Guide to Supply Chain Management: How Getting It Right Boosts Corporate Performance (The Economist) by David Jacoby (review)

First impressions can be very misleading. At a quick glance, The Guide to Supply Chain Management appears to be another book geared toward grabbing the eye of the CEO. But don't be deceived; this little book packs a significant punch! There is meat in this guide, presented in a straightforward organized way as an excellent reference for the CEO and supply chain students as well. It is intended to get to the core of supply chain management (SCM) by being clear, objective, relevant, and effective and includes numerous real-world examples. In great measure, this book succeeds in solidly delivering on those goals.

The author matches years of experience with anecdotes, examples, and research derived from an impressive list of corporations, professional organizations, and academics. The book starts with a short history of SCM, highlighting the key problem of balancing supply and demand. Along the way, the author examines cost, security, legislative compliance, consumer safety, and environmental protection issues in making supply chain management the "hot topic" that it is today.

The focus of this guide, though, is on supply chain strategy, an evolving and dynamic activity to which specific SCM tools, techniques, and metrics must be aligned. Even the organizational positioning of the supply chain function within the firm is critical to implementing a successful strategy. The author makes a clear distinction between supply chain management and supply chain strategy. Supply chain management provides customer benefit through increased efficiency, reliability, flexibility, and innovation. Supply chain strategy is all about putting these principles into action. Supply chain strategy flows from the business strategy and, for successful firms, requires careful consideration. This guide further dissects strategy through a framework containing four individual sequenced strategies—rationalization, synchronization, customization, and innovation.

Rationalization is the first strategy explored, focusing on low-cost competition. Among the key elements discussed are strategic sourcing and outsourcing, lean manufacturing with all its familiar tenets, and product standardization and simplification. Consignment practices, vendor managed inventory, transportation mode selection, cross-docking, by-passing inventory tiers, and equipment pooling are among the many other rationalization techniques described in the text. The follow-on strategy is synchronization—competing on reliability of service. Techniques such as constraint management, just-in-time inventory, the perfect order, make-to-order practices, sales and operations planning, and risk management are among the techniques described in synchronization and, in most cases, illustrated with real-world examples.

Flowing from synchronization is the customization strategy, competing on customer intimacy. The guide highlights techniques such as control of the customer relationship, value analysis, and customer knowledge management and profitability management. Customization places an emphasis on personal interactions and the goal of closely linking supply chain partners over time through value-adding services. Again, the author relies heavily on real world anecdotes and examples to illustrate these concepts.

The final strategy—which follows from customization—is the innovation strategy or competing through a rapidly changing supply chain. Continuous feedback, product development, prototyping, and product life-cycle management are among the practices described for successfully competing in an innovative environment. Firms that compete with innovative supply chains are identifiable not only by top-tier positioning of this function with the firm, but also by the amount of synergy and integration built into the organization.

The guide follows the strategy framework discussion with a chapter on organizing, training, and developing the staff to support each individual strategy. One of the highlights here is the linking of each supply chain strategy to the placement of SCM within the organizational structure of the firm. As strategy moves from rationalization to innovation, the seat of the supply chain function moves closer to the top of the organization with the operational focus becoming more horizontal than vertical. Typical organization charts help to emphasize these points.

Of course...