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DistributionPlanning and Control
DistributionPlanning and Control
Managing in the Era of SupplyChain Management
Third Edition
David Frederick Ross
David Frederick RossAPICSChicago, IL, USA
ISBN 978-1-4899-7577-5 ISBN 978-1-4899-7578-2 (eBook)DOI 10.1007/978-1-4899-7578-2
Library of Congress Control Number: 2015934905
Springer New York Heidelberg Dordrecht London# Springer Science+Business Media New York 2015, corrected publication 2018This work is subject to copyright. All rights are reserved by the Publisher, whether the whole orpart of the material is concerned, specifically the rights of translation, reprinting, reuse ofillustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way,and transmission or information storage and retrieval, electronic adaptation, computer software,or by similar or dissimilar methodology now known or hereafter developed.The use of general descriptive names, registered names, trademarks, service marks, etc. in thispublication does not imply, even in the absence of a specific statement, that such names areexempt from the relevant protective laws and regulations and therefore free for general use.The publisher, the authors and the editors are safe to assume that the advice and information inthis book are believed to be true and accurate at the date of publication. Neither the publisher northe authors or the editors give a warranty, express or implied, with respect to the materialcontained herein or for any errors or omissions that may have been made.
Printed on acid-free paper
Springer Science+Business Media LLC New York is part of Springer Science+Business Media(www.springer.com)
CONTENTS
PREFACE / XIX
PART 1. THE SCM AND THE DISTRIBUTIONMANAGEMENT ENVIRONMENT / 1
1. Introduction to Supply Chain Management / 31.1 Defining Logistics and Supply Chain
Management / 4
1.1.1 Defining Logistics / 5
1.1.2 Detailed Logistics Activities / 7
1.1.3 Detailed Logistics Performance
Measurements / 8
1.1.4 Defining Supply Chain Management / 9
1.2 The Evolution of Supply Chain Management / 15
1.2.1 Stage 1: Basic Logistics / 15
1.2.2 Stage 2: Total Cost Management / 17
1.2.3 Stage 3: Integrated Logistics Management / 17
1.2.4 Stage 4: Supply Chain Management / 18
1.2.5 Summary / 19
1.3 Supply Chain Structures / 19
1.3.1 Basic Supply Chain Structures / 20
1.3.2 Basic Supply Chain Strategies / 21
1.3.3 The SCOR® Supply Chain Framework / 22
1.3.4 Lean Supply Chain Model / 26
1.3.5 Adaptive, Demand-Driven Supply Chain
Model / 29
1.3.6 Components of Adaptive Supply Chain Management / 29
1.3.7 Demand-Driven Supply Network (DDSN) / 31
1.4 Supply Chain Maturity Model / 34
1.5 Trends in Supply Chain Management / 36
1.6 Goals of Today’s Supply Chains / 38
1.7 Summary / 39
Discussion Questions / 42
References / 43
2. The Distribution Management Environment / 452.1 Defining the Disribution Function / 46
2.2 Revisiting the Supply Chain / 47
2.2.1 Basic Supply Chain Distribution Formats / 49
2.2.2 Alternative Distribution Channel Formats / 50
2.3 Role of Distribution Channels / 58
2.3.1 Channel Service Outputs / 60
2.3.2 Other Functions of Distribution Channels / 61
2.4 Distribution Channel Transaction Flows / 64
2.5 Distribution Channel Inventory Flows / 68
2.5.1 Substituting Information for Inventory / 72
2.5.2 Reverse Logistics / 73
2.5.3 Sustainability / 75
2.6 Summary / 77
Discussion Questions / 79
References / 80
PART 2. SCM STRATEGIES, CHANNEL STRUCTURES,AND DEMAND MANAGEMENT / 81
3. Crafting Business and Supply Chain Strategies / 833.1 Defining Business Strategy / 84
3.1.1 Scanning the External and Internal Business Environments / 84
3.1.2 Defining the Enterprise Vision, Mission, and Goals / 91
3.2 Crafting the Supply Chain Strategy / 99
3.2.1 Defining Supply Chain Strategy / 99
3.2.2 Stages of Supply Chain Strategy / 102
3.2.3 Supply Chain Strategy Performance Attributes / 104
3.2.4 Process Drivers of Supply Chain Performance / 105
3.2.5 Applying the Supply Chain Strategy Matrix / 113
3.3 Achieving Strategic Supply Chain “Fit” / 114
3.3.1 Concept of Supply Chain Strategic Fit / 114
3.3.2 Supply Chain Strategy Performance Metrics / 116
3.3.3 Balanced Scorecard Approach / 119
3.4 Supply Chain Strategy and Risk Management / 121
3.4.1 Defining Supply Chain Risk Management / 122
3.4.2 Managing Supply Chain Risk Resiliency / 128
3.4.3 SCRM Maturity Model / 132
3.4.4 Effect of Supply Chain Management on Resiliency / 134
3.5 Summary / 135
Discussion Questions / 138
References / 139
4. Designing Channel Networks / 1414.1 Defining Channel Networks / 142
4.1.1 Exploring Channel Systems / 143
4.1.2 Basic Channel Networking Structures / 144
vi CONTENTS
4.2 Network Configuration: Definitions / 146
4.2.1 Reasons for Channel Networks / 147
4.2.2 Network Channel Design Considerations / 148
4.3 Channel Network Design Process / 149
4.3.1 Map Channel Strategy / 149
4.3.2 Segment Marketplace / 155
4.3.3 Channel Positioning / 157
4.4 Channel Selection / 165
4.4.1 Facility Selection Issues / 167
4.4.2 Methods for Locating Channel Network Facilities / 168
4.5 Channel Implementation / 176
4.5.1 Selection of Channel Partners / 176
4.5.2 Role of Channel Power / 177
4.5.3 Managing Channel Conflict / 179
4.5.4 Achieving Strategic Channel Collaboration / 182
4.6 Summary / 185
Discussion Questions / 187
Problems / 187
References / 190
5. Forecasting in the Supply Chain Environment / 1915.1 Forecasting: An Overview / 192
5.1.1 Elements of Forecasting / 193
5.1.2 Forecasting Levels / 196
5.2 Forecasting Techniques / 200
5.2.1 Qualitative Techniques / 201
5.2.2 Quantitative Intrinsic Techniques / 204
5.2.3 Basic Quantitative Forecasting Techniques / 204
5.3 Time-Series Analysis / 209
5.3.1 Basics of Time-Series Analysis / 209
5.3.2 Decomposition of a Time Series / 211
5.4 Associative (Correaltion) Forecasting / 222
5.4.1 Simple Associative Model / 223
5.4.2 Correlation Coefficient for Regression / 224
5.4.3 Multiple Variable Associative Forecast / 225
5.5 Alternative Forecasting Methods / 226
5.6 Managing Forecast Performance / 230
5.6.1 Measures of Forecast Error / 231
5.6.2 Why Forecasts Fail / 236
5.7 Summary / 238
Discussion Questions / 239
Problems / 239
Case Study / 242
References / 244
CONTENTS vii
6. Demand Management / 2456.1 Defining Demand Management / 246
6.1.1 Demand Management Definitions / 247
6.1.2 Components of Demand Management / 247
6.1.3 Formulating Demand Strategies / 248
6.2 Creating the Demand Plan / 250
6.2.1 Demand Planning / 250
6.2.2 Planning Demand / 251
6.2.3 Marketing Plan / 258
6.2.4 Sales Plan / 262
6.2.5 Developing the Demand Forecast / 265
6.3 Creating the Supply Plan / 270
6.3.1 Elements of Production Planning / 271
6.3.2 Resource Planning / 276
6.3.3 Inventory and Distribution Planning / 280
6.4 Balancing the Demand and Supply Plans / 283
6.4.1 S&OP: A Balancing Act / 284
6.4.2 S&OP Foundations / 286
6.4.3 Working with S&OP Planning Grids / 288
6.5 Monthly S&OP Process / 291
6.5.1 Step 1: Data Gathering / 292
6.5.2 Step 2: Demand Planning / 293
6.5.3 Step 3: Supply Planning / 293
6.5.4 Step 4: Pre-Executive S&OP Meeting / 295
6.5.5 Step 5: Executive S&OP Meeting / 296
6.5.6 Benefits of the S&OP Process / 298
6.6 Summary / 298
Discussion Questions / 301
Problems / 301
Case Study / 303
References / 306
PART 3. INVENTORY MANAGEMENT IN THE SUPPLYCHAIN ENVIRONMENT / 307
7. Managing Supply Chain Inventories / 3097.1 Inventory Management Basics / 310
7.1.1 The Magnitude of Inventory / 312
7.1.2 Inventory Management Objectives / 312
7.1.3 How Does Inventory Provide Value? / 313
7.1.4 The Purpose of Inventory / 315
7.1.5 The Role of Inventory Management / 316
7.1.6 Classes of Inventory / 317
7.1.7 Function of Inventory / 318
7.1.8 Types of Supply Chain Inventory / 320
viii CONTENTS
7.2 Components of Inventory Decisions / 322
7.2.1 Cycle Inventory / 322
7.2.2 Safety Inventory / 323
7.2.3 Seasonal Inventory / 324
7.2.4 Surplus and Obsolete Inventory / 325
7.3 Inventory Costs / 326
7.3.1 Elements of Inventory Cost / 326
7.3.2 Inventory Valuation / 332
7.4 Inventory Control / 335
7.4.1 Transaction Management / 336
7.4.2 ABC Analysis / 337
7.4.3 Periodic Physical Inventory and Cycle Counting / 340
7.5 Performance Measurement / 342
7.5.1 Customer Service / 342
7.5.2 Financial Statements and Inventory / 344
7.5.3 Inventory Turns and Ratios / 346
7.6 Summary / 349
7.6.1 Supplement: Inventory Valuation Methods / 350
Discussion Questions / 354
Problems / 354
References / 356
8. Statistical Inventory Management / 3578.1 Statistical Inventory Replenishment Concepts / 358
8.1.1 Understanding the Demand Driver / 358
8.1.2 Concept of Stock Replenishment / 360
8.1.3 Replenishment Review Interval / 362
8.1.4 Basic Terms of Statistical Inventory Replenishment / 364
8.2 Inventory Replenishment Techniques / 365
8.2.1 Visual Review System / 365
8.2.2 Two-Bin System / 366
8.2.3 Periodic Review / 367
8.2.4 Reorder Point / 367
8.2.5 Time-Phased Order Point (TPOP) / 367
8.2.6 Lean Inventory Systems / 368
8.3 Reorder Point Systems / 368
8.3.1 Reorder Point Basics / 368
8.3.2 Min/Max and Periodic Review / 379
8.4 Order Quantity Techniques / 382
8.4.1 The Economic Order Quantity / 383
8.4.2 Replenishment by Item Class / 392
8.5 Lean Inventory Management / 394
8.5.1 Lean and Supply Chain Management / 395
8.5.2 The Lean Inventory Replenishment Pull System / 397
CONTENTS ix
8.6 Summary / 401
Discussion Questions / 402
Problems / 402
References / 405
9. Replenishment in a Multi-echelon Channel Environment / 4079.1 Distribution Channel Basics / 408
9.1.1 Coupled Deployment “Push” Systems / 410
9.1.2 Independent Deployment “Pull” Systems / 414
9.1.3 Which to Choose: Order Points or DRP? / 418
9.2 The Basics of DRP / 423
9.2.1 Introduction to the DRP Grid / 423
9.2.2 DRP Order Policies and Safety Stock / 429
9.3 The DRP Calculation / 432
9.3.1 Basic Data Elements / 432
9.3.2 Bucketless DRP / 433
9.3.3 DRP Regeneration Frequency / 434
9.4 DRP in a Multi-echelon Environment / 435
9.4.1 DRP Planning Process / 436
9.5 Stocking Multi-echelon Supply Channels / 438
9.5.1 Bullwhip Effect / 439
9.5.2 Adjusting Channel Imbalances / 446
9.6 Supply Chain Capacity Planning / 449
9.6.1 Financial Estimating / 450
9.6.2 Transportation Planning / 451
9.6.3 Warehouse Space Planning / 453
9.6.4 Labor and Equipment Capacity / 455
9.7 Summary / 455
Discussion Questions / 457
Problems / 457
Case Study / 460
References / 463
PART 4. SUPPLY CHAIN OPERATIONS EXECUTION / 465
10. Customer Management / 46710.1 The Revolution in Customer Management / 468
10.1.1 Understanding Today’s Customer / 469
10.1.2 Defining the Customer / 470
10.1.3 Understanding Customer Wants and Needs / 473
10.1.4 Marketing To Today’s Customer / 474
10.1.5 Creating Lifetime Customers / 476
10.1.6 Dimensions of Customer Values / 477
10.1.7 Creating the Customer-Centric Organization / 484
10.2 Customer Relationship Management / 486
x CONTENTS
10.2.1 Defining Customer Relationship Management (CRM) / 486
10.2.2 Components of CRM / 488
10.2.3 The Range of CRM Application Functions / 489
10.3 Customer Order Management / 499
10.3.1 Charting Customer Order Management Attributes / 500
10.3.2 Order Management Process / 503
10.3.3 The Order Management Cycle / 505
10.3.4 The Perfect Order / 508
10.3.5 Aligning Order and Fulfillment Supply Channels / 509
10.4 Customer Service Management / 511
10.4.1 Defining Customer Service Management / 511
10.4.2 Elements of Effective Service Management / 513
10.5 Summary / 525
Discussion Questions / 527
References / 528
11. Procurement and Supplier Management / 53111.1 Defining the Procurement Function / 532
11.1.1 Defining Purchasing / 533
11.1.2 Categories of Purchasing / 533
11.1.3 Purchasing Responsibilities / 534
11.1.4 Objectives of Purchasing / 536
11.1.5 The Purchasing Organization / 538
11.2 Anatomy of Purchasing Strategy / 544
11.2.1 Role of Strategic Sourcing / 552
11.3 Supplier Relationship Management / 553
11.3.1 Supplier Relationship Types / 553
11.3.2 Advent of Supplier Relationship Management / 555
11.3.3 Advantages of Supplier Relationship Management / 557
11.3.4 Implementing Supplier Relationship Management / 558
11.4 Managing the Sourcing Process / 560
11.4.1 Sourcing Process Steps / 562
11.5 Purchase Order Management / 576
11.5.1 Purchase Processing Cycle / 577
11.6 Supplier and Procurement Performance Measurement / 584
11.6.1 Supplier Performance Measurement / 584
11.6.2 Purchasing Organization Performance Measurements / 587
11.7 Impact of e-Commerce on Procurement / 590
11.7.1 The Array of B2B e-Commerce Functions / 590
11.7.2 Structure of the B2B e-Commerce Marketplace / 597
11.7.3 Benefits of B2B e-Commerce / 598
11.8 Summary / 599
Discussion Questions / 601
Problems / 601
Case Study / 602
References / 604
CONTENTS xi
12. Warehouse Management / 60512.1 Defining Warehouse Management / 606
12.1.1 The Magnitude of Warehousing / 607
12.1.2 Warehousing Functions / 608
12.2 Types of Warehouse / 613
12.2.1 The Four Warehouse Types / 613
12.2.2 Specialized Warehouse Services / 617
12.3 Developing Warehouse Strategies / 619
12.3.1 Strategic Overview / 619
12.3.2 Developing the Warehouse Strategic Plan / 621
12.3.3 The Outsourcing Decision / 624
12.4 Warehouse Management Process / 626
12.4.1 Establishing Warehouse Standards / 627
12.4.2 Receiving and Stocking / 629
12.4.3 Order Picking and Shipping / 631
12.4.4 Performance Measurement / 636
12.5 Warehouse Design and Layout / 639
12.5.1 Warehouse Design and Layout Objectives / 640
12.5.2 Sizing the Warehouse / 641
12.5.3 Warehouse Layout / 644
12.6 Warehouse Storage Equipment / 650
12.6.1 Types of Storage Systems / 651
12.6.2 Stocking Inventory in Warehouse Locations / 657
12.6.3 The Cross-Docking Warehouse / 661
12.7 Warehouse Materials Handling Equipment / 662
12.7.1 Dock Door Equipment / 662
12.7.2 Mobile Materials Handling Equipment / 665
12.7.3 Packaging and Unitization / 669
12.7.4 Warehouse Automation / 672
12.8 Warehouse Management and Environmental Sustainability / 677
12.9 Today’s Warehouse Challenges / 679
12.10 Summary / 680
Discussion Questions / 682
Problems / 682
Case Study / 683
References / 685
13. Transportation Management / 68713.1 Defining Transportation Management / 689
13.1.1 The Magnitude of Transportation / 689
13.1.2 The Principles of Transportation / 690
13.1.3 Transportation Services / 692
13.1.4 Transportation Participants / 694
13.1.5 Relationship of Transportation to Other Business
Functions / 695
13.1.6 Transportation Performance Characteristics / 697
xii CONTENTS
13.2 Types of Transportation / 698
13.2.1 Forms of Transportation / 699
13.3 Modes of Transportation / 701
13.3.1 Motor Transport / 701
13.3.2 Railroad Transport / 703
13.3.3 Air Transport / 705
13.3.4 Water Transport / 706
13.3.5 Pipelines / 708
13.3.6 Transportation Mode Summary / 709
13.3.7 Intermodal Transportation / 709
13.4 Transportation Management Functions / 711
13.4.1 The Role of Transportation Administration / 713
13.5 Issues Confronting Transportation / 737
13.5.1 Transportation Infrastructure Issues / 738
13.5.2 Transportation Risk Management / 741
13.5.3 Transportation Management Technologies / 743
13.5.4 Transportation Management Systems (TMS) / 743
13.5.5 Yard Management Systems / 746
13.5.6 Routing, Scheduling, and Event Management Systems / 747
13.5.7 Driver-Focused Technologies / 748
13.6 Transportation Management LSPs / 749
13.6.1 Types of Transportation LSPs / 749
13.6.2 Range of Transportation LSP Services / 751
13.6.3 Working with LSPs / 751
13.7 Summary / 753
Discussion Questions / 756
Problems / 756
Case Study / 757
References / 759
PART 5. INTERNATIONAL DISTRIBUTION AND SUPPLY CHAINTECHNOLOGIES / 761
14. International Distribution / 76314.1 Globalization of the World Economy / 765
14.1.1 Trends Accelerating Globalization / 766
14.1.2 Barriers to Globalization / 770
14.1.3 Summary / 773
14.2 Globalization Strategies / 774
14.2.1 Global Strategy Development / 775
14.2.2 Strategy Development Summary / 778
14.3 Channel Strategies / 779
14.3.1 Exporting / 780
14.3.2 Licensing / 783
14.3.3 Joint Ventures / 784
CONTENTS xiii
14.3.4 Direct Ownership / 785
14.3.5 Other Methods of Entry / 785
14.4 Managing Global Trade Networks / 787
14.4.1 Establishing Global Distribution Channels / 787
14.4.2 Global Marketing Issues / 792
14.4.3 Global Trade Management (GTM) Systems / 803
14.5 International Purchasing / 806
14.5.1 Overview / 806
14.5.2 Advantages of International Sourcing / 807
14.5.3 Countertrade Purchasing / 808
14.5.4 International Purchasing Management Process / 809
14.6 International Transportation and Warehousing / 814
14.6.1 International Transportation: Opening Issues / 814
14.6.2 Surface Transportation / 815
14.6.3 Ocean Transport / 817
14.6.4 International Air Transport / 819
14.6.5 International Warehousing / 819
14.7 Summary / 821
Discussion Questions / 824
References / 825
15. Information Technology and Supply Chain Management / 82715.1 Foundations of Information Technology / 829
15.1.1 Information Technology Concepts / 830
15.2 Technology Architecture Basics / 833
15.2.1 Enterprise Technology Architecture / 833
15.2.2 Enterprise Business Architecture / 835
15.2.3 Inter-enterprise Business Architecture / 837
15.3 Information System Foundations / 840
15.3.1 The Five Basic Functions of Information Systems / 840
15.3.2 Principles of System Management / 842
15.3.3 Objectives of Information Technology
in the Supply Chain / 843
15.4 Supply Chain Management Business Technologies: Foundations / 844
15.4.1 Identifying Core SCM Business Technologies / 845
15.4.2 Advanced SCM Business Technologies / 848
15.4.3 Networking SCM Business Technologies / 849
15.4.4 SCM Business System Maturity Model / 854
15.5 Standard SCM Business Systems / 856
15.5.1 Enterprise Resources Planning (ERP) / 856
15.5.2 Supply Chain Management (SCM) Systems / 859
15.5.3 Evaluating Information Technology Solutions / 861
15.5.4 SCM Business Technology Configuration Choices / 863
15.6 Advent of SCM Internet Technologies / 864
15.6.1 Defining Internet Business / 865
15.6.2 Evolution of Internet Business / 866
xiv CONTENTS
15.6.3 Impact of Internet Business on the Supply Chain / 869
15.7 SCM Technology Implementation Issues / 871
15.7.1 SCM Technology Benefits and Risks / 871
15.7.2 Managing the Implementation Project / 873
15.8 Summary / 882
Discussion Questions / 884
References / 885
Erratum to: Distribution Planning and Control / E1
INDEX / 887
The original version of this book was revised. An erratum to this book can be found at https://doi.org/10.1007/978-1-
4899-7578-2_16
CONTENTS xv
FEATURES OF THE THIRD EDITION
The third edition is marked by several major enhancements. The text follows the same basic
objectives as the first two editions. It is written primarily for use by practitioners, instructors,
students, and consultants involved in supply chain management (SCM), logistics and
distribution channel management courses, seminars, supply chain certification programs,
and internal company development programs, as well as professionals seeking a handy up-
to-date reference text. Although broad enough to encompass all the management activities
found in today’s logistics and distribution channel organizations, the text is detailed enough
to provide the reader with a thorough understanding of essential strategic and tactical
planning and control processes, as well as problem-solving techniques that can be applied
to everyday operations.
Changes to this edition include:
• Each of the 15 chapters comprising the book was reviewed and errors occurring in the
second edition were corrected.
• Each chapter underwent significant updating to include new developments in supply
chain management over the past 10 years.
• A new chapter was added to the text. Chapter 4Designing Channel Networks discusseshow companies can effectively design supply chain strategies and configure channel
networks that capture marketplace advantage.
• In many chapters, statistical-based problems have been inserted into the text to
stimulate learning and provide practical exercises. Each problem is a mini-case
study and the reader is provided with detailed information needed to solve the
problem.
• Summary questions and problems found at the conclusion of each chapter have been
expanded. The goal is to challenge readers as to their knowledge of topics presented in
each chapter and to offer a tool for learning reinforcement.
• For instructors, each chapter has a test databank of true/false and multiple choice
questions and analytical problems that can be used to gauge learner understanding of
the materials. In addition, most chapters have accompanying Excel spreadsheets to
assist in problem solving and simulation. Finally, each chapter has a full PowerPoint
visual presentation deck that can serve as a basis for classroom presentation.
PREFACE
In the decade since the publication of the second edition of this text, the concept and practice
of supply chain management (SCM) has come to dominate discussion on all levels of
business. Whether it is producing custom machine tools, delivering pizzas, or utilizing the
Internet to browse for unique products and services, SCM is being applied by today’s top
companies to not only provide customers with a superlative buying experience but also
enable enterprises to be more connected and agile in their mission to create new sources of
value across a global supply chain. Terms such as “multi-channel,” “omni-channel,”
“demand-driven networks,” and “next-day delivery” are the current buzzwords driving
fresh approaches to delivering goods and services to an increasingly demanding customer.
As these new dimensions of supply chain management have arisen, the attention of supply
chain managers has migrated away from traditional concerns with cost management,
logistics, operations management, and lean business models to leveraging the power of
big data, analytics, social networking, and collaborative supply chains in their search for new
avenues of competitive advantage.
This view of the innovative, networking nature of supply chain strategies has driven the
success of high-profile businesses as diverse as Walmart and Dell Computer and is at the
core of the disruptive success of Amazon.com. Unilever credits its supply chain for assisting
in doubling the size of its marketplace footprint while reducing its environmental impact.
Inditex, the Spanish parent of Zara clothing retail outlets, uses supply chain strategies to
accelerate design, production, and delivery of cutting-edge apparel at low prices to a mass
clientele. These and other top companies have succeeded by using SCM to create more agile
channel networks capable of rapid organizational change, collaborative decision making,
and the reengineering of roles and responsibilities on all supply chain levels in the search for
greater flexibility, agility, and sensing of customer demand.
This tremendous growth in the science and application of SCM calls for a revision of the
second edition of Distribution: Planning and Control. The purpose of the third edition is
twofold: the first is to integrate today’s newest supply chain theories and business practices
into what is basically a solid text. The text has been rewritten, and in many cases expanded
with additional subject matter. The second objective is to significantly expand the ancillary
materials available to instructors and students. The end result is a text that will provide
professionals, students, and practitioners with the latest thinking in the field of SCM. For
instructors, an array of educational and testing tools have been added to the third edition that
will significantly assist in making the text easy to use in a classroom environment.
The third edition of Distribution Planning and Control follows closely the original
structure of the first two editions. Part 1 of the text, The SCM and Distribution ManagementEnvironment, sets the background necessary to understand today’s supply chain environ-
ment. Chapter 1 defines the principles and practices of modern logistics and SCM. Main
topics include defining logistics and SCM, the evolution of SCM from its roots in the
logistics concept, and designing competitive supply chain structures. Chapter 2 describes the
nature and functions of the distribution industry. Main topics include exploring the role of
distribution channels, mapping distribution channel transaction and inventory flows, and
exploring new trends in reverse logistics and environmental sustainability.
Part 2, SCM Strategies, Channel Structures, and Demand Management, reviews the
activities involved in performing strategic planning, designing channel networks,
forecasting, and managing channel demand. Chapter 3 sketches the basics of supply chain
strategy development. Key topics include defining business strategy, crafting the supply
chain strategy, achieving strategic supply chain “fit,” and managing supply chain risk.
Chapter 4 explores the tasks associated with structuring supply and distribution channel
networks. Topics of discussion are defining channel networks, networking configuration,
channel network design processes, channel selection, and implementing channel structures.
Chapter 5 provides a review of forecasting in the SCM environment. Forecasting topics
include a review of forecasting techniques, time series analysis, associative (correlation)
forecasting, and managing forecast performance. Chapter 6 concludes Part 2 with an
exploration of how demand management plans are developed and used to drive the tactical
strategies of the supply chain. Focal points include defining supply chain demand manage-
ment, creating the demand plan, creating the supply plan, and balancing demand and supply
plans through the sales and operations planning (S&OP) process.
Part 3, Inventory Management in the Supply Chain Environment, centers on translating thetactical plans arising out of the demand management process into detailed supply chain
inventory requirements, logistics capacity plans, and distribution channel resources deploy-
ment. Chapter 7 describes the role of inventory in the supply chain environment. Main topics
include understanding inventory management basics, components of inventory decisions,
inventory costs, inventory control, and performance measurement. Chapter 8 continues the
discussion on inventory management by examining how inventory is replenished in an
independent demand environment. Main topics include a review of statistical inventory
replenishment concepts and techniques, order point systems, order quantity techniques, and
lean inventory management. Chapter 9 discusses inventory replenishment in a multi-echelon
channel environment. Main topics include working with inventory “push” and “pull”
concepts, using statistical replenishment techniques, understanding the basics of DRP,
the DRP calculation, stocking multi-echelon supply channels, and supply chain capacity
planning.
Part 4, Supply Chain Execution, traces the translation of the strategic supply chain plans
into detailed customer and supplier management, warehousing, and transportation
operations activities. Chapter 10 examines how pursuing superior customer service requires
order processing and customer service functions that provide for the speedy and accurate
transference of goods, value-added services, order information, and financial settlement.
Chapter 11 focuses on today’s supply chain procurement and supplier management
functions. Chapter 12 explores the role of warehousing as a facilitator of the smooth flow
of inventory through the supply chain system. Chapter 13 details the principles and scope of
transportation. Discussion focuses on the interaction of transportation with other enterprise
functions and with supply channel strategies. The various legal forms, performance
characteristics, modes, and types of transportation are examined in depth.
Part 5, International Distribution and Supply Chain Technologies, concludes the text byexploring the role of two integral elements of SCM: international distribution management
xx PREFACE
and the deployment of information technologies in the supply chain environment.
Chapter 14 explores the role of global trade and distribution. Major topics include under-
standing the impact of the globalization of the world economy, development of supply chain
global strategies, managing global trade networks, international purchasing, and interna-
tional transportation and warehousing. Chapter 15 provides an overview of the impact of the
information technology revolution on SCM. Key topics include outlining the foundations of
information technology, technology architecture basics, information system foundations, the
array of available SCM business technologies, standard SCM business systems, advent of
SCM internet technologies, and SCM technology implementation issues.
Chicago, IL, USA David Frederick Ross
PREFACE xxi
ACKNOWLEDGEMENTS
The author is greatly indebted to the many individuals and companies that have provided
over the decades the insight and understanding of logistics and supply chain management
fundamental to the writing of this text. Of particular importance are the comments of the
many students gleaned from countless hours spent in the classroom in a variety of settings.
I am particularly grateful to APICS for their support and understanding during the writing of
this text. The magnificent library of texts, monographs, courseware, articles, white papers,
and other sources owned by APICS was always at my disposal. Also I would like to thank
APICS for the use of the SCOR®
framework materials. The author would also like to
especially thank Mr. Daniel Martin, CPIM, CIRM, and CSCP for his very thorough and
meticulous reviews and suggestions for the text. His efforts have significantly contributed to
a first rate and very readable text. I would also like to thank the staff at Springer Science +
Business Media for their keen support in drafting the third edition and finishing it through to
completion. The author would especially like to thank Matthew Amboy, who was with the
project from the beginning, and Christine Crigler, who shepherded the manuscript through to
completion. Finally, I would like to express my loving thanks to my wife Colleen who had to
bear yet again another period of lost afternoons and long evenings but who receives little of
the rewards.
ABOUT THE AUTHOR
David Frederick Ross A recognized thought leader in enterprise resources planning (ERP)
and supply chain management (SCM), David Frederick Ross has spent over 35 years in the
field of operations management as a practitioner, consultant, and educator. During his
13 years as a practitioner, he held line and staff positions in several manufacturing and
distribution companies. Over 22 years of his career was spent in ERP and SCM software
project management, application software and education courseware development, and
consulting and professional development for several technology companies. Currently, he
is Senior Manager, Professional Development for APICS headquartered in Chicago, Illinois,
USA (e-mail: [email protected]).
Dr. Ross has also taught operations and supply chain management in several academic
settings. These include Oakton Community College, Easter Illinois University, Elmhurst
College, and the Kellogg School of Management at Northwestern University. He is a long-
time instructor in several of APICS’s education and certification programs and is a certified
APICS instructor. Dr. Ross holds a Ph.D. degree from the University of Chicago and is
recognized as a CFPIM and CSCP by APICS.
Besides articles and industry white papers, he has published six books in SCM. Distribu-tion Planning and Control (1996, 2nd ed. 2004) is used by many universities and is a
foundation book for APICS’s Certified in Production and Inventory Management (CPIM)
program. Competing Through Supply Chain Management (1998) is one of the very first
complete texts on the science of supply chain management. Introduction to e-Supply ChainManagement (2003) merged the concepts of e-business and SCM. A second edition of this
book, entitled Introduction to Supply Chain Management Technologies, was released in
2010. This book has been adopted by APICS as a primary resource in the Certified SupplyChain Professional (CSCP) program. The Intimate Supply Chain (2008) explores the
interrelationship between SCM, customer relationship management (CRM), and customer
experience management (CEM). He also contributed a chapter entitled “Supply Chain
Management: Principles and Structures” for the Manufacturing Engineering Handbook(2015).
