring service (EMS) example, 556
elements of, 501-506 fixed-price, 64-65, 507-509
honest mistakes, 553-554 how to write, 506-507 international, 360, 507 IT systems contracts, 518-520
law of, 541, 544-554 leaking capacitors example, 530-531
longer-term contracts with alliances
and partnerships, 513-518, 514
long-term, 513-518, 514 minority and women-owned
business contracts, 520 need for, 63-64 negotiation of, 215-217 nonperformance of, 466, 541
offer, acceptance, and consideration,
60-61,544-546 predefined language and shorter
contracts, 264 preventive contracting, 499
principles and guidelines for awarding, 98-99
procedures, 105-lO6 process of contracting, 547, 547
for professional services, 656
purchase orders as, 547, 547-549
purchasing agreements as, 524-525
Roche Diagnostics example, 497-499
schedules, 502, 503, 504, 505-506,
507,510 services contracts, 505 short-term, 512, 513 supply management, role of, 120
top 10 most frequently negotiated
terms, 532-534, 534 types, comparison and selection of,
507,508,512,512-513 Control, as supply chain management
activity, 17 Control ratios, 721 Control systems and supplier
evaluation, 253
Index
Convenience of the purchaser, cancellation for, 550
Convenience ordering systems, 78
Con-way Inc., 172-173 Cooperation and teamwork, 759
Coordination, 156 Copyright law, 561-562,563
Copyright ownership, 521-522 Corcoran, Tom, 241-242 Core competencies, 749 Corporate agreements, 525 Corporate purchasing councils, 172
Corporate purchasing office policies,
90-91,91 Corporate social responsibility,
574-576,576 Corporate steering committees, 172
Corporate strategies, 190-191, 192, 193
Corporate supplier diversity committees, 97
Corrective action requests, 285, 286,
517-518 Cost accounting system, 119, 590
Cost analysis, defined, 384 Cost analysis techniques, 399-404,
402,403 Cost avoidance, 715-716 Cost-based contracts, 64-65, 509-511
Cost-based measurement system, 313,
313-315,314,315 Cost-based pricing models, 400,
414-415,41~417
Cost-change measures, 715-716
Cost cutting for compliance, 482
Cost-effectiveness measures, 715-716
Cost management, strategic break-even analysis, 404-408,407 collaborative approaches, 412-417,
415,417 cost analysis techniques, 399-408
definitions, 384 e-SCM and, 676 pipeline costs forecast example,
394-395 price analysis, 390, 390-399, 393,
396,398,399 Southwest Airlines example, 383-384
structured approach to, 385, 385-
390,386,387,388 total cost of ownership (TCO), 221,
397,408-412 trends, 745 voice of the factory (VOF) example,
417-419 welder cost example, 405
Cost markup pricing model, 400
Cost of quality, 289 Cost per transaction, 74, 365-366
Cost plus fixed-fee contracts, 511
Cost plus incentive fee contracts, 508, 509
Cost reduction purchasing and, 7 quality and, 291 strategic planning and, 191, 191
supplier measurement and, 309
supply base and, 318
797
798 Index
Cost reduction (continued) Customs-Trade partnership Against Description by brand, 52 worldwide sourcing and, 345-346, Terrorism (C-TPAT) program, Description by industry standard, 52
348-349,376 636 Description by market grade, 52 See also Cost management, strategic Cutler, Alexander (Sandy), 264-265, Description by performance
Cost-reduction measures, 719 577-578 characteristics, 52 Cost-savings sharing pricing, 414, Cycle counts, 51 Description by specification, 52
416-417 Cycle time, 262-264, 597, 612-613, Descriptions, 51-52 Cost sharing, 327, 515 745-746 Design for supply, 695 Cost -sharing contracts, 510 Cycle time reduction measures, 718 Design of new products. See New
". Cost structure of suppliers, 214, D
product development (NPD)
\ 250-251 DHL Corp., 336, 598-599 Council of Logistics Management DaimlerChrysler, 157, 714 DiMicco, Dan, 227, 389
(CLM),285 Damages, 551-552 Direction oflinkages, 670 Council of Supply Chain Management Databases, 239-240, 654-655, 681-683 Disaster relief and inventory, 598-599
Professionals (CSCMP), 623 Data buckets, 693 Discounts, cash, 397 Counteroffer, 545, 547 Data collection, 205-206, 648 Dispute prevention, 529 Counterpurchase, 363 Data information management, Dispute resolution Countertrade, 162, 262, 362-363 675-676 overview, 526, 526 Cousins, P., 125 Data sources. See Information sources arbitration, 506, 528, 556 CPM (Critical Path Method), 430, 431 and gathering dispute prevention, 529 Critical commodities, 212, 325-326 Data warehouses, 263, 682 Ford and C&A example, 510-511 Critical Path Method (CPM), 430, 431 Davis, Russ, 165, 166 legal alternatives, 526-527 Critical suppliers, 326 Decentralized structure mediation, 528-529 CRM (customer relationship manage- advantages of, 169-170 minitrials, 529
ment) systems, 669, 673, 673, 695 defined, 164 online, 527 Crosby, Philip, 273, 275, 288 factors influencing, 166-167 rent-a-judge, 529 Cross-cultural skills, 760 policies and procedures manual. Disruptions of supply, 99, 142, Cross-functional sourcing teams and,86 218-219,319-320,593
overview, 127-138, 128 trends, 761 Distribution as supply chain manage-at Air Products, 183 worldwide sourcing and, 360, 361, ment activity, 17 benefits, 128-130 371 Distribution requirements planning drawbacks, potential, 130-131 Decision Analysis, 264 (DRP) systems, 668 effectiveness, improving, 132-136 Decision making Distribution resource planning (DRP) project management and, 433 complexity management, 611-612 systems, 614 trends, 758-759 cost and quality, 281 Distributive bargaining. See Win-lose when to form, 131 groupthink and poor decisions, 131 negotiation
Cross-functional supply manage- hybrid structure and, 170 Distributors vs. manufacturers, 243 ment,10 performance measurement and, 709 Diversity and minority suppliers,
Cross-functional teams, 51, 137-139, routine, 670 94-97, 106-107 326,451. See also Teams strategic, 670 DMAIC, 294
CSCMP (Council of Supply Chain teams and, 129 Document management, 658-660 Management Professionals), 623 transportation strategy development, Douglas Aircraft Company, 441
CSI (Container Security Initiative), 635 626,627 Dow Chemical, 97 CSM Worldwide, 511 Decision support systems (DSSs), 670 DPMOs (defects per million opportu-CSX Transportation, 3-5, 6 Deere and Company, 332-333 nities), 292-293 Culture, 356 Default, cancellation for, 550 Dragnis, John P., 202 Cultures, organizational, 332 Defective material policies, 101 DRP (distribution requirements Culture shock, 485-486 Defects, 285, 552-553 planning) systems, 668 Cummins, Tim, 120, 532-533 Defects per million opportunities DRP (distribution resource planning) Cumulative knowledge database, (DPMOs),292-293 systems, 614
654-655 Deficiency vs. problem, 259-260 DSSs (decision support systems), 670 Currency adjustment clauses, 368 Delaney, Wayne, 460 Dun & Bradstreet (D&B), 247 Currency risk, 351, 367-369 Delco Electronics, 148-149 Duplication of effort, 168 Current budget plus adjustment Deliverables, focus on, 125 DuPont, 252
measure, 720 Delivery performance, 309 Dynarnic systems, 726 Customer-centric supply measures, 762 Delivery uncertainty, 596-597, 598 Dynamichading networks, 696 Customer defects per supplier, 717 Dell Computer, 15, 52, 119, 276, 320, t Customer orders measures, 720 485,599,611-612,697,743,753 Customer relationship management Delphi, 148-149,212,511 Early supplier design involvement
(CRM) systems, 669, 673, 673, 695 Demand forecasts, uncertain, 597 (ESDI), 284. See also New product Customer satisfaction, 722 Demand management, 175, 657, 659, development (NPD) Customer service, 17, 594 695 Eaton Corporation, 264-267, 451, Customer service management, 175 Demand planning, 16 577-578 Custom items for standard Deming, W. Edwards, 279 E-auctions, 58. See also Reverse
applications, 598 Deming's 14 points, 279-283,280 auctions (e-RAs) Customization, premium pricing for, Deregulation of transportation, eBay, 440
610 625-626,640 E-bid optimization, 689 Customs laws, 567
E-catalogs, supplier-managed, 652 E-commerce contracts, 501, 525-526 E-commerce supplier capabilities, 254 Economic Cycle Research Institute,
227,389 Economies of scale, 115,208,318,633,
640, 642, 643, 748 ED!. See Electronic data interchange Edmisten, Brent, 454 Education and s~lf-improvement, 283 Effectiveness, 70\ Efficiency, 599-600, 708, 720-721 Efficient and effective purchasing
process, managing, 39 EFT (electronic funds transfer), 68 ELAMS system, 80 E-Learning Scorecard, 264 Electronic capability, expanded, 613 Electronic catalogs, 77-78 Electronic competitive bidding, 58 Electronic data interchange (EDI)
B2B platforms vs., 254 cycle time and, 65 Internet EDI, 685-686, 686 process of, 684-685 in purchasing process, 77 supplier development and, 333 system components, 683-684
Electronic funds transfer (EFT), 68 Electronic procurement. See
E-procurement Electronic purchasing commerce
through the Internet, 75 Electronic Signatures in Global and
National Commerce Act, 501 Elm, Tyler, 745 Emergency planning, 113 Emergency policies, 99 Employee capabilities of suppliers, 249 Emptoris, 693 EMSs (environmental management
systems), 100-10 1 End-of-life costs, 408, 411, 412 Engineering, ll8, 146 Enterprise resource planning. See ERP
(enterprise resource planning) systems
Entry barriers, 392 Entry qualifiers, 245 Environmental issues
poliCies on, 97 S.c. Johnson sustainability example,
750-751 social responsibility, 575-576 supplier regulation compliance, 214,
251-252 Environmental management
department, 121 Environmental management systems
(EMSs),100-101 EPIC, 20, 33n14 E-procurement
definition and benefits of, 44 electronic purchase requisition
systems, 49 at FedEx, 80 negotiation and, 467-468, 490 reorder point systems, 50 traveling requisitions, 50
See also Automation; Supply chain information systems and e-SCM
E-RAs. See Reverse auctions ERFx modules, 689 ERP (enterprise resource planning)
systems overview,676-678,677 advantages of, 671-673, 673 expediting and, 161 history of, 668 implementing, 678-679 integration with e-sourcing, 694 Premier International example,
679-681, 680 Escalation clauses, 508 Escape clauses, 63, 518 E-SCM. See Supply chain information
systems and e-SCM ESDI (early supplier design involve
ment), 284. See also New product development (NPD)
E-sourcing. See Supply chain informa-tion systems and e-SCM
E-sourcing business models, 687 E-sourcing suites, 686-687 Essar Global, 346 Ethics
overview, 567-568 Caterpillar's code of conduct, 102 Eaton example, 577-578 influence and, 571, 572 Iraqi food services example, 539-541 ISM Standards of Conduct, 571-573 policy, 92, 573-574 risks of unethical behavior, 568 supporting ethical behavior, 573-574 types of unethical behavior, 569-57l
E-transactions measures, 720 European Common Market, 294 Evaluation of suppliers. See Supplier
evaluation and selection Evergreen clauses, 517 Excellence, striving for, 586 Execution software, 20 Execution systems, 674 Executive orders, 520 Exempt carriers, 639, 640 Exhortations, 282 Exit barriers, 207 Expand the pie method, 481-482 Expectancy, 551 Expediting function, 161 Experience curves, 438 Expertise, development of, 168-169 Expert power, 476 Export Administration Act, 566-567 Expressive bidding, 689 Express warranties, 557 Extended enterprise concept, 12 Extended value chains, 11, 12 External integration linkages, 121-122 External strategic integration, 675
f Facts, in negotiation, 472 Failure costs, 289, 589
external, 289 internal, 289
Fanning, Bill, 76 Favors, 570 Fax systems, automatic, 77 Fear, 282
Index
Federal Trade Commission (FTC), 565, 569
Federal Trade Commission Act (FTCA, 1914), 565
FedEx Corporation corrective action, 285 indirect spending and, 648, 649 international negotiation and, 486 sourcing process, 78-80, 81 Staples and, 7l supplier measurement, 336-337, 338
Feedback, 709 Fiegenbaum, Armand, 273 Field failure rates by purchased item
and by supplier, 717 Finance department, 368 Financial condition of suppliers, 214,
252-253,253 Financial conflicts of interest, 570-571 Financial risk analysis, 244 Finished-goods inventory, 588 Finished products purchase, 70 Firm fixed price, 64, 507-508 First insight measure, 718 Five Forces model, 206-207, 207 Fixed-price contracts, 64-65, 507-509
with escalation, 508 with incentives, 509 with redetermination, 508-509
Flow, 586 FOB destination, 626, 627, 628, 644,
648,560 FOB (free on board), 560, 626-628, 628 FOB origin (or shipping point), 627,
628, 644, 560 Forbes, Nathaniel, 112 Force majeure, 503, 506, 507 Ford Motor Company, 7, 23, 100, 142,
194,241,262,272,510-511,595, 685,697,752
Ford, William Clay, Jr., 100, 194 Forecasts
of commodity prices, 226-229 demand forecasts, uncertain, 597 improving, 53 market forecasts and customer
orders, 50 price forecasting models, 693-694 product forecasting improvement,
609 purchasing responsibility for,
162-163 of requirements, 44-45
Foreign Corrupt Practices Act, 360, 566,568
Foreign laws, 567 Former employees representing
suppliers, 92 Forms, procedures on, 105 Fortune magazine, 172 Forward exchange contracts, 368 Founder's philosophy, 157 Fourth-party logistics (4PL), 645-646 France, 488
799
800 Index
Freight bills, 559 Friedman, Thomas, 5, 345, 485 Fritz, Lynn, 599 Fronckoski, Tim, 3 FTC (Federal Trade Commission),
565,569 Fuji Heavy Industries Ltd., 142 Full-service suppliers, 317-318 Future contracts, 551
," \G
Gantt charts, 430, 431 Gap Inc., 93-94 Garrigus, Shondra, 242-243 GDP (gross domestic product), 6, 357 General agent, 541, 542, 557 General damages, 552 General Electric (G.E.), 23, 168,575 General Motors (GM), 7, 70, 218, 262,
321,510,575,595,600,601, 645-646,697,748,755
Geographic-specific options and standards, 610-611
Germany, 488 Gillette, Tames, 511 Giunipero, Larry, 760 GlaxoSrnithKline,212 Global buying committees, 172 Global engineering and procurement
process, 182 Globalization, 345-346, 346, 675 Globalization managers, 183 Global Outlook, 205 Global positioning systems (GPSs), 20,
644,674 Global sourcing, defined, 347. See also
Worldwide sourcing Goals
aligning with internal functional stakeholders, 40
expandin~ 744-746 performance goals for teams,
135-136 supply management objectives
translated into, 193-195 supporting organizational goals, 40
Government linkages, 121-122 Gray box design, 140, 140 Greater team concept, 124 Greif,228 Gross domestic product (GDP), 6, 357 Groupthink, 131 Guest engineer program, 141 Guided buying, 695 Guide to Supplier Development, 324 Gutierrez, Marshall, 539, 540-541
Hammer, Gregg, 266 Handfield, Robert, 125 Harley-Davidson, 154-155 Harris,755 Harvard Business Review, 24 Hazardous waste policy, 97, 100-101 H.B. Fuller Corporation, 250 Health and safety departments, 121 Hedging, 368, 594-595
Hefley, Stan, 4 Henderson, Bruce D., 23 Heparin, 7 Herman Miller Inc., 157, 252 Hewlett-Packard (HP), 70, 157, 168,
387,722 High ball tactic, 479 Hill, T ohn A., 23 Hoffman, Debra, 613 Hofstede, G. H., 178 Hold-harmless clauses, 524 Holzman, Carey, 531 Honda, 7,99, 142, 157,212,324 Honda of America, 67, 330, 331, 333,
335,413-414 Honda of America Manufacturing
(HAM), 307-308, 333,413-414 Honest mistakes, 553-554 Honesty and openness tactic, 478-
479 Honeywell, 45, 145 Horizontal portals, 687 Horizontal vs. vertical organization,
178,179 Hours of service rules, 630 Huber, Mike, 72 Human resources, 18, 19 Husain, Aasim, 226 Hybrid structure, 165, 170-172, 171 Hyundai Motor Company, 332, 334
IACCM (International Association of Commercial and Contract Managers), 120,532,533,534
IBM, 70, 76, 119, 157,254,329,357, 518, 743
ICC Termination Act, 625 ICE, 205 IMF (International Monetary Fund),
226 Immelt, Teffrey, 575 Implied warranties, 557-558 Improvement, continuous. See
Continuous improvement Improvement teams, buyer-seller,
144-145 "Improve or else" approach, 321 Inbound logistics, 623 Incentives and rewards, 328, 509 Incidental damages, 552 Incoterms, 357, 358 Indemnification, 563 Independent demand systems, 614 India, 488, 563 Indirect information, 240-241 Indirect spending
overview, 622-623, 646-648, 647 Bayer example, 651 enabling tactics and strategies,
650-653 external management methods,
650 FedEx example, 649 internal management methods,
648-650 at Microsoft, 72
Saab example, 622 See also Logistics; Services;
Transportation Individualistic national culture, 178 Industrial directOries, international,
353-354 Industry standard, description by, 52 Industry Week, 291 Inefficient production and inventory,
599-600 Influence, 571,572 Informal policies, 87 Informational power, 475, 476 Information flows in e-supply chains,
669-674,671,673,686,697 Information sharing, 331, 373, 683. See
also Electronic data interchange (EDI)
Information sources and gathering for benchmarking, 730-731 cost analysis and, 40 i data warehouses, 263 external or third-party, 247 negotiation and, 471 for supplier evaluation, 238-241 supplier-provided, 245 value analysis and, 446
Information systems. See Supply chain information systems and e-SCM
Information technology (IT), 18, 20-21,248,518-520
Information visibility, 694-700 Infringement, warranty of, 558 Innovation, 129,745,753,757 INSEAD,196 Innovation measures, 718 InSight, 718 Insourcing and outsourcing as
purchasing activity, 162 Inspection, 281 Institute for Supply Management
(ISM), 8, 240-241, 391-392, 571-573,574-575,576
Insurance protection for international shipments, 366
Integrated supply, 243 Integrated supply chain management
measures, 719 Integrated supply chain management
strategies, 454-455 Integration
overview, 112-116 of accounts payable processes, 652 Apple example, 112-113 benchmarking and, 731 buyer-seller improvement teams,
144-145 Caterpillar and Delco example,
148-149 cross-functional teams (CFTs),
127-136 for customer order fulfillment, 143 cycle time and, 263 defined, 114-115 of ERP and e-sourcing, 694 external, 121-127 forms and methods, 115-116
greater team concept, 124 internal, 116-121, 117 internal and external strategic
integration, 675 of]ogistics and other SCM
applications, 674 Manitowoc example, 111-112 of marketing and purchasing,
181-182 Motorola ellj,<l:mple, 743 in new pro~ct development, 99,
137-143,138,140 on-site supplier representatives,
145-147,148 in strategy evolution, 224-225 supplier suggestion programs,
143-144 Integration clauses, 507 Integrative bargaining (win-win
negotiation), 461, 481-482, 482 Integrative strategy development,
191-193, 192 Inte~ 275, 277, 485 Intellectual property (IP), 561-565 Intellectual property law, 359, 561-565,
564 Interest, financial, 570-571 Interest of negotiators, 462 Intermodal transportation, 637 Internal customers, 12, 180, 181,263,
657 defined, 39 purchasing process and, 38-46, 43,
51,54,69 satisfaction measures, 722
Internal customer satisfaction measures, 722
Internal functional stakeholders, 40 Internal integration, 116-121, 117 Internal relationships, building, 130 Internal strategic integration, 675 Internal supply chain management,
670 International Association of
Commercial and Contract Managers (IACCM), 120, 532, 533,534
International industrial directories, 353-354
International laws, 567 International Manufacturing
Technology Show, 354 International Monetary Fund, 226 International Organization for Stand
ardization (ISO), 251, 273, 294 International purchaSing, defined, 347.
See also Worldwide sourcing International purchasing offices
(IPOs), 345, 360, 361, 374 Internet-based reverse auctions, 467.
See also E-procurement Internet commerce law, 501 Internet EDI, 685-686, 686 Internet searches, 241 Intraorganizational movement, 623 Intuit, 505 Inventory control, 16, 24, 161, 162,
599,615,680
Inventory management overview, 586-587 Amazon.com example, 592,
592-593,593 Cardinal Health example, 585-586 costs, 588-590, 589 cycle time reduction, 612-613 disaster relief example, 598-599 financial impact, 590, 590-592, 591 JIT and lean supply chains, 600-607,
601, 602, 603, 606 kanban systems, 606-607 lean supply chains, 586, 600 leveraging companywide purchase
volumes, 612 measures, 719 palladium market example, 595 perfect customer order, delivering,
6l3-615 product design standardized and
simplified, 610-612 product forecasting improvement,
609 as purchasing activity, 162 record integrity, 608-609 right reasons for inventory
investment, 593-596 stock checks, 51 suppliers, on-site inventory
management by, 612 as supply chain management
activity, 16 three-V model, 607, 608 transportation system, 605-606, 606 traveling requisitions and bar codes,
49-50 types of inventory, 587-588 wrong reasons for inventory
investment, 596-600 Inventory turnover, 253, 593,593, 719 Invoice settlement and payment in
P2P cycle, 67, ... 68 IP (intellectual property), 121, 357, 360,
466,503,521,532,561-565,577 IPOs (international purchasing offices),
345,360,361,374 Irregular business dealings, reporting, 94 Irrevocable letters of credit, 366 ISM (Institute for Supply Manage-
ment), 8, 240-241, 391-392, 571-573,574-575,576
ISM Standards of Conduct, 571-573 ISO (International Organization for
Standards), 251, 273, 294 ISO 9000:2000 registration, 294-296 ISO 9000 criteria, 251 ISO 14000 standards, 100, 296 Issues, in negotiation, 472 IT (information technology), 18,
20-21,248 Itani, Samir, 540 IT systems contracts, 518-520 I2 Technologies, 45, 697
Jackcon Capacitor Electronics Co., 530 J acobs, Irwin, 88
Jacobs, Rick, 265, 266 J affray, Piper, 670 Japan, 488-489 JCI Corporation, 333, 334 JC Penney, 672 Jeffcott, Bob, 93-94
Index
JIT. See Just-in -time (TIT) approach John Deere, 648 John Michael Personnel Group, 467 Johnson, Charles B., 764 Johnson & Johnson, 181-182 Johnson Controls, 291 Joint ownership of decisions, 129 Joint participation, 726 Jones, D. T., 586 Jones, Don, 72 JP Cannon Associates, 467 Juran,Joseph,273,296 Just-in-time (TIT) approach
K
overview, 600-601, 601 defective shipments and, 10 1 on inventory, 602, 602-604, 603 in P2P cycle, 67 purchasing system, 604-605 on waste, 601-602
Kahl, Steven, 670 Kaizen, 281, 330, 331,439-440. See
also Continuous improvement Kanban systems, 606-607 Kaplan, Robert S., 733 Katzorke, Michael R., 764 Keefe, Rod, 3 Kelly, Gary, 383 Kelly-Green, Edith, 649 Kempler, Robert, 88 Key performance indicators (KPIs),
126,504,591,641,693,733 Kirkendoll, Teresa, 455 Klingman, Dennis, 405 Knowledge networking, 696 Kolchin, M. G., 74 KOTRA,354 KPIs (key performance indicators),
126,504,591,641,693,733
l Labor costs, 403, 404 Labor issues, 93-94, 99 Language issues, 356, 486 Latent defects, 552 Law and legal issues
agency law, 541-542,543 antitrust and unfair trade practices,
565-566 authority and liability of purchasing
managers, 541-544, 543 common law, 562 contract law, 541, 544-554 electronic manufacturing service
(EMS) example, 556 global purchasing laws, 566-567 intellectual property, 561-565, 564 Iraqi food services example, 539-541 seller's and buyer's rights, 560-561 trade diversion laws, 569
801
802 Index
Law and legal issues (continued) transportation terms and risk of
loss, 559-560 UCC as source of, 554-561 warranties, 556-559 in worldwide sourcing, 357-360
Lawsuits, 500, 522 Lead division buying, 171 Leadership, 106-107, 135,282
," Lead times and worldwide soureing, \ 351
Lean supply chains, 586, 600. See also Just-in-time (JIT) approach
Lean techniques at Cessna, 454-456 Lear Corp., 100 Learmonth, Art, 410 Learning-curve analysis, 438-442, 441,
443 Learning-curve effect, 404 Learning rate, 438 Leenders, Michiel, 324 Legacy systems, 676, 678 Legal authority, of purchasing
manager, 542 Legal barriers to closer buyer-seller
relationships, 125 Legal department, 119-121,264 Legal issues. See Law and legal issues Legal subject matter, 546 Leggett & Platt, 226-227, 389 Legitimate power, 475 Lemon, Dennis, 45 Less-than-truckload (LTL) shipments,
633 Letters of credit, 365-366 Levels of functionality, 669-670 Levels of service, 519 Leverage commodities, 213 Lewis, Harold T., 23 Liability, 99, 542-544 Liking principle, 480 Limits of authority, 574 Liquidated damages clauses, 524 Litigation, 500, 522 Little r, 125-126 Local community linkages, 122 Locke, Dick, 356 Lockheed Martin Energy Systems
(LMES),615-617 Logistics
defined, 623 GM 4PL joint venture, 645-646 outsourcing of, 624 performance-based logistics (PBL),
640-642 third-party logistics (3PL), 623,
641-646,643 transportation linkages, 623-624, 624 See also Transportation
Logistics applications, 670, 673-674 Logroll method, 482 Long, Gene, 196 Longer-term contracts
benefits, 513-515, 514 buyer-seller relationships and, 123 contingency elements, 517-518 definitions, 513 risks of, 515-517
Longer-term purchase agreements, 75 Longer-term supplier relationships,
215,220,254-255 Long-term contracts, 513-518, 514 Longs Drug Stores, 609 Lopez de Arriortua, J. Ignacio, 321 L'Oreal,345 Low ball tactic, 478 Low-dollar systems, 78 Low-level negotiation, 461 Low-value purchase process, 77 LTL (less-than-truckload) shipments,
633 Lucent TechnolOgies, 360
M MackTrucks,482-485,483 MacLean,John,461 Maintenance, repair, and operating
(MRO) inventory, 588, 594, 612 Maintenance, repair, and operating
(MRO) items, 70-71 Maintenance, repair, and operating
(MRO) suppliers, 615-617 Major information search, 239 Malcolm Baldrige National Quality
Award (MBNQA), 251, 296-298,297
Management, executive, 133-134 Management capabilities of suppliers,
214,249,404 Manitowoc Co., 111-112,747 Manufacturers vs. distributors, 243 Manufacturing flow management, 175 Manufacturing processes, inefficient,
599-600 Marconi's International Register, 353 Margin pricing model, 400 Market-based pricing, 390, 390-391 Market-driven pricing models,
393-397 Market grade, description by, 52 Marketing and sales department, 119,
181-182 Marketplace uncertainty and material
hedging, 594-595 Market prices, 64 Market research on suppliers, 204-210,
207 Market-share model, 393-395 Market skimming model, 395 Market structure, 391 Markup pricing, 400 Master Service Agreements (MSAs), 505 Material control, 16, 644 Material discrepancies, 67 Material handling, efficient, 605-606 Material hedging, 594-595 Material packing slips, 66 Material pipelines, extended, 598 Material purchase releases, 63 Material requirements planning (MRP)
systems, 50, 614, 668 Materials handling, 16 Materials management concept, 24 Material Specification Management,
666-667
Material specifications. See Specifica-tions
Material yield, 596 Mattel, 272, 352 Maverick buying and selling, 41, 54 Maverick spend, 648-649, 652 Maytag Corp., 410 McDonald's Corporation, 316, 352 McNerney, Jim, 189 Meaningful tasks, 132 Measurement
as enabler of supply chain excellence, 18, 21
by objective, 283 objective vs. subjective, 284-285 See also Performance measurement
and evaluation; Supplier measurement
Mediation, 528-529 Meindl, P., 670, 673 Merchantability, warranty of, 558 Merrill Lynch, 576, 655 Metrics, 21, 327, 697-698, 706-708,
710, 718, 733 Mexico, 489 Microsoft, 72 Miles, Larry, 442 Minitrials, 529 Minor information search, 239 Minority- and women-owned business
enterprise (MWBE), 504, 722 Minority business suppliers
contracts and, 520 leadership ancl, 106-107 measures, 722 policies on, 94-97
Minor to moderate information search, 238,239
Misrepresentation, 570 Mission, expanding, 744-746 Mistakes, honest, 553-554 Mitchell, Pierre, 695-696 Mitsubishi Motors Corp., 142 Modwar approach, 519 Monczka, Robert, 132, 135 Monopolies, 391 Most Favored Customer clauses, 514 Motor Carrier Act, 625 Motor carriers, 633 Motorola, 743 MRO inventory, 588, 594, 612 MRO items, 70-71 MRP (material requirements planning)
systems, 50, 614, 668 MSAs (Master Service Agreements), 505 Multiple vs. single sourcing, 244 Munoz, Oscar, 4 Mutual assent, 546 Mutual consent, cancellation by, 550 MWBE (minority- and women-owned
business enterprise), 504, 722
NAFTA (North American Free Trade Agreement), 346, 348
Nardone, J., 157
National Association of Purchasing Agents, 23
National buying agreements, 525 National contracts, 525 National Science Foundation (NSF),
137 National Surface Transportation Board
(NSTB),559 Natural disasters, 113,218-219,
598-599 " NCR Corpora11ion, 333-334 Needs '\
identifying requirements, 44-45, 237,464
in negotiation, 462-463, 471-472 Negotiated Rates Act, 625 Negotiation
overview, 460-461 American Airlines example, 461 bidding vs., 55-56 of blanket purchase orders, 63 Boulwarism, 478 concessions, 476-478, 477, 479 of contracts, 215-217 definitions, 461-463 effective negotiators, 468 e-sourcing systems and, 692 five-phase process, 464-470, 465 international, 485-491 low-level, 461 Mack Trucks example, 482-485, 483 planning, 467-468,470-474, 473 power in, 474-476 principle-based, 461 railroad example, 460 strategy, 473 tactics, 468, 473, 478-481 Texas Instruments example, 491 of transportation rates and services,
640 Triangle Talk tool, 463, 463-464 win-win, 461, 481-482, 482
Nelson, Dave, 212 Network design applications, 674 New product development (NPD)
Chrysler example, 753 cross-functional teams, 51,139-140 early supplier involvement as
strategy, 221 introduction ramp-up schedules and
dates, 718 kaizen and, 439 policies on early supplier involve
mentin,99 qUality and, 284 supplier integration best practices,
137-143, 138 target pricing and, 413 white, gray, and black box design,
140,140 Nike Inc., 93 Nissan, 7, 99, 142, 324 Nolting, Bruce, 234-235 Non-core competencies, outsourcing
of, 749 Nondisclosure or confidentiality
agreements, 142, 564, 565 Nonmanipulable measures, 727
Nonspecific compensation method, 482
Nortel Networks, 157 North American Free Trade Agree-
ment (NAFTA), 346, 348 Norton, David P., 733 NPD. See New product development NSF (National Science Foundation),
137 NSTB (National Surface Transporta
tion Board), 559 Nucor, 227, 389 Nunn, Sam, 100
o Oakhurst Dairy, 575 Objective measurement, 284-285 Objectives
defined, 470 minority- and women-owned
business enterprises, 722 for negotiation, 470 organizational, 40 for performance measures, 727-728 policies on, 90 purchasing objectives, 38-41 supply management and enterprise
objectives, 190-195 supply management goals and,
193-195 Objectivity, 724 Occupational Safety and Health
Administration, 121 Ocean Shipping Reform Act (OSRA),
625 Ocean shipments, 636 O'Connor, J. 0., 132 OEMs (original equipment manufac-
turers),243 Offers, contractual, 60-61, 544-545 Offset, 363 Oligopolies, 391 Ombudsmen, 331 OneSource, 45 Online dispute resolution, 527 Online ordering systems to suppliers,
75-77 Online ordering through electronic
catalogs, 77-78 Online purchasing. See E-procurement Online requisitioning systems, 74 On-site inventory management, 612 On-site relationship managers, 53 On-site supplier representatives,
145-147, 148 On-time delivery/responsiveness
measures, 717-718 Open-ended orders, 525 Open price term clauses, 548 Open systems, 696 Operating policies, 100-103 Operational benchmarking, 729 Operational procedures, 106 Operational support and follow-up
group, 160-161 Operational vs. strategic purchasing,
163, 164
Index
Operations, 116-118,594,714 Opportunism, 516 Opportunity costs, 409-411 Optimization. See Supply base
rationalization and optimization Option requests database, 611 Options, frequently requested, 611 Oracle, 4, 45, 198,518,673,687,696 Order-cycle time measurement, 613 Order fu!fillment
on-site supplier representatives and, 145-147, 148
perfect orders, 613-615, 721 supplier integration into, 143
Ordering costs, 588 Order proceSSing, 16-17 Organizational cultures, 332 Organizational design and structure
overview, 155-156 centralized, decentralized, and
hybrid structure, 164-172, 171 definition and features of, 19 as enabler of supply chain
excellence, 18, 19-20 future of, 178-181, 179, 180, 181 Harley-Davidson example, 154-155 indirect spending and, 651 purchasing department activities,
161-163 purchasing's position, 156-158, 159 specialization within purchasing,
158-161 for supply chain management,
174-175,176 trends, 761, 761-762, 762 Tyco example, 165-166 worldwide sourcing and, 360,
361-362 Organizational goals and objectives, 40,
726 Organizational strategies, integrating
with, 40-41 Original equipment manufacturers
(OEMs),243 OSRA (Ocean Shipping Reform Act),
625 Outbound logistics, 624 Output vs. process, 285-287 Outsourced environment
integration and, 116 non-core competencies and, 749 quality assurance and, 119,276 risk exposure and, 219-220 See also Worldwide sourcing
Outsourcing, 6, 39, 218-219, 346, 385, 653
China example, 359 vs. insourcing, 162 of logistics to third-party providers,
642-646 of non-core competencies, 749 of purchase requirements, 276 of services, 647 of supply management, 650
Overhead costs, 403, 523 Overseas factories, labor abuses at, 93 Owens, Jim, 102 Ownership, 170,290-291
803
804 Index
P P2P cycle. See Procure to pay (P2P)
cycle and process Packaging for foreign purchases, 366
Packing slips, 66 Pareto charts, 199, 199-200,200,201,
204 Partners, strategic, 751
i. Partnerships, 15,291,310,320,324,612
.\ long-term contracts in, 513-518
Parts per million, 716-717 Parts standardization, 748 Patent indemnification clauses, 563
Patent infringement, 558 Patent law, 561, 563 Patents, 558, 561-565, 564 Paterson, John, 76 PBL (performance-based logistics),
640-642 Pekman, Robert, 254-255 Penalty clauses, 524 Penetration pricing, 393-395 Pennsylvania Railroad, 22 Perfect competition, 391 Perfect-launch revenue, 716 Perfect orders, 613-615, 721 Performance-based logistics (PBL),
640-642 Performance characteristics,
description by, 52 Performance expectation trends,
744-746,746 Performance goals for teams, 135-136
Performance improvements and longterm contracts, 517
Performance measurement and evaluation
overview, 708-711 Accent Industries example, 735-
736 administration and efficiency
measures, 720-721 asset and integrated supply chain
management measures, 719-720
benchmarking, 729-733, 732 categories overview, 711, 712 continuous, 68 cost-effectiveness measures, 715-716
DairnlerChrysler example, 714
global automotive parts example, 706-708
government and social measures,
722 human characteristics, 735 internal customer satisfaction
measures, 722 physical environment and safety
measures, 719 price performance measures, 713,
713-715 Procter and Gamble perfect order
example, 721 professional services and, 656-657
quality measures, 716-717 revenue measures, 716 semiconductor case example, 734 in SRM systems, 693
strategic performance measures,
722-723,723 supplier performance measures, 722
supplier selection and, 244-245
system characteristics, 734-735
system development, 724-728, 725, 726
technology or innovation measures,
718 time/ delivery/responsiveness
measures, 717-718 trends, 762-763
Performance-reporting frequency, 728
Personal buying, 569 PERT (Program Evaluation and Re-
view Technique), 430, 431, 435
Peters, 1. H., 132 Philosophy of a founder, 157 Philosophy of management, 167
Physical environment measures, 719
Physical on hand (POH), 51, 608-609
PIE Nationwide, 366 Pipeline/in-transit inventory, 588
Pipelines, 636 Plaat, Mitch, 172-173 Place, J eff, 267 Planned concessions, 479 Planning
advanced supply planning, 695 benchmarking and, 731 contracts and, 515 cross-functional teams and, 132-133
distribution resource planning (DRP) systems, 614
for emergencies, 113 integrating with organizational
strategies, 40-41 MRP systems, 50, 614 for negotiation, 467-468, 470-474,
473 production planning, 17 in project management, 427-428 sales and operations plans, 116-117
supply chain inventory planners, 615
supply planning, 16 work team planning guide, 177
Planning and control systems, 214
Planning and control techniques for project management, 430-431, 431
Planning software, 20 Plant utilization and cost reduction,
403-404 POH (physical on hand), 51, 608-609
Policies advantages and disadvantages of,
87-88 on buyer-seller relationships, 98-100
decentralized cement company example, 86
defined, 87 effective, 88-89 emergency, 99 on ethics and behavior, 91-94,
573-574 informal, 87 on operational issues, 100-103
professional services and compliance
with, 657
on related-party transactions, 100 review and updating of, 87
for role of purchaSing, 89-91, 91
on social and minority business objectives, 94-97
supplier relationship policies at Wal-Mart, 88
Pollak, Lindsey, 575 Pollution, industrial, 97 Porter, Anne Milien, 654 Porter, Michael, 11, 206 Porter Five Forces, 206-208, 207 Portfolio analysis, 211, 212-213
Portfolio management, 696 Port terminal and handling fees, 367
Positions in negotiation, 462, 472-473, 473
Power in negotiation, 474-476 Power spenders, 652 PPI (Producer Price Index), 396,
397-399,398,399 Pratt Industries, 266 Prebudget savings, 651 Preferred customers, 274 Preferred suppliers
contract negotiation and, 216 cycle time and, 264 database of, 655 defined, 54-55 information from, 239 leverage commodities and, 213
relying on, 58 use of, 246
Premier International, 679-681, 680
Premium pricing, 610 Prevention costs, 289 Prevention of defects, 285 Prevention of disputes, 529 Prevention of unethical behavior, 574
Preventive contracting, 499 Price-adjustment mechanisms in
contracts, 517 Price analysis
defined, 384 economic conditions, 391-392 market-driven models, 393-397
market structure, 391 pipeline costs forecast example,
394-395 Producer Price Index (PPI), 396,
397-399,398,399 reverse price analYSiS, 388, 401-404,
402,403 seller pricing strategies, 392, 393
supply and demand, 390, 390-391
Price discrimination, 565-566
Price forecasting, 226-229, 693-694
Price increase tactic, 479 Price performance measures, 713,
713-715 Price term, 548 Price volume model, 393 Pricing
cost-based pricing models, 400, 414-415,415,417
cost-savings sharing pricing, 414, 416-417
fixed-price contracts, 64-65, 507-509
open price term, 548 premium pricing for customization,
610 product specifications and, 400-401 target pricing, 385-387, 413-414,
416-417,715 Pricing agreements, 525 Pride, Steve, 234 Principals, 541-542, 543, 546 Principle-based n,e;gotiation, 461 PrintSmart, 659-.,60 Private carriers, 627, 639-640 Proactive purchasing, 51 Problem identification and resolution,
129-130 Problem vs. deficiency, 259-260 Procedures and procedure manuals
areas covered, 105-106 decentralized cement company
example, 86 definition and overview, 103-105, 104 systems contracts and, 519-520
Process and technological capabilities of suppliers, 251
Process approach, 9, 28 Process capability, 214, 287-288, 404 Processes, standardized, 53 Process focus, 285-287 Process loss, 130-131 Process mapping, 263, 447-453, 452,
453 Process or technological uncertainty,
513 Procter and Gamble, 721, 755 ProctorLink, 366 Procurement cards issued to users, 74,
212 Procure to pay (P2P) cycle and process
approval, contract, and purchase order preparation, 58-63, 59, 62
contracts and, 63-65 cycle, 42-44, 43 invoice settlement and payment,
67-68 needs clarification and requisition
ing, 46-52, 47, 48 needs forecasting and planning,
44-46 receipt and inspection, 65, 65-67, 66 records maintenance, 68 re-engineering, 68-69 subject matter insights into, 53-54 supplier identification and selection,
54-58,57 supplier performance measurement,
68 Producer Price Index (PPI), 396,
397-399,398,399 Product and process technology,
international, 349 Product development. See New
product development (NPD) Production and support items
purchase, 7l Production outputs of a new supplier
technology, 718 Production planning, 17 Production scheduling, 253
Product life cycle management, 754-755
Product speCifications. See Specifications
Professional services sourcing, 653-657 Program Evaluation and Review Tech-
nique (PERT), 430, 431, 435 Project, defined, 425-426 Project 10X, 731, 763 Project charters, 204 Projections. See Forecasts Project charter, 203, 204 Project leads, 204 Project management
China and, 428-429 defined, 425-426 house-building example, 424-425 network rules, 431, 432-433 phases of a project, 426-430, 427 planning and control techniques,
430-431,431 sourcing strategy example, 433-434,
434 success, measuring, 426 with time estimates, 435-437, 437
Promotional pricing model, 395-397 Proprietary supplier technology, 514 Prototypes, 52 Public Warehousing Company,
539-540 Pull, 586 Pull systems, 720 Purchase agreements. See Purchase
orders Purchased item comparisons, 101-103 Purchase order issuance modules, 692 Purchase orders, 59
blanket, 61-63, 62, 75, 78, 525 conditions and instructions, 60 as contracts, 547,547-549 invoices, matching to, 37 longer-te= purchase agreements,
75 monitoring, 65, 67 process of, 60-61 purchasing agreements as contracts,
524-525 Purchase price to market index,
713-714 Purchase price variance from plan,
713,713 Purchase requisitions, 47
description of, 46-49 flow of, 48, 49 traveling,49-50
Purchase volumes, annual, 205 Purchasing
defined, 8 evolution of, 21-25 importance of, 6-8 as supply chain management
activity, 15 supply management vs., 8, 10 as support activity, 12
Purchasing administrative budget, 720-721
Purchasing authority, 89-90,164-173, 171
Index
Purchasing cycle, 44, 55, 65, 68, 105, 464,687
Purchasing department activities, 161-163. See also Organizational design and structure
Purchasing efficiency and cost reduction, 404
Purchasing magazine, 8 Purchasing Medal of Excellence,
264-267 Purchasing managers
authority and liability of, 541-544, 543
ethics and, 568 in organizational structure, 166
Purchasing process defined, 38 FedEx example, 78-80, 81 flow chart, 43 improvement of, 74-78 objectives, 38-41 procedures, 105 types of purchases, 69-73 See also Procure to pay (P2P) cycle
and process Purchasing research group, 160 Purchasing workload in/out, 721 Pyzdek, Thomas, 292 PZL Swidnik, 455
Q QDA (quantity discount analysis), 446,
448,449-450 Qualification of suppliers, 54. See also
Supplier evaluation and selection Quality
defined, 273 inventory and, 596 TIT purchasing and, 605 measures of, 716-717 supplier quality and product quality, 7 supply chain management activity,
quality control as, 16 worldwide sourcing and, 349 See also Supplier quality manage
ment; Total quality management (TQM)
Quality assurance, 118 Quality at the source, 283-284 Quality control, 16, 444-445 Quality costs, 589-590 Quality management of suppliers, 251 Quality performance, 309 Quantity discount analysis (QDA),
446,448,449-450 Quantity discounts, 595-596 Questions tactic, 479 Quotas, 283
R Radio frequency identification (RFID),
20 Rail carriers, 633-634 Rank reverse auctions, 689 Rate-of-return pricing model, 400 Rationalization. See Supply base
rationalization and optimization
805
806 Index
Raw material and semifinished item inventory, 587
Raw material costs, 202 Raw materials purchase, 70 Raytheon, 323 Reactive purchasing, 51 Real-time updating, 693 Receiving, 16, 65, 65-67, 553 Receiving and inspection modules, 692
," Receiving discrepancy reports, 67 .\ Reciprocation principle, 480
Reciprocity, 92, 569 Record integrity, 608-609 Record on hand (ROH), 51, 608-609 Records maintenance, 68 Recovery and recycling (reverse
logistics), 624 Redesign of the purchasing process, 77 Redetermination, fixed-price contracts
with, 508-509 Re-engineering, 68-69, 678-679 Referent power, 476 Regan, Rich, 4 Regional buying groups, 171-172 Regular reverse auctions, 689 Rejection of goods, 552-553 Related-party transactions, 100 Relationship management (RM), 115,
335. See also Supplier relationship management (SRM) systems
Relationship managers, on-site, 53 Reliability variable, 631 Reliance, 551 Rent-a-judge, 529 Reorder point systems, 50-51 Reporting frequency, 309-310, 728 Reporting of unethical behavior, 574 Reputation, 568 Requests for information (RFls),
209-210 Requests for proposal (RFPs), 58, 79,
97,468 Requests for quotation (RFQs)
in Babson College example, 29 competitive bidding and, 55 contracts and, 547 defined,689 form, 56, 57 onIine, 468 RFQ modules, 689 supplier selection, final, 216
Requirements, 44-45, 237, 464 Requisitioning
overview, 46 automation of, 649 online systems, 74 purchase requisitions and statements
ofwork,46-49,4~48 requisitioners, 51 traveling requisitions and bar codes,
49-50 Research function, 162-163 Residuals, 521 Resin Technology Inc., 227, 389 Resistance to change, 125,351 Resource support for teams, 132-133 Responsibilities of purchasing, 41-42
Responsible Care program, 97 Responsiveness, 746 Restitution, 551 Results-monitoring process, 217-218 Return channel processes, 175 Return on investment, 591 Return on net assets (RONA), 460 Revenue measures, 716 Revenue pricing model, 395 Revenues, increasing, 191, 191 Reverse auctions (e-RAs)
as category strategy, 221-222 defined,58 e-SCM and, 689-692 indirect spending and, 650 Internet-based,467 portfolio analysis and, 213 rank,689 regular, 689
Reverse logistics, 624 Reverse price analysis, 388, 401-404,
402,403 Reverse supply chains, 11 Revocable letters of credit, 366 Reward power, 475 Rewards and recognition, 134 RFID (radio frequency identification), 20 RFls (requests for information),
209-210 RFPs (requests for proposal), 58, 79,
97,468 RFP software, 264 RFQ modules, 689 RFQs. See Requests for quotation Rightsizing, 218 Rights of buyer and seller, 560-561 Riken Corp., 142 Rio Tinto, 346 Risk
China and risk management, 359 currency risk, 351, 367-369 defined,318 with fewer suppliers, 319-320 financial risk analysis, 244 identifying and mitigating, 745 long-term contracts and, 515-517 supply base risk, 318 supply risk management, 218-220 systems contracting and, 518-519 of unethical behavior, 568
Robert Morris Associates, 402, 403 Robinson-Patman Act (1936), 566 Roche Diagnostics, 497-499 Rockwell Collins, 455-456 Roehm, Julie, 88 ROH (record on hand), 51, 608-609 Rohan, Kevin, 467 Rolls-Royce, 666-667 RONA (return on net assets), 460 Ronchetto, Dan, 228 Routine commodities, 212 Routine decision making, 670 Royalty revenues, 716 Rules of action, 87 Russia, 489, 595 Russo, Peter, 26-31
s Saab,622 Safety measures, 719 Safety requirements, 523 Salaries, 8 Sales, general, and administrative
(SGA) expenses, 402 Sales and operations plans, 116-117 Sales representatives, 146, 239 SAP, 37,45,53, 72, 198,518,673,687,
696, 708 Sara Lee Corporation, 540 Sarbanes Oxley Act, 197 Saudi Arabia, 489 S.c. Johnson, 750-751 Scarcity principle, 480 Schedules in contracts, 502, 505-506 Scheduling, 17 SCM. See Supply chain management Scope creep, 653-654; 657-658 Scope of agreement, 502 Scorecards, balanced, 733, 734 Scorecards, supplier, 215, 217, 693 Scott, H. Lee, 88 Scrase, Kerry, 456 Second-party information, 240-241 Security, maritime, 635-636 Selection of suppliers. See Supplier
evaluation and selection Selex, 344-345, 349 Seller's rights, 560-561 Sell-side systems, 687 Semifinished products and components
purchase, 70 Sensitivity analysis, 405, 749 Sequential processes, 450 Service-level agreements (SLAs), 641 Services
attention to purchases of, 71 category strategies and, 202 contracts, 505, 518-520 document management at Bank of
·America, 658-660 indirect spending, 647, 647 inventory and, 586 Iraqi food services example, 539-541 IT suppliers, 248 monitoring purchases orders or
SOWs; 67 profeSSional, 653-657
Settlement zones, 472 Shared approach, 519 Shared schedules measures, 720 Sharp practices, 570 Sherman Antitrust Act (1890), 565 Shipmaster, 366 Shipment tracking systems, 644 Shipping, 17. See also Transportation Shook, John, 586 . Short-term contracts, 512, 513 "Should cost" analysis, 401 Shull, Jana, 72 SIC (standard industrial code), 397,
403 Signatures, electronic, 501, 526 Silence tactic, 479
Single vs. multiple sourcing, 244 Site visits, 245-246, 246, 250 Six Sigma, 292-294, 293,323 Size relationship with suppliers, 261 SLAs (service-level agreements), 641 Small business enterprises, 722 SME Initiative, 329 Smith, Frederick W., 174 Social measures, 722 Social objectifes, 262 Social proof ptinciple, 480 Social responsibility, corporate,
574-576,576 Soft-side skills, 760 Software, 20, 696. See also Supply
chain information systems and e-SCM
Solectron, 157,330,332 Sony, 119, 348 Sourcing councils, 76 Sourcing strategy. See Strategy
development and category management
Sourcing teams. See Cross-functional sourcing teams
Southwest Airlines, 383-384 SOWs (statements of work), 49, 67 Span of control, 41, 42 Special agent, 542, 557 Special Edition, 264 Specifications
authority to review, 42 description by specification, 52 negotiation and, 466 pricing and, 400-401 quality and, 279 RFQs and, 56
Speculating, 368 Speed variable, 629-631 Spend analysis
at category level, 204 consolidation of purchase volumes,
167-168 defined, 68 Honeywell's OneSource, 45 at IBM, 76 Pareto charts, 199, 199-200,200,
201 SRM and, 688-692 strategy development and, 196-202,
197,198 trends, 754
SPEX evaluation kits, 264 Spot buys, 61 Spot contracts, 513 Spreadsheet, spend analysis, 198, 198-
202 SRM. See Supplier relationship
management (SRM) systems Staggers Rail Act, 625 Stakeholders
internal, 40 interviews with, 205 joint ownership of decisions, 129 Porter Five Forces and, 206 strategic sourcing and, 203
Standard industrial code (SIC), 397, 403 Standardization measures, 718
Standardization of direct spend, 649-650
Standardization of parts, 748 Stanford University, 196 Staples, 71 Starkweather, Jim, 410 Statement of responsibility, 280 Statements of work (SOWs), 49, 67 Steering committees, 172, 182-183 Stevens, John, 72 Stewart, Shelley, Jr., 165, 323 Stock checks, 51 Storage, 16. See also Logistics Strategic benchmarking, 729 Strategic business units (SBUs), 646-
647, 763 Strategic cost management. See Cost
management, strategic Strategic decision making, 670 Strategic negotiation, 473 Strategic resourcing process, stan-
dardized, 166 Strategic responsibilities, 9 Strategic sourcing. See Category
strategy development; Supply management
Strategic sourcing matrix. See Portfolio analysis
Strategic suppliers, 212 Strategic vs. operational purchasing,
163,164 Strategies, purchasing and organiza
tional, 40-41 Strategy development and category
management Boeing example, 189 category strategy and commodity
teams, 195-196 category strategy development, 203,
203-218 commodity forecasting, 226-229 cycle time and, 263-264 evolution of strategy, 222-225, 223 integrative strategy development,
191-193, 192 organizational structure and, 168 project management and, 433-434,
434 spend analysis, 196-202, 197, 198,
199,200,201 supplier evaluation process and,
237-238 types of strategies, 218-221
Strategy trends Bosch parts standardization
example, 748 category strategies, 746-750 Cessna example, 764-765 Chrysler design process example,
753 collaboration, 754-755,756-757 cooperation and teamwork, 759 Ford's Aligned Business Framework,
752 GM and China sourcing example,
748 Harris's EXPO program, 755
Index
Manitowoc global sourcing example, 747
mission, goals, and performance expectations, 744-746, 746
Motorola supply chain integration example, 743
organization and measurement, 761, 761-764,762
S.c. Johnson sustainability example, 750-751
supply base management, 750-753 supply management talent, 757-761,
758 supply networks, multiple, 753 technology enablers, 754-756, 756
Strengths and weaknesses, analysis of, 470-471
Strikes, 99 Striving for excellence, 586 Stromer, Magnus, 622 Subcategories, 203 Subjective measurement, 284-285 Subject matter experts (SMEs), 53-54,
69 Suggestion programs, 143-144 Sultan Center, 539 Sun, 70, 157 Suncor Energy, 124 Supplier analysis, 209-210 Supplier catalog, 212, 388 Supplier certification, 285, 298-300,
301 Supplier Champions Program (SCP),
333 Supplier codin& 652 Supplier Continuous Quality Improve
ment (SCQI) program, 277 Supplier dependency, 319 Supplier development. See Supplier
management and development Supplier diversity programs (SDPs),
94-97 Supplier evaluation and selection
overview, 236 category strategy and, 213-215 chemical distributors example,
241-243 competitors as suppliers, 262 for consultants, 655-656 countertrade requirements, 262 cross-functional teams for, 137-139 cycle time, reducing, 262-264 Dun & Bradstreet example, 247 Eaton example, 264-267 final selection process, 216-217, 247 identification and selection process,
54-58 international suppliers, use of, 261 IT suppliers, 248 key criteria, 248-255 key requirements, identifying, 237 long-term contracts and, 516 method, determining, 245-247 potential sources, identifying,
238-241 as purchasing responsibility, 41 quality and, 284 recognizing need for, 236-237, 238
807
808 Index
Supplier evaluation and selection ( continued)
selection pool, limiting, 244-245 seven-step process, 236, 237 size relationship, 261 social objectives, 262 sourcing alternatives, 243-244 sourcing strategy, determining,
237-238 survey development, 255-261, 256,
257,260 Toyota Industrial Equipment
Manufacturing example, 234-235 worldwide sourcing and, 355-356
Supplier managed inventory (SMI) measure, 720
Supplier management and development
overview, 308 applications, history of, 324-325 barriers to, 328-335 at Cessna, 455 FedEx example, 336-337, 338 Honda of America Manufacturing
example, 307-308 inventory management and, 613 process map for, 324, 325-327, 328 results, 327, 328 supplier measurement, 308-315,
310,311 as supply management strategy, 221 See also Supply chain management
(SCM) Supplier measurement
overview, 308-309 decisions in, 309-310, 310 types of techniques, 311, 311-315,
312,313 Supplier measurement and control
modules, 693 Supplier opportunism, 516 Supplier performance index (SPI),
313-315,315 Supplier performance measurement.
See Performance measurement and evaluation
Supplier quality, defined, 274 Supplier quality management
overview, 273-276 Boeing B-777 aircraft example, 276 continuous improvement, 275 ISO standards and, 294-296 Malcolm Baldrige National Quality
Award, 251, 296-298, 297 Six Sigma, 292-294,293, 323 supply management's role in,
276-278 toys example, 272-273 from TQM perspective, 278,
278-291,280,28~290
Supplier relationship management (SRM) systems
category strategy development and, 217-218
contract management and compliance, 692-693
critical elements for, 125-127 ERP and, 669
e-sourcing suites, 686-687 functionalities of, 673, 673 relationship management (RM)
skills, 115 sourcing modules overview, 687-688 spend analysis, 688-692, 754 supplier performance measurement
and control, 693 total cost reporting, 693-694 trends, 751-752
Supplier relationship managers, 217 Supplier relationships
longer-term, 215, 220, 254-255 policies on, 88, 92, 98-100
Supplier Relations Working Index, 7 Supplier research, 210 Suppliers
competitors as, 262 critical, 326 defective material policies and, 101 environmental policies of, 97 external linkages with supply
management, 121 former employees representing, 92 full-service, 317-318 as information sources, 239 irregular business dealings,
reporting, 94 labor issues and, 93-94, 99 large vs. small, 244 limited interest by, 123-125 local, national, or international,
243-244 manufacturers vs. distributors, 243 market research on, 204-210, 207 minority business suppliers, 94-97,
106-107 number of, 218 online ordering systems to, 75-77 for on-site inventory management,
612 performance measurement and
management, 68 primary contact with, 42 selection criteria policies, 98 strategic, 212 transactional, 212 users allowed direct contact with,
78-80 See also Preferred suppliers
Supplier scorecards, 217, 693 Supplier selection scorecards, 215 Supplier suggestion programs, 143-144 Supplier surveys, 255-261, 256, 257,
260 Supplier value improvement process
(SVIP),455 Supplier visits, 245-246, 246, 250 Supply and demand, 390, 390-391 Supply base management, 39-40,
750-753 Supply base rationalization and
optimization overview, 316-317, 322 advantages of, 317-319 Cessna example, 764-765 formal approaches to, 320-322 measurement data and, 310
for professional services, 656 quality and, 288 risks with fewer suppliers, 319-320 supply management strategy and,
218,224 Supply chain information systems and
e-SCM overview, 667-668 automotive example, 698-700 databases,681-683 drivers of new e-SCM systems,
675-676 EDI and, 683-686, 686 emerging technologies, 695-696 ERP systems, 668, 67l-673, 673,
676-681,677 e-sourcing business models, 687 e-sourcing suites, 686-687 evolution of, 668, 668-669 information flows, 669-674, 671, 673 information visibility, 694-701 integration of ERP and e-sourcing
systems, 694 JC Penney example, 672 Premier International and ERP,
679-681,680 Rolls-Royce example, 666-667 SRM systems, 687-694 technology trends, 754-756, 756
Supply chain inventory. See Inventory management
Supply chain inventory planners, 615 Supply Chain Leadership Council, 575 Supply chain management (SCM)
activities of, 15-17 Bose and international purchasing,
366 defined, 10 design trends, 753 electronic (see Supply chain informa-
tion systems and e-SCM) emergence of concept, 6 enablers of excellence, 17-21, 18 evolution of, 21-25 at FedEx, 78 integrated, 25 integrative strategies, 193 internal, 670 map of systems, 670-674, 671 organizational structure and, 174-
175,176,180 origins of, 174 supplier diversity programs and, 97 by suppliers, 254 See also Supplier management and
development Supply chain orientations, 10 Supply Chain Resource Cooperative
(SCRC), 96,106-107 Supply chains
benefits of, 15 cost management and, 385, 385 defined, 10 disaster relief and, 599 disruptions in, 99, 142,218-219,
319-320 emergence of concept, 6 illustrated, 12-15, 13, 14
Iraqi food services example, 539-541 maritime security, 635-636 processes, 10-11 relationships in, 13-15 reverse, 11 at risk, 112-113 service challenges, 657-658 value chains vs., 11-12
Supply continuity objective, 38-39 Supply disruFlJ;ion, 275, 318, 319-320,
353, 514593-594 Supply integra1ion, 114. See also
Integration Supply management
contracts, role in, 120 cross-functional, 10 definitions, 8-9, 9 emerging technologies in, 695-696 enterprise objectives, aligning with,
190-195 external linkages, 121-122 FedEx strategic sourcing process, 81 internal linkages, 116-121, 117 objectives translated into goals,
193-195 on -site representatives and, 146 outsourcing of direct spend, 650 process approach, 9 product development, role in, 137 as purchasing activity, 163 purchasing vs., 8, 10 quality management and, 276-278 strategic and operational purchasing,
separating, 163, 164 suggestion programs, 143-144 supply integration (see Integration) transportation, role in, 626 trends, 757-761, 758
Supply management strategy. See Strategy development and category management
Supply market intelligence, 41 Supply networks, 748-749, 751, 753 Supply planning, 16 Supply risk management, 218-220 Support-activity benchmarking,
729-730 Sustainability,750-751 Suzuki Motor Corp., 142 SVIP (supplier value improvement
process),455 Sweatshops, 93 Switching costs, 207, 208, 221, 319 Switch trading, 363 SWOT analysis, 208, 209 Synergies with team interaction, 129 Systems contracts, 518-520 Systems outsourcing. See Systems
contracts
T Tactical vs. strategic purchasing, 163,
164 Tactics in negotiation, 468, 473,
478-481 TAL Apparel Ltd., 672 Tamimi Global, 540
Target pricing, 385-387, 413-414, 416-417,715
Tariffs, 73 Task selection in teams, 132 TaylorMade adidas, 20 TCO. See Total cost of ownership Teams
buyer-seller improvement teams, 144-145
category/commodity teams, 204, 215 commodity teams, 195-196,263-
264, 652-653 greater team concept, 124 for new product development, 51 organizational design and, 20 organizational structure and,
174-178 process mapping and, 451 quality and, 282 for supplier development, 326 for supplier evaluation, 137-139 voice of the factory (VOF), 418 work team planning guide, 177 See also Cross-functional sourcing
teams Technical requirements and
negotiation, 466 Technology, proprietary, 514 Technology measures, 718 Technology roadmaps, 141, 143 Technology systems. See Supply chain
information systems and e-SCM Technology trends, 754-756,756 Texas Instruments (TI), 275, 491 Textron Production System, 454 Third-party information, 247, 263 Third-party logistics (3PL), 623,
641-646,643 Third-party marketplaces, 687 Third-party purchasing, 73 Third-party support for worldwide
sourcing, 354-355 Third-party transportation brokers,
628-629 Thomas Register of American Manu
facturers, 240 Three-V model of inventory manage-
ment, 607, 608 Thyssen Krupp, 346 Tier 2 and Tier 3 suppliers, 254, 613 Time and materials contracts, 510-511 Time/delivery/responsiveness
measures, 717-718 Time reduction, 129, 745. See also
Cycle time Time-to-market targets, 717 Title, warranty of, 558 Total cost analysis, 384 Total cost of ownership (TCO)
overview, 408 building a TCO model, 408-409 complexity decisions and, 611-612 example of model, 412 factors to consider, 411-412 opportunity costs, 409-411 promotional pricing and, 397 as strategy, 221
Index
Total cost reporting, 693-694 Total cost support models, 692 Total cost variable, 629 Total quality management (TQM)
communication and, 279, 280 continuous improvement and,
289-290,290 cost of quality, 289 Deming's 14 points, 279-283,280 disillusionment with, 292 objective measurement and analYSis,
284-285 ownership for, 290-291 prevention, 285 prinCiples, 278, 278-279 process capability, 287-288 process focus, 285-287 quality at the source, 283-284 in strategy evolution, 223, 224 zero defects, 288-289
Tower Automotive, 511 Toyota, 7,99, 142,234,291,324,454,
600,601,755 Toyota Industrial Equipment Manufac-
turing, 234-235 Toys "R" Us, 352 TQM. See Total quality management Trade consulates, 355 Trade directories, 240 Trade diversion laws, 569 Trade journals, 240 Trade secret law, 562, 563-565 Trade shows, 240, 354 Trading companies, 354 Training
cross-functional teams and, 132 ethical, 573-574 joint buyer-supplier efforts, 143 for performance measurement, 728 quality and, 282 re-engineering and, 69 standardized,53
Transactional suppliers, 212 Transaction level data, 68 Transaction processing, 669 Transportation
bills oflading, 66-67, 559 brokers, 628-629 carrier selection, 638, 638-640 data, critical and timely, 644 decision-making strategy develop-
ment, 626, 627 deregulation of, 625-626, 640 federal hours of service rules, 630 FOB designations, 560, 626-628, 628 freight bills, 559 insourcing vs. outsourcing, 628 international costs, 365 just-in-time, 605-606, 606 logistics linkages, 623-624, 624 measures, 719 mode selection, 632, 632-638, 637 negotiation of rates and services,
640 on-site representatives and, 146 performance variables, 629, 629-632 as purchasing activity, 162
809
810 Index
Transportation (continued) as purchasing category, 73 as supply chain management
activity, 15-16, 17 supply management and, 626 terms and risk ofloss, 559-560 third-party logistics (3PL), 623,
641-646,643 worldwide sourcing and, 357, 358
Transportation and warehouse r planning systems, 674 ., Transportation department, 626.
Transportation Industry Regulation Reform Act, 625
Traveling requisitions, 49-50 Trends. See Strategy trends Trent, R. J., 74, 132, 135 Triage approach, 321, 321-322 Trial balloons, 479 Triangle Talk, 463, 463-464, 472, 474,
482 Triangulation, 205 TRInternational (TRI) , 242-243 Trust, 123, 142,513 Turnkey approach, 519 Twenty/eighty rule, 320 Tyco International, 165-166 Tyson Foods, 540
U Unfair trade practices laws, 565-566 Uniform Commercial Code (UCC)
overview, 554-555 on acceptance and rejection of
goods, 552 acceptance under, 545 on damages, 551, 552 on open price term, 548 seller's and buyer's rights, 560-561 transportation terms and risk of
loss, 559-560 warranties, 556-559 on written and verbal contracts, 549
Unique products and cost management, 388
Unit costs, 588 United Nations Convention for the
International Sale of Goods (CISG), 360, 566
United Nations Standard Products and Services Code (UNSPSC), 72
United Technologies, 21 Unsolicited proposals, policies on, 99 UPS, 274,336,599,642,646 U.S. Air Force, 329 U.S. Bureau of Labor Statistics, 397,
398 U.S. Constitution, 561 U.S. Department of Defense (DOD),
641 U.S. News and World Report magazine,
27 U.S. Postal Service, 336 Use of industry standards measure,
718
v Value-added activities and negotiation,
466 Value-added networks (VANs), 684 Value analysis (V A), 23-24, 162,
289-290,442-446 Value chain analysis, 210 Value chains, 11, 11-12 Value engineering (VE), 289-290, 442 Value of inventory, 607, 608 Values, worldwide, 356 Van der Knapp, Adrian, 599 Varity Perkins, 330, 331, 334 Vector SCM, 645-646 Velocity of inventory, 607, 608 Vendor managed inventory, 145, 243 Venue tactic, 479 Vertical portals, 687 Vertical vs. horizontal organization,
178,179 Vietnam, 489-490 Virtual private networks, 685, 686 Visibility systems. See Information
visibility Visibility to material shipments, 644 Vision, 281 Voice of the factory (VOF), 417-419 Volkswagen, 142,291 Volume leveraging, 515 Volume ofinventory, 607, 608 Volume purchasing, 167-168 Volume uncertainty, 516
VII Walberg, Richard, 599 Walker, Tim, 383 Wall Street Journal, 100,241,440 Wal-Mart Corporation, 4, 27, 88, 352,
440,575,593,599,615,630,743, 745, 753
Wants, in negotiation, 462-463 Ward, N., 125 Ward, Robert, III Warehousing, 17. See also Logistics Warnings and penalties, 328 Warranties, 556-559 Warranty of infringement, 558 Warranty of merchant ability, 558 Warranty of title, 558 Waste elimination, 601-602 Water carriers, 635-636 Wavelength,656 Web-based business and kaizen,
439-440 Weeks, Chris, 598, 599 Weighted-point system, 312, 312-313 West, Jack, 295 Whalen, Susan, 451 What-if analysis, 405, 670, 749 Whirlpool,745 White box deSign, 140, 140 Win-lose negotiation, 481, 481 Win-win negotiation, 461, 481-482,
482
Win-win sourcing optimization, 695 W.N. Proctor Company, 366 Womack, J. P., 586 Women-owned businesses, 95, 520,
722 Wood, Paul, 510 Work-in-process (WlP) inventory, 587 "Works made for hire" concept, 522 Work team planning guide, 177 The World Is Flat (Friedman), 345,485 World Marketing Directory, 353 World Trade Organization, 360 Worldwide sourcing
x
overview, 345-348, 346 Air Products example, 376-377 barriers to, 350-351 Bose Corporation example, 366 chemical distributors and, 241-243 China and risk management, 359 contracts, 360, 507 costs, 364-365, 364:'367 countertrade requirements, 362-363 cross-cultural skills, 760 cultural understanding and, 356 definitions, 347 future trends, 375-376 global sourcing benefits, 374-375,
374-375 GM and China example, 748 implications of choice, 261 information for, 353-355 inventory and, 597 language and communication
differences, 356 laws affecting, 566-567 legal issues, 357-360 levels I to V, 369, 369-370 logistical issues, 357, 358 Mack Trucks example, 482-485, 483 Manitowoc example, 747 negotiation, international, 485-491 organizational issues, 360, 361-362 reasons for, 348-350 risk exposure and, 219-220 Selex example, 344-345 shifting commodity markets, 389 Sony example, 348 as strategy, 220 success factors, 370-374, 371, 372 supplier selection issues, 355-356
Xerox, 284, 387
y
Youssef, Joseph, 316
z Zenger, J., 135 Zero-based budgeting, 650-651 Zero defects, 288-289 Zobro, Emery J., 467 Zogbi, Dennis, 531