Fundamentals of Supply Chain Management

Volume 18, Number 1 Article by Thillai Rajan A March, 2006

Fundamentals of Supply Chain Management : By John T Mentzer, Response Books, Sage Publications, New Delhi, 2004, pp. 292, Price: Rs. 380 (cloth). :

Every company wants to achieve sustainable competitive advantage and supply chain management, being one of the acknowledged ways of achieving it, is a much researched topic. The book under review identifies twelve drivers which could be used for leveraging one’s supply chain to achieve competitive advantage in the marketplace.

The earlier book edited by the author on the same subject was more focused on the literature and very few practitioners would have enjoyed reading it. The new book incorporates many examples which illustrate the concept, and is thus more reader friendly. The first chapter of the book summarises the earlier book and provides a launching pad for the reader. This chapter also introduces the twelve drivers, each of which forms a topic of the following chapters. The last chapter integrates all the drivers by revisiting the example quoted in the initial chapter, and also summarises the drivers. A reader who wants a quick overview of the book can read the last chapter first. The treatment of each of the drivers is well structured, beginning with the theoretical aspects, going on to elaborate its use in real life situations with two or three examples, and ending with a summary and some exercises. The chapters are short, simple and readable.

The first driver is coordination in the traditional businesses within the company, which needs to be addressed before starting off with coordination outside the company. Coordination within the traditional functions of marketing, logistics, merchandising, sales, production, procurement is vital and has to be achieved before the company can work with its partners. If this first principle is not in place then the other eleven principles will be not be of much use.

Collaborating with partners in the non-core competency functions and achieving synergies is the next step. The author explains the essential ingredients of achieving coordination, the enablers for collaboration, and the need to aim at a win-win situation for all partners. It is also necessary to differentiate the customer segments and handle them appropriately. This aspect has been discussed in detail, with several useful examples. Simple tools for putting the concept to use, like the customer value requirement map, are also described.

In order to get the best out of one’s supply chain, it is necessary to first identify the various flows in the supply chain and manage them. The emphasis should not be only on the forward flow of products but also on the reverse flow, when products are returned or exchanged. According to the author, managing demand as well as forecast is very important, although it has been a neglected area in supply chain management. This question is discussed in detail.

The next driver is recognising the importance of information, using it to substitute assets in a supply chain. Mentzer emphasises the use of increasingly available and inexpensive information to reduce investments in other more expensive supply chain assets. However, the coverage given to the issue seems a little inadequate, and merits more detailed treatment. The author cautions supply chain managers not to be carried away by all the software available to address the problems in supply chain management. It is the various processes of the company which should decide the solution, not the software package, and systems are templates to be laid over processes.

Not all products are equally profitable and the company needs to focus its energies on the most profitable group of products. As with customer segments, products too need to be treated differentially. The author has illustrated the concept through several examples.

Companies should strive to make themselves easy to do business with. When an organisation becomes difficult to do business with, the immediate impact is seen in the loss of customers. Concepts of relationship marketing and identifying customer values have been discussed in detail, including anticipating and responding to changes in customers’ desired values. In a corporate world in which quarter to quarter profitability determines the stock price and the fate of the chief executive, there is a constant danger of the pursuit of short term results coming in the way of achieving the long term goals. Companies need to guard against this. The twelfth and the last driver is the alignment of rewards and supply chain strategies. The author cites several examples of such alignment leading to success. He also raises the important issue of measurement in the supply chain and the problems associated with it.

Overall the book is very well written but the use of more undisguised examples would have increased its relevance. A reader who is not reading the book in one stretch would find it difficult to remember the disguised examples, which have been identified only by an alphabet. Whenever the author has made use of the true names the impact on the reader has been greater because he is able to relate to the examples better. Another drawback of the book is that the author has apparently tried to avoid the more accepted terminologies in the field. For example, the difference between derived and independent demand would have been easier to understand had the author used the concept of bull whip effect.

The book is a definite addition to the literature on the subject. While the large number of references provided at the end of the book becomes a ready source of information for an advanced student of supply chain management, the use of numerous examples and the organisation of the book in terms of drivers makes appealing to the practising manager.

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