McGraw-Hill Higher Education ‘Aino The McGraw Hil Compo DDISIGNING AND MANAGING THE SUPPLY CHAIN ‘Copyright © 2000 by The McGraw-Hill Companies, Inc. All rights reserved. Printed in the ‘Une Stevo Amer, Escep ae permite under the United Sates Copyright Act 1976, ‘opartef us pubbestion nay berspoduced or ited nny for ory an teans ot ‘Sore inadatubenr tetra ystem, wou! te pie wee permission ofthe publisher This hooks printed on aire paper 294567890RGR/FOR909876543210 ssn o2se261687 Vice president Editor Chief Mia! W. Junior Publisher: oy. Saoed Senior sponsoring eon Sit nbs Eston eortinaton late Shaper Senior maetingwanager Collet). Subic Projo manages Kimberly Mona ‘Mattage new book proucon: Mele Slat Desgne: Suzmne Noweaer Supplement corres Fase M. Range Now ida ‘Chole Peto (Coonpontor hats ne. “ypetce 10/2 Paitin Frnt Quo Printing Book Groupee brary of Congress Cataloging -Publeton Data Sich Le, David ‘Designing and managing the supply chain / Davi inc Le, hip Raminey, Bath Sich Lev zen In¢lade bibliographical references and index aN oo7oa42 [hye dstriation of goods—Managerent, 2. Marketing channele-Management. 3 Basins ogsts. 4 Inu Drocurement Kaminsky Philp. Simcht-Lei, Bab. invite BesiIs7S05_ 2000 e85-—del seam p//oneeenhe com "To our children, Sara and Yuval, who have the patience and humor to survive our work logether DSL,ESL ‘Tomy fay, for hele support and encouragementTHE IRWIN/MCGRAW-HILL SERIES Operations and Decision Sciences (ONS MANAGEMENT and Closs, Logistical Management: The Integrated Supply Chain First Edition uilano, and Jacobs, Production and Operations Management, tition onstein, and Greenlavs, PROSIM for Windows, Third Edition \"Apte, Manufacturing Automation, First Eition silano, and Chase, Fundamentals of Operations Management, ition 4 Burt, Purchasing and Supply Management, Sixth Edition slobal Operations Management, Firs! Edition ‘ns and Fitzsimmons, Service Management: Operations, Strategy, tion Technology, Second Edition Larson, Project Management: The Managerial Process, first Edition afacturing Strategy: Text & Cases, Third Edition Spearman, Factory Physics, Second Eaition rd Stock, Strategic Logistics Management, Thind Edition 1nd Fearon, Purchasing and Supply Chain Management, Edition sd Denzler, Operations Management, Second Edition shadsi, and Yakie, HOM Operations Management Software for ¢s, First Edition Production and Operations Analysis, Thind Edition Competitive Manufacturing Management, Firs! Edition d Cho, Operations Scheduling, Fist Edition ‘and Uzumeri, Managing Product Families, Firs! Edition | Operations Management: Contemporary Concepts and Cases, tion ser and Knod, Operations Management: Customer-Focused Principles, ition vi, Kaminsky, Simchi-Levi, Designing and Managing theSupply Chain: ts, Strategies, and Case Studies, First Edition Business Dynamics: Systems Thinking and Modeling for a Complex First Edition 1, Production/Operations Management, Sixth Eiition Beery, and Whybark, Manufacturing Planning & Control Systems, ition sundations of Inventory Management, First Edition ITATIVE METHODS AND MANAGEMENT SCIENCE arraway, Frey, Pfeifer, Quantitative Business Analysis: Casebook, ition arraway, Frey, Pfeifer, Quantitative Business Analysis: Text and Cases, ition fusman, and Bierman, Quantitative Analysis for Business Decisions, dition About the Authors David Simchi-Levi is Professor of Industrial Engineering and Manage- ‘ment Science at Northwestern University. Prior to joining the faculty at Northwestern, he taught at Columbia University. Professor Simchi-Levi received his Ph.D. in operations research from Tel-Aviv University and has won awards for his work in supply chain, logistics, and transportation. He is the co-author, with Julien Bramel, of The Logic of Logistics, published by Springer-Verlag, and the founder and chairman of LogicTools, Inc, a co pany that provides decision support software for supply chain and logis ‘management. Philip Kaminsky is Assistant Professor of Industrial Engineering at the University of California at Berkeley. He received his Pa. in Industrial Engineering from Northwestem University. Prior to his graduate studies, he worked for the production division of Merck & Co,, Ine. He has con- sulted in the areas of supply chain and production management, Edith Simchi-Levi is President of LogicTools, Inc. She received her BS. in Mathematics and Computer Science from Tel-Aviv University. She has extensive experience in software development and numerous consulting, projects in logistics and supply chain management.SEE Foreword In the last few years we have seen an explosion of publications on supply’ chain management; numerous books have been published and many ar ticles have appeared in academic, trade, and popular magazines. These publications are either too technical—and therefore inaccessible to prac- titioners and students—or they lack the breadth and depth that the topic deserves. Certainly, itis difficult to find a book appropriate for teaching supply chain management to business or engineering students. Designing and Managing the Supply Chain solves this problem! ‘The book is an important contribution and major milestone for the supply chain community. Itis the first book that covers a comprehensive breadth ofsupply chain topics in depth, and addresses the major challenges in this area. It was written by experts from academia and industry who have been researching, consulting, and developing software for supply chain management for many years. This book includes many classic and new case studies, numerous ex- amplesas well as in-depth analysis of some of the technical issues involved in inventory management, network design, and strategic partnering, to name a few. It is therefore an ideal textbook for classes on supply chain ‘management at the undergraduate, Master’s, and M.B.A. levels. Since each chapter is self-contained, instructors can pick the chapters they want touse, depending on the length ofthe class and its requirements. The book comes with two computerized games. The Computerized Beer Game pro- vides an excellent instructional fool that engages students in managing a supply chain and provides a starting point for discussing the value of in- formation in the supply chain, strategic partnering, centralized decision