Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies

Journal of Business Logistics, 2001 by Larson, Paul D

Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies David Simchi-Levi, Philip Kaminsky, and Edith Simchi-Levi Irwin McGraw-Hill, New York, 2000. ISBN: 0-07-235756-8 (hardcover) 321 xxii pages

The reviewer planned to use this book as a text for his Supply Chain Management (SCM) course last Spring (2000) at the University of Nevada. He completed the college bookstore book request form, using the ISBN (0-07-028594-2) found in the usual place, just inside the front cover. Several days before class began, a student visited the reviewer, anxiously inquiring: "Is Thomas H. Courtney's Mechanical Behavior of Materials, 2' edition really the text book for SCM?" An investigation soon discovered the publisher's error-Courtney's ISBN was printed where Simchi-Levi's should have been. With time running out, and copies of the former (Spring 1999) text still available in the bookstore, adoption of the book currently under review was aborted.

Simchi-Levi, et al. define SCM as "a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize systemwide costs while satisfying service level requirements" (p. 1). Note their supply chain, ak.a. "logistics network," ends at the retail outlet. This neglects new, business-to-consumer (B2C) supply chains, which bypass retail stores and dramatically alter the logistical role of end consumers. It is also important to note that the authors are re-labelers, since they "do not distinguish between logistics and supply chain management" (p. 3). In fact, their definition of SCM closely corresponds to the CLM definition of logistics management.

Chapters 2 and 3 cover quantitative modeling of warehouse location and inventory control, respectively. The Simchi-Levi, et al. warehousing model concentrates on number, location and size of warehouses, along with matching products to customers. While this treatment of strategic warehousing decisions is excellent, it is also distinctly quantitative. There is little mention of qualitative factors, such as quality of life and environmental issues. Meanwhile, the inventory chapter is dominated by "a single warehouse inventory example," with presentations of the economic order quantity (EOQ) and re-order point (ROP) models. The reviewer was surprised to find nothing on distribution requirements planning (DRP) at this point, since DRP addresses the issue of echelon inventory in a supply chain.

In Chapter 4, the authors diagram their supply chain, consisting of factory, distributor, wholesaler and retailer. Again, this supply chain excludes the household or end-consumer stage. This is despite the book's downstream or forward focus, and de-emphasis on upstream issues between manufacturers and their suppliers. The highlight of this chapter-and perhaps the entire book-is its treatment of the bullwhip effect, which "suggests that variability in demand increases as one moves up in the supply chain" (p. 107). Simchi-Levi, et al. quantify the bullwhip effect and outline the following methods of coping with the effect: reducing (forecast) uncertainty by sharing information, reducing demand variability, lead time reduction and forming strategic partnerships. To further demonstrate and explore the bullwhip effect, the book offers a "computerized beer game," described in Appendix A and available on a companion CD.

Chapter 5 discusses additional ideas and issues in downstream SCM. The three authors identify "three distinct outbound distribution strategies," as follows: direct (to retailer) shipment, warehousing, and cross-docking. Direct delivery to consumers is not included. This chapter also contrasts push- vs. pull-based supply chains. In Chapter 8, the only one in the book on upstream SCM, push vs. pull is developed much further. The authors use the push-pull boundary concept to explain postponement (a.k.a. delayed product differentiation) and mass customization. They also introduce "design for logistics" (DFL), a set of tools for designing inventory and transportation considerations into products. Finally, this chapter also includes a brief discussion on "supplier integration into new product development." It is surprising to see so little strategic purchasing content in an SCM book, since purchasing and SCM have considerable commonalities. Perhaps purchasing is a casualty of the logistics re-labeling perspective on SCM, i.e. logistics = SCM.

Chapters 6, 7 and 9 cover strategic alliances, international issues and "customer value," respectively. Simchi-Levi, et al. select the "three most important types of supply chain-related strategic alliances" for detailed discussion-retailer-supplier partnerships (RSP), third-party logistics (3PL), and distributor integration (DI). Once again, the book's downstream SCM focus is evident. The international chapter includes some important material on regional differences in logistics, such as cultural differences, infrastructure, information systems availability, and human resources. The highlight of Chapter 9, on dimensions and measures of customer value, is a cameo appearance by the Supply Chain Operations Reference (SCOR) model.