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 Designing
; Managing

David Simchi-Levi I Philip Kaminsky I Edith Simchi-Levi

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

Fourth Edition

David Simchi-Levi, Philip Kaminsky,

Edith Simchi-Levi

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Copyright 2021 by McGraw-Hill Education. All rights reserved.

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ISBN-13: 9781307747270

ISBN-10: 1307747272
Contents
Dedication ..... v

About the Authors ..... vii

Foreword ..... viii

Preface ..... ix

Acknowledgments ..... xiii

List of Cases ..... xv

Detailed Contents ..... xvii

1 CHAPTER 1: INTRODUCTION TO SUPPLY CHAIN MANAGEMENT ..... 1

2 CHAPTER 2: INVENTORY MANAGEMENT AND RISK POOLING ..... 29

3 CHAPTER 3: NETWORK PLANNING ..... 69

4 CHAPTER 4: SUPPLY CONTRACTS ..... 115

5 CHAPTER 5: THE VALUE OF INFORMATION ..... 135

6 CHAPTER 6: SUPPLY CHAIN INTEGRATION ..... 163

7 CHAPTER 7: DISTRIBUTION STRATEGIES ..... 193

8 CHAPTER 8: STRATEGIC ALLIANCES ..... 207

9 CHAPTER 9: PROCUREMENT AND OUTSOURCING STRATEGIES ..... 231

10 CHAPTER 10: COORDINATED PRODUCT AND SUPPLY CHAIN

DESIGN ..... 263

11 CHAPTER 11: FLEXIBILITY ..... 285

12 CHAPTER 12: CUSTOMER VALUE ..... 305

13 CHAPTER 13: RISK MANAGEMENT ..... 317

14 CHAPTER 14: SUSTAINABLE SUPPLY CHAINS ..... 353

15 CHAPTER 15: SMART PRICING ..... 369

16 CHAPTER 16: INFORMATION TECHNOLOGY AND BUSINESS
PROCESSES..... 399

17 CHAPTER 17: TECHNOLOGY STANDARDS....• 433

PART 1 CASE SUPPLEMENT ..... 461

18 CASE: SPORT OBERMEYER, LTD...••. 462

19 CASE: BARILLA SPA (A) ..... 481

20 CASE: AMAZON.COM'S EUROPEAN DISTRIBUTION STRATEGY..... 502

21 CASE: SOLECTRON: FROM CONTRACT MANUFACTURER TO GLOBAL

SUPPLY CHAIN INTEGRATOR..... 530

22 CASE: HEWLETT-PACKARD CO.: DESKJET PRINTER SUPPLY CHAIN

(A)..•.. 551

23 CASE: HEWLETT-PACKARD CO.: NETWORK PRINTER DESIGN FOR

UNIVERSALITY..••. 563

Index..... 575
Credits..... 585

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

To our children, Sara and Yuval, who have the patience and humor
to survive our work together

D.S.L., E.S.L.

To my family, for their support and encouragement

PK.
vi Simchi eBook with Cases for Connect
 vii

ABOUT THE AUTHORS

DAVI D SIMCHI-LEVI is a Professor of Engineering Systems at MIT and serves as the

Director of the MIT Data Science Lab. He is considered one of the premier thought lead­
ers in supply chain management and business analytics. His Ph.D. students have accepted
faculty positions in leading academic institutes including U. of California Berkeley,
Carnegie Mellon U., Columbia U., Duke U., Georgia Tech, Harvard U., U. of Illinois
Urbana-Champaign, U. of Michigan, Purdue U., and Virginia Tech. Professor Simchi­
Levi is the current Editor-in-Chief of Management Science, one of the two flagship
journals of INFORMS. He served as the Editor-in-Chief for Operations Research (2006-
2012), the other flagship journal of INFORMS and for Naval Research Logistics (2003-
2005). He is an INFORMS Fellow, MSOM Distinguished Fellow, and was awarded the
prestigious 2020 INFORMS Impact Prize for playing a leading role in developing and
disseminating a new highly impactful paradigm for the identification and mitigation of
risks in global supply chains. He is the recipient of the 2020 INFORMS Koopman Award
given to an outstanding publication in military operations research; Ford Motor Company
2015 Engineering Excellence Award; 2014 INFORMS Daniel H. Wagner Prize for
Excellence in Operations Research Practice; 2014 INFORMS Revenue Management and
Pricing Section Practice Award; and 2009 INFORMS Revenue Management and Pricing
Section Prize. He was the co-founder of LogicTools, which provided software solutions
and professional services for supply chain optimization. LogicTools became part of IBM
in 2009. In 2012, he co-founded OPS Rules, an operations analytics consulting company.
The company became part of Accenture in 2016. In 2014, he co-founded Opalytics, a
cloud analytics platform company focusing on operations and supply chain intelligence.
The company became part of the Accenture Applied Intelligence in 2018.
PHILIP KAMINSKY is the Earl J. Isaac Professor in the Science and Analysis
of Decision Making in the Department of Industrial Engineering and Operations
Research at UC Berkeley. He served as Executive Associate Dean and Associate
Dean for Students in the UC Berkeley College of Engineering, and before that, faculty
director of the Sutardja Center for Entrepreneurship and Technology, director of the
Initiative for Research in Biopharmaceutical Operations, and department chair of the
Industrial Engineering and Operations Research Department. He currently serves as
the Focused Issue Editor for //SE Transactions Scheduling and Logistics. His research
focuses on the analysis and development of robust and efficient tools and techniques
for design, operation, and risk management in logistics systems and supply chains.
EDITH SIMCHI-LEVI is startup adviser and investor in New York City. She was
the co-founder and Vice President of Operations of LogicTools, which became part
of IBM in 2009 and Opalytics, which was acquired by Accenture in 2018. She has
extensive experience in software development and has engaged in numerous projects
in logistics and supply chain management. She received her B.S. in Mathematics and
Computer Science from Tel-Aviv University.

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FOREWORD

When the first edition of this book appeared, in August 1999, it stood out from
the explosion of publications on supply chain management. Although a few books
were published and many articles appeared in academic, trade, and popular maga­
zines, most of these publications were either too technical-and therefore inaccessible
to practitioners and students-or lacked the breadth and depth that the topic deserves.
Certainly, it was difficult to find a book appropriate for teaching supply chain manage­
ment to business or engineering students. Designing and Managing the Supply Chain
solved that problem!
Since that time, this has been the most influential supply chain management book.
With a combination of analytical concepts, case studies, and examples, the book has
helped numerous executives, graduate, and undergraduate students grasp the practice
and science of supply chain management. This was the first book that covered a com­
prehensive breadth of supply chain topics in depth, and addressed the major chal­
lenges 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.
The book continues to be an important contribution and major milestone for the
supply chain community. The fourth edition continues in this direction in important
ways by adding new chapters on timely topics including supply chain risk manage­
ment, supply chain flexibility, and sustainable supply chains.
This book includes many classic and new case studies, numerous examples, and
in-depth analyses of the critical technical issues involved in inventory management,
network design, risk, 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 to use depending on the length of the class and its requirements.
I want to compliment the authors for having written such an outstanding textbook
for the supply chain community.
Hau L. Lee
Kleiner Perkins, Mayfield, Sequoia Capital Professor
Director, Stanford Global Supply Chain Forum
Stanford University

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

PREFACE

THE BOOK EVOLUTION

The original edition of this book, published in 1999, grew out of a number of sup­
ply chain management courses and executive education programs we taught at
Northwestern University, as well as numerous consulting projects and supply chain
decision-support systems we developed at LogicTools, a company we founded in
1995, which became part of IBM in 2009.
Since the publication of the first edition, we have continued teaching executive and
regular courses, both at Massachusetts Institute of Technology and at the University
of California, Berkeley, and have continued to develop a variety of supply chain deci­
sion support tools. These courses have spawned many innovative and effective supply
chain education concepts. The focus in these programs has always been on presenting,
in an easily accessible manner, recently developed state-of-the-art models and solution
methods important in the design, control, and operation of supply chains. Similarly,
the consulting projects and decision-support systems developed by LogicTools have
focused on applying these advanced techniques to solve specific problems faced by
our clients.
These developments led to the release of two subsequent editions, in 2002 and
2007, where we continued to add new approaches, models, and techniques and, in
particular, introduced and emphasized frameworks for supply chain integration. We
are pleased to note that these revisions were successful; we received a tremendous
response from adopters, students, executives, and consultants.
As interest in supply chain management increased both in industry and academia,
many businesses have adopted strategies such as just-in-time, lean manufacturing, off­
shoring, and frequent deliveries to retail outlets. These much-touted strategies may
have allowed companies to cut cost but dramatically increased supply chain risk. This
was demonstrated in a powerful way during events such as the global financial tur­
moil in 2008, the 2011 tsunami in Japan and flood in Thailand and the world-wide
COVID-19 pandemic in 2020.
In response to some of these developments, David Simchi-Levi published in 2011,
the business book Operations Rules: Delivering Customer Value through Flexible
Operations, where he offers a set of scientific and empirically based rules that manage­
ment can follow to achieve a quantum leap in operational performance. The book
identifies the crucial elements in a company's success: the link between the value it

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X PREFACE

provides and supply chain strategies; flexibility, an important capability that allows the
firm to innovate its supply chain strategy; and effective sustainability and risk mitiga­
tion strategies. The fourth edition of Designing and Managing the Supply Chain now
includes new chapters that provide in-depth coverage of these important topics.
Finally, recent technology trends such as digitization, advanced analytics, in par­
ticular, machine learning and artificial intelligence, and automation are changing the
way companies manage businesses, from demand planning and promotional deci­
sions, all the way to financial planning. In this space, we have benefited both from
academic research as well as numerous development and implementations of digital
solutions from Ops Rules and Opalytics, two companies we founded that became part
of Accenture in 2016 and 2018, respectively. In recognition of these developments,
the fourth edition includes material based on work that we have done individually and
collectively in the area of business analytics.

THE BOOK OBJECTIVES

The book is written to serve as

• A textbook for M.B.A.-level logistics and supply chain management courses.
• A textbook for B.S. and M.S. industrial engineering courses on logistics and supply
chain management.
• A reference for teachers, consultants, and practitioners involved in any one of the
processes that make up the supply chain.
The emphasis is on a format that is accessible to executives and practitioners, as
well as students interested in careers in related industries. For that reason, almost
every chapter starts with a case study that raises a few supply chain issues; issues dis­
cussed in the chapter. Similarly, every chapter ends with a case-study that motivates
an in-depth discussion of the material covered in the chapter.

THE BOOK COVERAGE

Of course, supply chain management is a very broad area, and it would be impossible
for a single book to cover all of the relevant areas in-depth. Indeed, there is consider­
able disagreement in academia and industry about exactly what these relevant areas
are. Nevertheless, we have attempted to provide a broad introduction to many critical
facets of supply chain management. Although many essential supply chain manage­
ment issues are interrelated, we have strived wherever possible to make each chapter
as self-contained as possible, so that the reader can refer directly to chapters covering
topics of interest.
The book includes four interrelated parts.
Part I (Chapters 2-5) is focused onfundamentals and covers topics such as inven­
tory management, logistics network planning, supply contracts, the Bullwhip
Effect, and the value of information in the supply chain.
Part II (Chapters 6-11) covers coordination and integration and is focused on
topics such asPush-Pull strategies, distribution strategies, strategic alliances such
as Vendor Managed Inventory, procurement and outsourcing strategies, product
design, and the interface between product design and supply chain strategies and
supply chain flexibility.
 Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies, Fourth Edition xi

PREFACE Xi

Part III (Chapters 12-15) is all about strategy, from the coordination of customer
value proposition and supply chain strategy to risk management, sustainability, and
corporate social responsibility, all the way to smart pricing.
Part IV (Chapters 16-17) is focused on technology including business processes
such as Sales and Operations planning, information technology for supply chains,
decision-support systems, and technology standards associated with infrastructure,
architecture, the Internet of Things (loT), RFID, and Blockchain.
Each chapter utilizes numerous case studies and examples, and mathematical and
technical sections can be skipped without loss of continuity.

NEW IN THE FOURTH EDITION

The fourth edition of the book represents a substantial revision. Indeed, while we kept
the same structure and philosophy as in the previous editions, we have included new
chapters:
• Chapter 11 Supply chain flexibility;
• Chapter 13 Supply chain risk management;
• Chapter 14 Sustainable supply chains.
Existing chapters have been completely revised to introduce new concepts such
as the link between customer value and supply chain strategies (Chapter 12); busi­
ness analytics and smart pricing (Chapter 15); and new technologies such as IoT,
Blockchain, and their impact on supply chains (Chapter 17).
Some of the new material in the fourth edition is based on recent work by David
Simchi-Levi.
• Chapters 11-14 borrow extensively from Simchi-Levi, D., Operations Rules:
Delivering Customer Value through Flexible Operations. MIT Press, 2011.
• Chapter 13 also borrows heavily from Simchi-Levi, D.; W. Schmidt; and Y. Wei,
"From Superstorms to Factory Fires: Managing Unpredictable Supply Chain
Disruptions." Harvard Business Review, January-February 2014, pp. 96-101.
• Chapter 15 is, in part, based on the paper by Simchi-Levi, D., "The New Frontier of
Price Optimization." Sloan Management Review, Fall 2017, pp. 22-26, as well as the
paper by Simchi-Levi, D; and M.X. Wu, "Powering Retailers Digitization Through
Analytics and Automation." Special issue of International Journal of Production
Research, dedicated to 55 Best Scholars in Production Research for the 55th Volume
Anniversary of IJPR, Volume 56, (2018) Issue 1-2, pp. 809-816.
• Chapter 15 is also based on the paper by Johnson, K.; A.B.H. Lee; and D. Simchi­
Levi, "Analytics for an Online Retailer: Demand Forecasting and Price Optimization."
Manufacturing and Service Operations Management, Volume 18, No. 1 (2016), pp. 69-85.
The spreadsheets used in the third edition to assist learning topics such as supply
contracts (Chapter 4), the bidding game (Chapter 9) and the new Nissan case (Chapter
13), are now on the book's website through Connect.
Selected Harvard and Stanford cases in the fourth edition are available in a Case
Supplement at the end of the text. This supplement is also available separately through
McGraw Hill's Create system at http://create.mhhe.com.
xii Simchi eBook with Cases for Connect
 Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies, Fourth Edition xiii

ACKNOWLEDGMENTS

It is our pleasure to acknowledge all those who helped us with the four editions of
this manuscript. First, we would like to thank Dr. Myron Feinstein, former director
of supply chain strategy development at Unilever, New York City, who read through
and commented on various chapters of the first edition. Similarly, we are indebted to
the instructors who reviewed the manuscript of the first edition, Professors Michael
Ball (University of Maryland), Wendell Gilland (University of North Carolina, Chapel
Hill), Eric Johnson (Dartmouth College), Douglas Morrice (The University of Texas,
Austin), Michael Pangburn (Pennsylvania State University), Powell Robinson (Texas
A&M University), William Tallon (Northern Illinois University), and Rachel Yang
(University of Illinois, Urbana-Champaign).
We are also grateful to Dr. Deniz Caglar of Booz Allen Hamilton for his comments
on earlier drafts of the book.
The second edition benefited from comments and suggestions we received from
many people. These include Professors Arjang Assad, Michael Ball, and their col­
leagues from the University of Maryland-College Park; Chia-Shin Chung (Cleveland
State University); Brian Gibson (Auburn University); Boaz Golany (Technion, Israel);
Isaac Gottlieb (Rutgers University); Shelly Jha (Wilfrid Laurier University, Ontario,
Canada); Dana Johnson (Michigan Technical University); Mary Meixell (George
Mason University); Dan Rinks (Louisiana State University); Tony Arreola-Risa
(Texas A&M University); and Joel Wisner (University of Nevada-Las Vegas). These
comments were invaluable in improving the organization and presentation of the book.
Professor Ravi Anupindi (University of Michigan, Ann Arbor), Professor Yehuda
Bassok (University of Southern California), Dr. Jeff Tew (General Motors), and
Professor Jayashankar Swaminathan (University of North Carolina, Chapel Hill) pro­
vided valuable insights that we incorporated into the second edition of the text.
We also are indebted to those who reviewed the second edition in preparation for
the third edition: Kyle Cattani (University of South Carolina, Chapel Hill), Zhi-Long
Chen (University of Maryland), Deborah F. Cook (Virginia Technical University),
Sriam Dasu (University of California, Los Angeles), Mark Ferguson (Georgia
Technical University), Manoj K. Malhotra (University of South Carolina, Columbia),
Charles Petersen (Northern Illinois University), and Young K. Son (Baruch College).
The third edition has greatly benefited from their comments.

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xiv ACKNOWLEDGMENTS

The third and fourth editions benefited from comments by Professor Chung-Lun Li
(The Hong Kong Polytechnic University) and Professor Victor Martinez de Albeniz
(IESE, Spain).
We are grateful to our colleagues at Massachusetts Institute of Technology;
University of California, Berkeley; Amazon; LogicTools; IBM; Ops Rules; Opalytics;
and Accenture who have provided us with opportunities to interact with some of the
brightest minds in our field and to learn from their research and development.
David Simchi-Levi
Cambridge, Massachusetts

Philip Kaminsky
Berkeley, California

Edith Simchi-Levi
New York City, New York
 Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies, Fourth Edition xv

LIST OF CASES

Meditech Surgical 21
Steel Works, Inc. 29
Risk Pooling 53
Sport Obermeyer Ltd. 68 (continued in the Case Supplement)
The Bis Corporation 69
ElecComp Inc. 89
H. C. Starck, Inc. 101
American Tool Works 115
Barilla SpA (A) 135 (continued in the Case Supplement)
Reebok NFL Replica Jerseys: A Case for Postponement 155
Dell Inc.: Improving the Flexibility of the Desktop PC Supply Chain 163
The Great Inventory Correction 187
Amazon's European Distribution Strategy 193 (continued in the Case Supplement)
How Kimberly-Clark Keeps Client Costco in Diapers 207
Audio Duplication Services, Inc. (ADS) 227
The Smith Group 228
Zara's Procurement and Outsourcing Strategies 231
Solectron: From Contract Manufacturer to Global Supply Chain Integrator 260
(continued in the Case Supplement)
Hewlett-Packard: DeskJet Printer Supply Chain 263 (continued in the Case
Supplement)
Hewlett-Packard Company: Network Printer Design for Universality 283
(continued in the Case Supplement)
Zara's Customer Value Proposition 305
Nissan Motor Company: Building Operational Resiliency 317
Supply Chain Resilience in the Telecom Industry 343

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:xyj LIST OF CASES

To Build "Circular" Operations, Ikea Takes Aim at Its Supply Chain 353
Rue La La 369
The Great Rebate Runaround 394
Supply Chain Whirl 399
7-Eleven Stocks Up on Tech Savvy 413
S&OP "Evolution" at Adtran 426
Centratech Systems (CTS) Increases Productivity of Field Technicians by 50% 433
 Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies, Fourth Edition xvii

CONTENTS

1. INTRODUCTION TO SUPPLY CHAIN MANAGEMENT 1

1.1 What ls Supply Chain Management? 1
1.2 The Development Chain 3
1.3 Global Optimization 4
1.4 Managing Uncertainty and Risk 6
1.5 Supply Chain Segmentation and Customer Value Proposition 8
1.6 The Evolution of Supply Chain Management 9
1. 7 The Complexity 13
1.8 Key Issues in Supply Chain Management 14
1.9 Book Objectives and Overview 19
Discussion Questions 20
CASE: MEDITECH SURGICAL 21

2. INVENTORY MANAGEMENT AND RISK POOLING 29

CASE: STEEL WORKS, INC. 29
2.1 Introduction 32
2.2 Single-Stage Inventory Control 35
2.2.1 Stable Demand-the Economic Lot Size Model 35
2.2.2 Known Demand Changing Over Time 38
2.2.3 The Effect ofDemand Uncertainty 38
2.2.4 Single Period Models 39
2.2.5 Initial Inventory 42
2.2.6 The Newsvendor Model 44
2.2.7 Multiple Order Opportunities 44
2.2.8 Continuous Review Policy 45
2.2.9 Variable Lead Times 48
2.2.10 Periodic Review Policy 49
2.2.11 Service Level Optimization 50
2.3 Risk Pooling 52

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XX CONTENTS

CASE: RISK POOLING 53

2.4 Centralized versus Distributed Systems 55
2.5 Managing Inventory in the Supply Chain 56
2.6 Practical Issues 60
2. 7 Forecasting 61
2.7.1 Judgment Methods 61
2. 7.2 Market Research Methods 62
2. 7.3 T ime-Series Methods 62
2. 7.4 Causal Methods 63
2. 7.5 Selecting the Appropriate Forecasting Technique 63
Summary 64
Discussion Questions 64
CASE: SPORT OBERMEYER LTD. 68

3. NETWORK PLANNING 69
CASE: THE BIS CORPORATION 69
3.I Introduction 71
3.2 Network Design 71
3.2.1 Data Collection 72
3.2.2 Data Aggregation 74
3.2.3 Transportation Rates 77
3.2.4 Mileage Estimation 79
3.2.5 Warehouse Costs 80
3.2.6 Warehouse Capacities 81
3.2.7 Potential Warehouse Locations 82
3.2.8 Service Level Requirements 82
3.2.9 Future Demand 82
3.2.10 Model and Data Validation 82
3.2.11 Solution Techniques 83
3.2.12 Key Features of a Network Configuration SCP 86
3.3 Inventory Positioning and Logistics Coordination 87
3.3.1 Strategic Safety Stock 87
CASE: ELECCOMP INC. 89
3.3.2 Integrating Inventory Positioning and Network Design 94
3.4 Resource Allocation 96
Summary 99
Discussion Questions 100
CASE: H. C. STARCK, INC. 101

4. SUPPLY CONTRACTS 115

CASE: AMERICAN TOOL WORKS 115
4.1 Introduction 116
4.2 Strategic Components 117
4.2.1 Supply Contracts 117
4.2.2 Limitations 122
 Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies, Fourth Edition xix

CONTENTS xxi

4.3 Contracts for Make-to-Stock/Make-to-Order Supply Chains 122

4.4 Contracts with Asymmetric Information 127
4.5 Contracts for Nonstrategic Components 128
Summary 130
Discussion Questions 131

5. THE VALUE OF INFORMATION 135

CASE: BARILLA SPA (A) 135
5.1 Introduction 136
5.2 The Bullwhip Effect 136
5.2.1 Quantifying the Bullwhip Effect 139
5.2.2 The Impact of Centralized Information on the Bullwhip Effect 141
5.2.3 Methods for Coping with the Bullwhip Effect 144
5.3 Information Sharing and Incentives 145
5.4 Effective Forecasts 147
5.5 Information for the Coordination of Systems 147
5.6 Locating Desired Products 148
5. 7 Lead-Time Reduction 148
5.8 Information and Supply Chain Trade-Offs 149
5.8.1 Conflicting Objectives in the Supply Chain 149
5.8.2 Designing the Supply Chain for Conflicting Goals 150
5.9 Decreasing Marginal Value of Information 153
Summary 154
Discussion Questions 154
CASE: REEBOK NFL REPLICA JERSEYS: A CASE FOR POSTPONEMENT 155

6. SUPPLY CHAIN INTEGRATION 163

CASE: DELL INC.: IMPROVING THE FLEXIBILITY OF THE DESKTOP PC SUPPLY CHAIN 163
6.1 Introduction 172
6.2 Push, Pull, and Push-Pull Systems 172
6.2.1 Push-Based Supply Chain 172
6.2.2Pull-Based Supply Chain 173
6.2.3Push-Pull Supply Chain 174
6.2.4 Identifying the Appropriate Supply Chain Strategy 175
6.2.5 Implementing aPush-Pull Strategy 177
6.3 The Impact of Lead Time 179
6.4 Demand-Driven Strategies 180
6.5 The Impact of the Internet on Supply Chain Strategies 182
6.5.1 What ls £-Business? 183
6.5.2 The Grocery Industry 184
6.5.3 The Book Industry 184
6.5.4 The Retail Industry 185
6.5.5 Impact on Transportation and Fulfillment 185
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XXii CONTENTS

Summary 186
Discussion Questions 187
CASE: THE GREAT INVENTORY CORRECTION 187

7. DISTRIBUTION STRATEGIES 193

CASE: AMAZON'S EUROPEAN DISTRIBUTION STRATEGY 193
7.1 Introduction 193
7.2 Direct Shipment Distribution Strategies 194
7.3 Intermediate Inventory Storage Point Strategies 194
7.3.1 Traditional Warehousing 195
7.3.2 Cross-Docking 196
7.3.3 Inventory Pooling 197
7.4 Transshipment 202
7.5 Reverse Logistics 203
7.6 Selecting an Appropriate Strategy 203
Summary 204
Discussion Questions 205

8. STRATEGIC ALLIANCES 207

CASE: HOW KIMBERLY-CLARK KEEPS CLIENT COSTCO IN DIAPERS 207
8.1 Introduction 210
8.2 A Framework for Strategic Alliances 211
8.3 Third-Party Logistics 213
8.3.1 What Is 3PL? 213
8.3.2 Advantages and Disadvantages of 3PL 214
8.3.3 3PL Issues and Requirements 216
8.3.4 3PL Implementation Issues 217
8.4 Retailer-Supplier Partnerships 218
8.4.1 Types of RSP 218
8.4.2 Requirements for RSP 219
8.4.3 Inventory Ownership in RSP 220
8.4.4 Issues in RSP Implementation 221
8.4.5 Steps in RSP Implementation 222
8.4.6 Advantages and Disadvantages of RSP 222
8.4. 7 Successes and Failures 223
8.5 Distributor Integration 224
8.5.1 Types of Distributor Integration 225
8.5.2 Issues in Distributor Integration 226
Summary 226
Discussion Questions 227
CASE: AUDIO DUPLICATION SERVICES, INC. (ADS) 227
CASE: THE SMITH GROUP 228
 Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies, Fourth Edition xxi

CONTENTS xxiii

9. PROCUREMENT AND OUTSOURCING STRATEGIES 231

CASE: ZARA'S P ROCUREMENT AND OUTSOURCING STRATEGIES 231
9.1 Introduction 244
9.2 Outsourcing Benefits and Risks 245
9.3 A Framework for Buy/Make Decisions 247
9.4 Procurement Strategies 249
9.4.1 Supplier Footprint 251
9.5 £-Procurement 254
Summary 257
Discussion Questions 258
CASE: SOLECTRON: FROM CONTRACT MANUFACTURER TO GLOBAL SUPPLY
CHAIN INTEGRATOR 260

10. COORDINATED PRODUCT AND SUPPLY CHAIN DESIGN 263

CASE: HEWLETT-PACKARD: DESKJET PRINTER SUPPLY CHAIN 263
10.1 A General Framework 264
10.2 Design for Logistics 267
10.2.1 Overview 267
10.2.2 EconomicPackaging and Transportation 268
10.2.3 Concurrent andParallelProcessing 269
10.2.4 Standardization 270
10.2.5 Selecting a Standardization Strategy 274
10.2.6 lmportant Considerations 274
10.2.7 ThePush-Pull Boundary 275
10.2.8 Case Analysis 276
10.3 Supplier Integration Into New Product Development 277
10.3.1 The Spectrum of Supplier Integration 278
10.3.2 Keys to Effective Supplier Integration 279
10.3.3 A "Bookshelf" of Technologies and Suppliers 279
10.4 Mass Customization 279
10.4.1 What ls Mass Customization? 279
10.4.2 Making Mass Customization Work 280
10.4.3 Mass Customization and Supply Chain Management 281
Summary 282
Discussion Questions 282
CASE: HEWLETT-PACKARD COMPANY: NETWORK PRINTER DESIGN FOR UNIVERSALIT Y 283

11. FLEXIBILIT Y 285

11.1 lntroduction 285
11.2 The Concept 286
11.3 The Impact 287
11.4 Flexible Operations 291
11.5 Process Flexibility 292
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xxiv CONTENTS

11.5.1 Set-Up Times and Costs 294

11.5.2 U-Shaped Production Lines 295
11.5.3 Workforce Cross-Training 296
Summary 302
Discussion Questions 303

12. CUSTOMER VALUE 305

CASE: ZARA'S CUSTOMER VALUE PROPOSITION 305
12.1 Introduction 306
12.2 Product Innovation 308
12.3 Product Selection and Availability 309
12.4 Price and Brand 311
12.5 Value-Added Services 313
12.6 Relationships and Experiences 314
Summary 315
Discussion Questions 316

13. RISK MANAGEMENT 317

CASE: NISSAN MOTOR COMPANY: BUILDING OPERATIONAL RESILIENC Y 317
13.1 Introduction 324
13.2 Many Sources of Risks 324
13.3 The Risk Exposure Method 327
13.3.1 T he Ford Motor Company 330
13.4 Managing the Unknown-Unknown 333
13.4.1 Capacity Redundancy 333
13.4.2 S peed in Sensing and Res ponding 335
13.4.3 Flexible Su pply Chain Community 336
13.5 Managing Global Risks 337
Summary 341
Discussion Questions 341
CASE: SUPPLY CHAIN RESILIENCE IN THE TELECOM INDUSTRY 343

14. SUSTAINABLE SUPPLY CHAINS 353

CASE: TO BUILD "CIRCULAR" OPERATIONS, IKEA TAKES AIM AT ITS SUPPLY CHAIN 353
14.1 Introduction 355
14.2 Corporate Social Responsibility 357
14.3 Reducing Supply Chain Emissions 360
14.3.1 Short-Term Opportunities 362
14.3.2 Long-Term Opportunities 364
14.3.3 An alysis 365
Summary 366
Discussion Questions 366
 Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies, Fourth Edition xxiii

CONTENTS XXV

15. SMART PRICING 369

CASE: RUE LA LA 369
15.1 Introduction 372
15.2 Price and Demand 373
15.3 New Frontier in Price Optimization 374
15.3.1 The Challenge and the Approach 375
15.3.2 Forecast and Price Optimization at Rue La La 376
15.3.3 Learning and Price Optimization at Groupon 378
15.4 Markdowns 380
15.5 Price Differentiation 381
15.6 Revenue Management 383
15. 7 Smart Pricing 386
15.7.1 Differential Pricing 386
15.7.2 Dynamic Pricing 388
15.8 Impact of Strategic Consumer Behavior 391
15.9 lmpact of the Internet 392
15.10 Caveats 392
Summary 393
Discussion Questions 394
CASE: THE GREAT REBATE RUNAROUND 394

16. INFORMATION TECHNOLOGY AND BUSINESS PROCESSES 399

CASE: SUPPLY CHAIN WHIRL 399
16.1 lntroduction 401
16.2 The Importance of Business Processes 402
16.3 Goals of Supply Chain IT 408
CASE: 7-ELEVEN STOCKS UP ON TECH SAVVY 413
16.4 Supply Chain Management System Components 416
16.4.1 Decision-Support Systems 416
16.4.2 IT for Supply Chain Excellence 422
16.5 Sales and Operations Planning 425
CASE: S&OP "EVOLUTION" AT ADTRAN 426
16.6 lntegrating Supply Chain Information Technology 428
16.6.1 Implementation of ERP and DSS 428
16.6.2 "Best of Breed" versus Single-Vendor ERP Solutions 429
Summary 430
Discussion Questions 431

17. TECHNOLOGY STANDARDS 433

CASE: CENTRATECH SYSTEMS (CTS) INCREASES PRODUCTIVITY OF FIELD

TECHNICIANS BY 50% 433

xxiv Simchi eBook with Cases for Connect

XXVi CONTENTS

17.1 Introduction 435

17.2 IT Standards 436
17.3 Information Technology Infrastructure 437
17.3.1 Interface Devices 437
17.3.2 System Architecture 438
17.3.3 Electronic Business 440
17.4 Web Services and Business Processes 442
17.4.1 Service-Oriented Architecture (SOA) 443
17.4.2 SOA and BPM 443
17.4.3 Microservices 444
17.5 Blockchain 445
17.5.1 The Advantages 446
17.5.2 Challenges 447
17.5.3 Applications 448
17.5.4 Applications of Blockchain in SCM 450
17.6 Internet of T hings 451
17.6.1 BlockChain and Internet of Things 452
17.6.2 Radio Frequency Identification 452
17.6.3 RFJD and Point-of-Sale Data 454
17.6.4 Business Benefits 455
17.6.5 Supply Chain Efficiency 457
Summary 458
Discussion Questions 458

INDEX 461
 CHAPTER 1

Introduction to Supply Chain

Management

1.1 WHAT IS SUPPLY CHAIN MANAGEMENT?

fierce competition in today's global markets, the introduction of products with shorter
life cycles, increased risk (for example weather, pandemic, cyber) and the heightened
expectations of customers have forced business enterprises to invest in, and focus
attention on, their supply chains. This, together with new technology trends, (for
example Artificial Intelligence, Internet of Things, RFID and blockchain technologies,
and more generally, digitization, advanced analytics, and automation), has motivated the
continuous evolution of the supply chain and of the techniques to manage it effectively.
In a typical supply chain, raw materials are procured and items are produced at one
or more factories, shipped to warehouses for intermediate storage, and then shipped
to retailers or customers. Consequently, to reduce cost and improve service levels,
effective supply chain strategies must consider the interactions at the various levels in
the supply chain. The supply chain, which is also referred to as the logistics network,
consists of suppliers, manufacturing centers, warehouses, distribution centers,
and retail outlets, as well as raw materials, work-in-process inventory, and finished
products that flow between the facilities (see Figure 1-1).
In this book, we present and explain concepts, insights, practical tools, and decision
support systems important for the effective management of the supply chain. But what
exactly is supply chain management? We define it as follows:
Supply chain management is a set of approaches utilized to efficiently integrate suppliers, manu­
facturers, 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.

This definition leads to several observations. First, supply chain management takes
into consideration every facility that has an impact on cost and plays a role in making
the product conform to customer requirements: from supplier and manufacturing
facilities through warehouses and distribution centers to retailers and stores.
Indeed, in some supply chain analyses, it is necessary to account for the suppliers'
suppliers and the customers' customers because they have an impact on supply chain
performance.
Second, the objective of supply chain management is to be efficient and cost-effective
across the entire system taking into account customer service and value requirements; total
systemwide costs, from transportation and distribution to inventories of raw materials,
2 Simchi eBook with Cases for Connect

2 DESIGNING AND MANAGING THE SUPPLY CHAIN

T
Warehouses and
Suppliers Manufacturers distribution centers Customers

'
'
• .
.
I •
)

FIGURE 1·1 The logistics network.

work in process, and finished goods, are to be minimized. Thus, the emphasis is not on
simply minimizing transportation cost or reducing inventories but, rather, on taking a
systems approach to supply chain management.
Finally, because supply chain management revolves around efficient integration of
suppliers, manufacturers, warehouses, and stores, it encompasses the firm's activities
at many levels, from the strategic level through the tactical to the operational level.
What about logistics management, or value chain management, or demand chain
management? Various companies, consultants, and academics have developed
a variety of terms and concepts to stress what they believe are the salient issues in
supply chain management. Although many of these concepts are useful and insightful,
for the purposes of this text, we will use supply chain management as the generic
name for the set of concepts, approaches, strategies, and ideas that we are discussing.
What makes supply chain management difficult? Although we will discuss a variety
of reasons throughout this text, they can all be related to some or all of the following
observations:
1. Supply chain strategies cannot be determined in isolation. They are directly
affected by another chain that most organizations have, the development
chain that includes the set of activities associated with new product introduction.
Similarly, decisions regarding the development chain, such as product design and
introduction, are affected by the characteristics of the supply chain. Thus, these
two chains (i.e., the supply chain and development chain) must be integrated to
improve business performance.
2. It is challenging to design and operate a supply chain so that total systemwide
costs are minimized, and systemwide service levels are maintained. Indeed, it
is frequently difficult to operate a single facility so that costs are minimized and
service level is maintained. The difficulty increases exponentially when an entire
 Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies, Fourth Edition 3

CHAPTER 1: INTRODUCTION TO SUPPLY CHAIN MANAGEMENT 3

system is being considered. The process of finding the best systemwide strategy is
known as global optimization.
3. Uncertainty and risk are inherent in every supply chain; customer demand can
never be forecast accurately, travel times will never be certain, and machines and
vehicles will break down. Similarly, recent industry trends, including outsourcing,
offshoring, and lean manufacturing that focus on reducing supply chain costs, sig­
nificantly increase the level of risk in the supply chain. Thus, supply chains need to
be designed and managed to eliminate as much uncertainty and risk as possible as
well as deal effectively with the uncertainty and risk that remain.
4. One-size-fits-all strategy is not appropriate. Indeed, different customer segments,
channels, or products may require different supply chain strategies. This drives the
need for supply chain segmentation, that is, the need for multiple supply chains
within the same firm, each of which may focus on delivering a different customer
value proposition. Unfortunately, segmentation can lead to increased complexity
and loss of the ability to benefit from economies of scale.
In the next four sections, we discuss these issues in more detail.

1.2 THE DEVELOPMENT CHAIN

The development chain is the set of activities and processes associated with new
product introduction. It includes the product design phase, the associated capabilities
and knowledge that need to be developed internally, sourcing decisions, and production
plans. Specifically, the development chain includes decisions such as product archi­
tecture, what to make internally and what to buy from outside suppliers (i.e., make/buy
decisions, supplier selection, early supplier involvement, and strategic partnerships).
The development and supply chains intersect at the production point, as illustrated
in Figure 1-2. It is clear that the characteristics of and decisions made in the
development chain will have an impact on the supply chain. Similarly, it is intuitively
clear that the characteristics of the supply chain must have an impact on product
design strategy and hence on the development chain.

EXAMPLE 1·1

Hewlett Packard was one of the first firms to recognize the intersection of the development and
supply chains. A case in point is the Inkjet printer introduction, where decisions about product
architecture were made by considering not only labor and material cost, but also total supply chain
cost throughout the product life cycle. More recently, HP has focused on making decisions such
as what design activities to outsource and the corresponding organizational structures needed to
manage the outsource design process by considering the characteristics of both the development
chain and supply chain.

Unfortunately, in most organizations, different managers are responsible for the

different activities that are part of these chains. Typically, the VP of Engineering is
responsible for the development chain, the VP of Manufacturing for the production
portion of the chains, and the VP of supply chain or logistics for the fulfillment of
customer demand. Unless carefully addressed, the typical impact of this organiz­
ational structure is a misalignment of product design and supply chain strategies.
To make matters worse, in many organizations, additional chains intersect with both
the development and supply chains. These may include the reverse logistics chain (i.e., the
chain associated with returns of products or components, as well as the spare-parts chain).
4 Simchi eBook with Cases for Connect

4 DESIGNING AND MANAGING THE SUPPLY CHAIN

• Product architecture
{ • Make/buy
Plan/design
�- �-� • Early supplier involvement
-

• Strategic partnerships
{ • Supplier selection
�-�-� • Supply contracts

Supply Produce Distribute Sell

Supply chain
FIGURE 1·2 The enterprise development and supply chains.

In this book, we explore the various characteristics of each of these supply chains in
order to better understand the impact of these on product and supply chains strategies.
We illustrate how these characteristics lead to the development of frameworks to assist
in matching products with strategies.

1.3 GLOBAL OPTIMIZATION

What makes finding the best systemwide, or globally optimal, integrated solution so
difficult? A variety of factors make this a challenging problem:
1. The supply chain is a complex network of facilities dispersed over a large
geography, and in many cases, all over the globe. The following example illustrates
a network that is fairly typical of today's global companies.

EXAMPLE 1 · 2

Intel Corporation, whose main competitor is Samsung Electronics, is one of the world's largest semi­
conductor chip manufacturers. Currently, the company has 11 fabrication facilities and five assembly/
test factories spread across North America, Asia, Europe, and the Middle East, for a total of seven
countries. These manufacturing facilities are supported by about 30 global distribution centers
that ship around 1 million units per day to global customers. In addition to semiconductor chips,
the company offers a variety of products from wireless controllers to software solutions. Since this
industry is highly competitive, Intel recognized that its supply chain is central to its success and has
focused on a variety of initiatives including shorter lead time; more cost-effective performance; and
increase environmental sustainability. All of these objectives need to be achieved at the same time
that their product mix and volume has increased dramatically.1

2. Supply chain trade-offs are not easy to optimize. Supply chain strategies
affect multiple measures of performance such as cost, time, and service levels.
Unfortunately, these are conflicting measures as is illustrated in Figure 1-3 where
you can see the solid curve represents the trade-offs between efficiency and respon­
siveness. Efficiency refers to cost while responsiveness refers to speed, or time to
serve customers. This curve, sometimes referred to as the efficient frontier, rep­
resents a range of possible strategies, each with a corresponding cost (efficiency)
and response time (responsiveness). Indeed, a high-efficiency level (i.e., a low-cost
supply chain strategy) typically increases time to serve customers and does not
Another random document with
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 10, more highly magnified pairing of gametes of different origin; 11, 12,
zygote developing into "A" form. (After Schaudinn.)

Several genera have tests of siliceous or chitinous plates, formed in

the cytoplasm in the neighbourhood of the nucleus, and connected
by chitinous cement. Among these Quadrula (Fig. 10, A) is Lobose,
with square plates, Euglypha (Fig. 8, p. 29), and Paulinella[69] are
Filose, with hexagonal plates. In the latter they are in five longitudinal
rows, with a pentagonal oral plate, perforated by the oval pylome. In
other genera again, such as Cyphoderia (Filosa), the plates are
merely chitinous. Again, the shell may be encrusted with sand-grains
derived directly from without, or from ingested particles, as shown in
Centropyxis, Difflugia (Fig. 10, D), Heleopera, and Campascus when
supplied with powdered glass instead of sand. The cement in
Difflugia is a sort of organic mortar, infiltrated with ferric oxide (more
probably ferric hydrate). In Lecqueureusia spiralis (formerly united
with Difflugia) the test is formed of minute sausage-shaped granules,
in which may be identified the partly dissolved valves of Diatoms
taken as food; it is spirally twisted at the apex, as if it had enlarged
after its first formation, a very rare occurrence in this group. The
most frequent mode of fission in the testaceous Rhizopods (Figs. 8,
10) is what Schaudinn aptly terms "bud-fission," where half the
protoplasm protrudes and accumulates at the mouth of the shell, and
remains till a test has formed for it, while the other half retains the
test of the original animal. The materials for the shell, whether sand-
granules or plates, pass from the depths of the original shell
outwards into the naked cell, and through its cytoplasm to the
surface, where they become connected by cementing matter into a
continuous test. The nucleus now divides into two, one of which
passes into the external animal; after this the two daughter-cells
separate, the one with the old shell, the other, larger, with the new
one.
 Fig. 10.—Test-bearing Rhizopods. A, Quadrula symmetrica: B, Hyalosphenia
lata; C, Arcella vulgaris; D, Difflugia pyriformis. (From Lang's Comparative
Anatomy.)

If two individuals of the shelled species undergo bud-fission in close

proximity, the offspring may partially coalesce, so that a monstrous
shell is produced having two pylomes.

Reproduction by fission has been clearly made out in most members

of the group; some of the multinucleate species often abstrict a
portion, sometimes at several points simultaneously, so that fission
here passes into budding[70] (Fig. 9, 2, 6).

Brood-division, either by resolution in the multinucleate species, or

preceded by multiple nuclear division in the habitually 1-nucleate,
though presumably a necessary incident in the life-history of every
species, has only been seen, or at least thoroughly worked out, in a
few cases, where it is usually preceded by encystment, and mostly
by the extrusion into the cyst of any undigested matter.[71]

In Trichosphaerium (Fig. 9) the cycle described by Schaudinn is very

complex, and may be divided into two phases, which we may term
the A and the B subcycles. The members of the A cycle are
distinguished by the gelatinous investment being armed with radial
spicules, which are absent from the B form. The close of the A cycle
is marked by the large multinucleate body resolving itself into
amoeboid zoospores (3), which escape from the gelatinous test, and
develop into the large multinucleate adults of the B form. These, like
the A form, may reproduce by fission or budding. At the term of
growth, however, they retract their pseudopodia, expel the excreta,
and multiply their nuclei by mitosis (7). Then the body is resolved
into minute 2-flagellate microzoospores (8), which are exogamous
gametes, i.e. they will only pair with similar zoospores from another
cyst. The zygote (9-11) resulting from this conjugation is a minute
amoeboid; its nucleus divides repeatedly, a gelatinous test is formed
within which the spicules appear, and so the A form is reconstituted.
In many of the test-bearing forms, whether Lobose or Filose,
plastogamic unions occur, and the two nuclei may remain distinct,
leading to plurinucleate monsters in their offspring by fission, or they
may fuse and form a giant nucleus, a process which has here no
relation to normal syngamy, as it is not associated with any marked
change in the alternation of feeding and fission, etc. In
Trichosphaerium also plastogamic unions between small individuals
have for their only result the increase of size, enabling the produce
to deal with larger prey. Temporary encystment in a "hypnocyst" is
not infrequent in both naked and shelled species, and enables them
to tide over drought and other unfavourable conditions.

Schaudinn has discovered and worked out true syngamic processes,

some bisexual, some exogamous, in several other Rhizopods. In
Chlamydophrys stercorea the pairing-cells are equal, and are formed
by the aggregation of the chromidia into minute nuclei around which
the greater part of the cytoplasm aggregates, while the old nucleus
(with a little cytoplasm) is lost. These brood-cells are 2-flagellate
pairing-cells, which are exogamous: the zygote is a brown cyst; if
this be swallowed by a mammal, the original Chlamydophrys
appears in its faeces.[72]

Centropyxis aculeata, a species very common in mud or moss, allied

to Difflugia, also forms a brood by aggregation around nuclei derived
from chromidia. The brood-cells are amoeboid, and secrete
hemispherical shells like those of Arcella; some first divide into four
smaller ones, before secreting the shell. Pairing takes place between
the large and the small forms; and the zygote encysts. Weeks or
months afterwards the cyst opens and its contents creep out as a
minute Centropyxis. Finally, Amoeba coli produces its zygote in a
way recalling that of Actinosphaerium (pp. 73-75, Fig. 21): the cell
encysts; its nucleus divides, and each daughter divides again into
two, which fuse reciprocally. Thus the cyst contains two zygote
nuclei. After a time each of these divides twice, so that the mature
cyst contains eight nuclei. Probably when swallowed by another
animal they liberate a brood of eight young amoebae. Thus in
different members of this group we have exogamy, both equal and
bisexual, and endogamy.

Most of the Rhizopoda live among filamentous Algae in pools,

ponds, and in shallow seas, etc.; some are "sapropelic" or mud-
dwellers (many species of Amoeba, Pelomyxa, Difflugia, etc.), others
frequent the roots of mosses. Amoeba coli is often found as a
harmless denizen of the large intestine of man. Amoeba histolytica,
lately distinguished therefrom by Schaudinn, is the cause of tropical
dysentery. It multiplies enormously in the gut, and is found extending
into the tissues, and making its way into the abscesses that so
frequently supervene in the liver and other organs. Chlamydophrys
stercorea is found in the faeces of several mammals. The best
monograph of this group is that of Penard.[73]

2. Foraminifera[74]
Sarcodina with no central capsule or distinction of ectosarc; the
pseudopodia fine, branching freely, and fusing where they meet to
form protoplasmic networks, or the outermost in the pelagic forms
radiating, but without a central or axial filament: sometimes
dimorphic, reproducing by fission and by rhizopod or flagellate germs
in the few cases thoroughly investigated: all marine (with the
exception of some of the Allogromidiaceae), and usually provided
with a test of carbonate of lime ("vitreous" calcite, or "porcellanous"
aragonite?), or of cemented particles of sand ("arenaceous"); test-
wall continuous, or with the walls perforated by minute pores or
interstices for the protrusion of pseudopodia.

The classification of Carpenter (into Vitreous or Perforate,

Porcellanous or Imperforate, and Arenaceous), according to the
structure of the shell, had proved too artificial to be used by Brady in
the great Monograph of the Foraminifera collected by the
"Challenger" Expedition,[75] and has been modified by him and
others since then. We reproduce Lister's account of Brady's
classification.[76] We must, however, warn the tyro that its
characterisations are not definitions (a feature of all other recent
systems), for rigid definitions are impossible: here as in the case, for
instance, of many Natural Orders of Plants, transitional forms making
the establishment of absolute boundaries out of the question. In the
following classification we do not think it, therefore, necessary to
complete the characterisations by noting the extremes of variation
within the orders:—

1. Allogromidiaceae: simple forms, often fresh-water and similar to

Rhizopoda; test 0, or chitinous, gelatinous, or formed of cemented particles,
whether secreted platelets or ingested granules. Biomyxa, Leidy =
Gymnophrys, Cienk.; Diaphorodon, Archer; Allogromia, Rhumbl. (= Gromia,
auctt.[77] nec Duj.) (Fig. 14, 1); Lieberkühnia, Cl. and Lachm. (Fig. 12);
Microgromia, R. Hertw. (Fig. 11); Pamphagus, Bailey.
2. Astrorhizidaceae: test arenaceous, often large, never truly chambered, or if
so, asymmetrical. Astrorhiza, Sandahl; Haliphysema, Bowerb.; Saccammina,
M. Sars (Fig. 13, 1); Loftusia, Brady.
3. Lituolidaceae: test arenaceous, often symmetrical or regularly spiral,
isomorphous with calcareous forms: the chambers when old often
"labyrinthine" by the ingrowth of wall-material. Lituola, Lam.; Reophax, Montf.;
Ammodiscus, Reuss; Trochammina, Parker and Jeffreys.
4. Miliolidaceae: test porcellanous, imperforate, spirally coiled or cyclic, often
chambered except in Cornuspira: simple in Squamulina. Cornuspira, Max
Sch.; Peneroplis, Montf.; Miliolina, Lam. (incl. Biloculina (Fig. 15), Triloculina,
Quinqueloculina (Figs. 14, 4; 15, B), Spiroloculina (Fig. 13, 5) of d'Orb.);
Alveolina, d'Orb.; Hauerina, d'Orb.; Calcituba, Roboz; Orbitolites, Lam.;
 Orbiculina, Lam.; Alveolina, Park. and Jeffr.; Nubecularia, Def.; Squamulina,
Max Sch. (Fig. 14, 3).
5. Textulariaceae: test calcareous, hyaline, perforated; chambers increasing
in size in two alternating rows, or three, or passing into a spiral. Textularia,
Def.; Bulimina, d'Orb.; Cassidulina, d'Orb.
6. Cheilostomellaceae: test vitreous, delicate, finely perforated, chambered,
isomorphic with the spiral forms of the Miliolidaceae. Cheilostomella, Reuss.
7. Lagenaceae: Test vitreous, very finely perforate, chambers with a distinct
pylome projecting (ectosolenial), or turned in (entosolenial), often succeeding
to form a necklace-like shell. Lagena, Walker and Boys (Fig. 13, 2);
Nodosaria, Lam. (Fig. 13, 3); Cristellaria, Lam.; Frondicularia, Def. (Fig. 13, 4);
Polymorphina, Lam.; Ramulina, Wright.
8. Globigerinidae: test vitreous, perforate; chambers few, dilated, and
arranged in a flat or conical spiral, usually with a crescentic pylome to the
last. Globigerina, d'Orb. (Figs. 13, 6; 16, 2); Hastigerina, Wyv. Thoms.;
Orbulina, d'Orb. (Fig. 16, 1).
9. Rotaliaceae; test vitreous, perforate, usually a conical spiral (like a snail),
chambers often subdivided into chamberlets, and with a proper wall, and
intermediate skeleton traversed by canals. Rotalia, Lam. (Fig. 14, 2);
Planorbulina, d'Orb. (Fig. 13, 9); Polytrema, Risso; Spirillina, Ehr. (non-
septate); Patellina, Will.; Discorbina, P. and J. (Fig. 13, 7).
10. Nummulitaceae: test usually a complex spiral, the turns completely
investing their predecessors: wall finely tubular, often with a proper wall and
intermediate skeleton. Fusulina, Fisch.; Polystomella, Lam.; Nummulites,
d'Orb. (Fig. 13, 11); Orbitoides, d'Orb.

The Allogromidiaceae are a well-marked and distinct order, on the

whole resembling the Rhizopoda Filosa, and are often found with
them in fresh water, while all other Foraminifera are marine. The type
genus, Allogromia (Fig. 14, 1), has an oval chitinous shell.
Microgromia socialis (Fig. 11) is often found in aggregates, the
pseudopodia of neighbours fusing where they meet into a common
network. This is due to the fact that one of the two daughter-cells at
each fission, that does not retain the parent shell, remains in
connexion with its sister that does: sometimes, however, it retracts
its pseudopodia, except two which become flagella, wherewith it can
swim off. The test of Pamphagus is a mere pellicle. In Lieberkühnia
(Fig. 12) it is hardly that; though the body does not give off the fine
pseudopodia directly, but emits a thick process or "stylopodium"[78]
comparable to the protoplasm protruded through the pylome of its
better protected allies; and from this, which often stretches back
parallel to the elongated body, the reticulum of pseudopodia is
emitted. Diaphorodon has a shell recalling that of Difflugia (Fig. 10,
D, p. 55), formed of sandy fragments, but with interstices between
them through which as well as through the two pylomes the
pseudopodia pass. In all of these the shell is formed as in the
Rhizopods once for all, and does not grow afterwards; and the fresh-
water forms, which are the majority, have one or more contractile
vacuoles; in Allogromia they are very numerous, scattered on the
expanded protoplasmic network.

Fig. 11.—Microgromia socialis. A, entire colony; B, single zooid; C, zooid which

has undergone binary fission, with one of the daughter-cells creeping out of
the shell; D, flagellula. c.vac, Contractile vacuole; nu, nucleus; sh, shell.
(From Parker and Haswell, after Hertwig and Lesser.)
 Fig. 12.—Lieberkühnia, a fresh-water Rhizopod, from the egg-shaped shell of
which branched pseudopodial filaments protrude. (From Verworn.)

The remaining marine families may all be treated of generally, before

noting their special characters. Their marine habitat is variable, but in
most cases restricted. A few extend up the brackish water of
estuaries: a large number are found between tide-marks, or on the
so-called littoral shelf extending to deep water; they are for the most
part adherent to seaweeds, or lie among sand or on the mud. Other
forms, again, are pelagic, such as Globigerina (Figs. 13, 6, 16, 17)
and its allies, and float as part of the plankton, having the surface of
their shells extended by delicate spines, their pseudopodia long and
radiating, and the outer part of their cytoplasm richly vacuolated
("alveolate"), and probably containing a liquid lighter than sea water,
as in the Radiolaria. Even these, after their death and the decay of
the protoplasm, must sink to the bottom (losing the fine spines by
solution as they fall); and they accumulate there, to form a light oozy
mud, the "Globigerina-ooze" of geographers, at depths where the
carbonic acid under pressure is not adequate to dissolve the more
solid calcareous matter. Grey Chalk is such an ooze, consolidated by
the lapse of time and the pressure of superincumbent layers. Some
Foraminifera live on the sea bottom even at the greatest depths, and
of course their shell is not composed of calcareous matter.
Foraminifera may be obtained for examination by carefully washing
sand or mud, collected on the beach at different levels between tide-
marks, or from dredgings, or by carefully searching the surface of
seaweeds, or by washing their roots, or, again, by the surface or
deep-sea tow-net. The sand used to weight sponges for sale is the
ready source of a large number of forms, and may be obtained for
the asking from the sponge-dealers to whom it is a useless waste
product. If this sand is dried in an oven, and then poured into water,
the empty shells, filled with air, will float to the surface, and may be
sorted by fine silk or wire gauze.

From the resemblance of the shells of many of them to the Nautilus

they were at first described as minute Cephalopods, or Cuttlefish, by
d'Orbigny,[79] and their true nature was only elucidated in the last
century by the labours of Williamson, Carpenter, Dujardin, and Max
Schultze. At first they possess only one nucleus, but in the adult
stage may become plurinucleate without dividing, and this is
especially the case in the "microsphaeric" states exhibited by many
of those with a complex shell; the nucleus is apt to give off fragments
(chromidia) which lie scattered in the cytoplasm. At first, too, in all
cases, the shell has but a single chamber, a state that persists
through life in some. When the number of chambers increases, their
number has no relation to that of the nuclei, which remains much
smaller till brood-formation sets in.

The shell-substance, if calcareous, has one of the two types,

porcellanous or vitreous, that we have already mentioned, but
Polytrema, a form of very irregular shape, though freely perforated,
is of a lovely pink colour. In the calcareous shells sandy particles
may be intercalated, forming a transition to the Arenacea. In these
the cement has an organic base associated with calcareous or
ferruginous matter; in some, however, the cement is a phosphate of
iron. The porcellanous shells are often deep brown by transmitted
light.
 Fig. 13.—Shells of Foraminifera. In 3, 4, and 5, a shows the surface view, and b
a section; 8a is a diagram of a coiled cell without supplemental skeleton; 8b
of a similar form with supplemental skeleton (s.sk); and 10 of a form with
overlapping whorls; in 11a half the shell is shown in horizontal section; b is
a vertical section; a, aperture of the shell; 1-15, successive chambers, 1
being always the oldest or initial chamber. (From Parker and Haswell, after
other authors.)

Despite the apparent uniformity of the protoplasmic body in this

group, the shell is infinitely varied in form. As Carpenter writes, in
reference to the Arenacea, "There is nothing more wonderful in
nature than the building up of these elaborate and symmetrical
structures by mere jelly-specks, presenting no traces whatever of
that definite organisation which we are accustomed to regard as
necessary to the manifestations of conscious life.... The tests (shells)
they construct when highly magnified bear comparison with the most
skilful masonry of man. From the same sandy bottom one species
picks up the coarsest quartz grains, unites them together with a
ferruginous cement, and thus constructs a flask-shaped test, having
a short neck and a single large orifice; another picks up the finer
grains and puts them together with the same cement into perfectly
spherical tests of the most extraordinary finish, perforated with
numerous small pores disposed at pretty regular intervals. Another
species selects the minutest sand grains and the terminal portions of
sponge-spicules, and works them up together—apparently with no
cement at all, but by the mere laying of the spicules—into perfect
white spheres like homoeopathic globules, each showing a single-
fissured orifice. And another, which makes a straight, many-
chambered test, the conical mouth of each chamber projecting into
the cavity of the next, while forming the walls of its chambers of
ordinary sand grains rather loosely held together, shapes the conical
mouths of the chambers by firmly cementing together the quartz
grains which border it." The structure of the shell is indeed variable.
The pylome may be single or represented by a row of holes
(Peneroplis, Orbitolites), or, again, there may be several pylomes
(Calcituba); and, again, there are in addition numerous scattered
pores for the protrusion of pseudopodia elsewhere than from the
stylopodium, in the whole of the "Vitrea" and in many "Arenacea";
and, as we shall see, this may exercise a marked influence on the
structure of the shell.

In some cases the shell is simple, and in Cornuspira and Spirillina

increases so as to have the form of a flat coiled tube. In Calcituba
the shell branches irregularly in a dichotomous way, and the older
parts break away as the seaweed on which they grow is eaten away,
and fall to the bottom, while the younger branches go on growing
and branching. The fallen pieces, if they light on living weed, attach
themselves thereto and repeat the original growth; if not, the
protoplasm crawls out and finds a fresh weed and forms a new tube.
In the "Polythalamia" new chambers are formed by the excess of the
protoplasm emerging and surrounding itself with a shell, organically
united with the existing chamber or chambers, and in a space-
relation which follows definite laws characteristic of the species or of
its stage of growth, so as to give rise to circular, spiral, or irregular
complexes (see Fig. 13).
 Fig. 14.—Various forms of Foraminifera. In 4, Miliola, a, shows the living animal;
b, the same killed and stained; a, aperture of shell; f, food particles; nu,
nucleus; sh, shell. (From Parker and Haswell, after other authors.)

In most cases the part of the previously existing chamber next the
pylome serves as the hinder part of the new chamber, and the old
pylome becomes the pore of communication. But in some of the
"Perforata" each new chamber forms a complete wall of its own
("proper wall," Fig. 13, 8b), and the space between the two adjacent
walls is filled with an intermediate layer traversed by canals
communicating with the cavities of the chambers ("intermediate
skeleton"), while an external layer of the same character may form a
continuous covering. The shell of the Perforata may be adorned with
pittings or fine spines, which serve to increase the surface of support
in such floating forms as Globigerina, Hastigerina, and the like (Fig.
17). In the "Imperforata" the outer layer is often ornamented with
regular patterns of pits, prominences, etc., which are probably
formed by a thin reflected external layer of protoplasm. In some of
the "Arenacea" a "labyrinthine" complex of laminae is formed.
A very remarkable point which has led to great confusion in the study
of the Foraminifera, is the fact that the shell on which we base our
characters of classification, may vary very much, even within the
same individual. Thus in the genus Orbitolites the first few chambers
of the shell have the character of a Milioline, in Orbiculina of a
Peneroplis. The arrangements of the Milioline shell, known as
Triloculine, Quinqueloculine, and Biloculine respectively, may
succeed one another in the same shell (Figs. 14 4, 15). A shell may
begin as a spiral and end by a straight continuation: again, the
spherical Orbulina (Fig. 16 1) is formed as an investment to a shell
indistinguishable from Globigerina, which is ultimately absorbed. In
some cases, as Rhumbler has pointed out, the more recent and
higher development shows itself in the first formed chambers, while
the later, younger chambers remain at a lowlier stage, as in the case
of the spiral passing into a straight succession; but the other cases
we have cited show that this is not always the case. In Lagena (Fig.
13 2) the pylome is produced into a short tube, which may protrude
from the shell or be turned into it, so that for the latter form the genus
Entosolenia was founded. Shells identical in minute sculpture are,
however, found with either form of neck, and, moreover, the
polythalamial shells (Nodosaria, Fig. 13 3), formed of a nearly
straight succession of Lagena-like chambers, may have these
chambers with their communications on either type. Rhumbler goes
so far as to suggest that all so-called Lagena shells are either the
first formed chamber of a Nodosaria which has not yet become
polythalamian by the formation of younger ones, or are produced by
the separation of an adult Nodosaria into separate chambers.
 Fig. 15.—A, Megalospheric; B, microspheric shell of Biloculina. c, The initial
chamber. The microspheric form begins on the Quinqueloculina type. (From
Calkins' Protozoa.)

Many of the chambered species show a remarkable dimorphism, first

noted by Schlumberger, and finally elucidated by J. J. Lister and
Schaudinn. It reveals itself in the size of the initial chamber;
accordingly, the two forms may be distinguished as "microspheric"
and "megalospheric" respectively (Fig. 15), the latter being much the
commoner. The microspheric form has always a plurality of nuclei,
the megalospheric a single one, except at the approach of
reproduction. Chromidial masses are, however, present in both
forms. The life-history has been fully worked out in Polystomella by
Schaudinn, and in great part in Polystomella, Orbitolites, etc., by
Lister; and the same scheme appears to be general in the class, at
least where the dimorphism noted occurs. The microspheric form
gives birth only to the megalospheric, but the latter may reproduce
megalospheric broods, or give rise to swarmers, which by their
(exogamous) conjugation produce the microspheric young. The
microspheric forms early become multinucleate, and have also
numerous chromidia detached from the nuclei, which they ultimately
replace. These collect in the outer part of the shell and aggregate
into new nuclei, around which the cytoplasm concentrates, to
separate into as many amoeboid young "pseudopodiospores" as
there are nuclei. These escape from the shell or are liberated by its
disintegration, and invest themselves with a shell to form the initial
large central chamber or megalosphere.
 Fig. 16.—1, Orbulina universa. Highly magnified. 2, Globigerina bulloides. Highly
magnified. (From Wyville Thomson, after d'Orbigny.)

In the ordinary life of the megalospheric form the greater part of the
chromatic matter is aggregated into a nucleus, some still remaining
diffused. At the end of growth the nucleus itself disintegrates, and
the chromidia concentrate into a number of small vesicular nuclei,
each of which appropriates to itself a small surrounding zone of thick
plasm and then divides by mitosis twice; and the 4-nucleate cells so
formed are resolved into as many 1-nucleate, 2-flagellate swarmers,
which conjugate only exogamously.[80] The fusion of their nuclei
takes place after some delay: ultimately the zygote nucleus divides
into two, a shell is formed, and we have the microsphere, which is
thus pluri-nucleate ab initio. As we have seen, the nuclei of the
microsphere are ultimately replaced by chromidia, and the whole
plasmic body divides into pseudopodiospores, which grow into the
megalospheric form.

Fig. 17.—Shell of Globigerina bulloides, from tow-net, showing investment of

spines. (From Wyville Thomson.)
In the Perforate genera, Patellina and Discorbina, plastogamy
precedes brood formation, the cytoplasms of the 2-5 pairing
individuals contracting a close union; and then the nuclei proceed to
break up without fusion, while the cytoplasm aggregates around the
young nuclei to form amoebulae, which acquire a shell and separate.
In both cases it is the forms with a single nucleus, corresponding to
megalospheric forms that so pair, and the brood-formation is, mutatis
mutandis, the same as in these forms. Similar individuals may
reproduce in the same way, in both genera, without this plastogamic
pairing, which is therefore, though probably advantageous, not
essential. If pseudopodiospores form their shells while near one
another, they may coalesce to form monsters, as often happens in
Orbitolites.[81]

The direct economic uses of the Foraminifera are perhaps greater

than those of any other group of Protozoa. The Chalk is composed
largely of Textularia and allied forms, mixed with the skeletons of
Coccolithophoridae (pp. 113-114), known as Coccoliths, etc. The
Calcaire Grossier of Paris, used as a building stone, is mainly
composed of the shells of Miliolines of Eocene age; the Nummulites
of the same age of the Mediterranean basin are the chief constituent
of the stone of which the Pyramids of Egypt are built. Our own Oolitic
limestones are composed of concretions around a central nucleus,
which is often found to be a minute Foraminiferous shell.

The palaeontology of the individual genera is treated of in

Chapman's and Lister's recent works. They range from the Lower
Cambrian characterised by perforated hyaline genera, such as
Lagena, to the present day. Gigantic arenaceous forms, such as
Loftusia, are among the Tertiary representatives; but the limestones
formed principally of their shells commence at the Carboniferous.
The so-called Greensands contain greenish granules of "glauconite,"
containing a ferrous silicate, deposited as a cast in the chambers of
Foraminifera, and often left exposed by the solution of the
calcareous shell itself. Such granules occur in deep-sea deposits of
the present day.[82]
 3. Heliozoa
Sarcodina with radiate non-anastomosing pseudopodia of granular
protoplasm, each with a stiff axial rod passing into the body plasma;
no central capsule, nor clear ectoplasm; skeleton when present
siliceous; nucleus single or multiple; contractile vacuole (or vacuoles)
in fresh-water species, superficial and prominent at the surface in
diastole; reproduction by fission or budding in the active condition, or
by brood-formation in a cyst, giving rise to resting spores;
conjugation isogamous in the only two species fully studied; habitat
floating or among weeds, mostly fresh water.

1. Naked or with an investment only when encysted.

Aphrothoraca.—Actinolophus F.E. Sch.; Myxastrum Haeck.;
Gymnosphaera Sassaki; Dimorpha (Fig. 37, 5, p. 112) Gruber;
Actinomonas Kent; Actinophrys Ehrb.; Actinosphaerium St.; Camptonema
Schaud; Nuclearia Cienk.

2. Invested with a gelatinous layer, sometimes traversed by a firmer elastic

network.
Chlamydophora.—Heterophrys Arch.; Mastigophrys Frenzel;
Acanthocystis, Carter.

3. Ectoplasm with distinct siliceous spicules.

Chalarothoraca.—Raphidiophrys Arch.

4. Skeleton a continuous, fenestrated shell, sometimes stalked.

Desmothoraca.—Myriophrys Penard; Clathrulina Cienk.; Orbulinella Entz.

This class were at first regarded and described as fresh-water

Radiolaria, but the differences were too great to escape the greatest
living specialist in this latter group, Ernst Haeckel, who in 1866
created the Heliozoa for their reception. We owe our knowledge of it
mainly to the labours of Cienkowsky, the late William Archer, F. E.
Schulze, R. Hertwig, Lesser, and latterly to Schaudinn, who has
monographed it for the "Tierreich" (1896); and Penard has published
a more recent account.

Fig. 18.—Actinophrys sol. a, Axial filament of pseudopod; c.v, contractile

vacuole; n, nucleus. (From Lang's Comparative Anatomy, after Grenacher.)

Actinophrys sol Ehrb. (Fig. 18) is a good and common type. It owes
its name to its resemblance to a conventional drawing of the sun,
with a spherical body and numerous close-set diverging rays. The
cytoplasm shows a more coarsely vacuolated outer layer, sometimes
called the ectosarc, and a denser internal layer the endosarc. In the
centre of the figure is the large nucleus, to which the continuations of
the rays may be seen to converge; the pseudopodia contain each a
stiffish axial filament,[83] which is covered by the fine granular plasm,
showing currents of the granules. The axial filament disappears
when the pseudopodia are retracted or bent, and is regenerated
afterwards. This bending occurs when a living prey touches and
adheres to a ray, all its neighbours bending in like the tentacles of a
Sundew. The prey is carried down to the surface of the ectoplasm,
and sinks into it with a little water, to form a nutritive vacuole. Fission
is the commonest mode of reproduction, and temporary plastogamic
unions are not uncommon. Arising from these true conjugations
occur, two and two, as described by Schaudinn. A gelatinous cyst
wall forms about the two which are scarcely more than in contact
with their rays withdrawn. Then in each the nucleus divides into two,
one of which passes to the surface, and is lost (as a "polar body"),
while the other approaches the corresponding nucleus of the mate,
and unites with it, while at the same time the cytoplasms fuse. Within
the gelatinous cyst the zygote so formed divides to produce two
sister resting spores, from each of which, after a few days, a young
Actinophrys escapes, as may take place indeed after encystment of
an ordinary form without conjugation.

Fig. 19.—Actinosphaerium eichornii. A, entire animal with two contractile

vacuoles (c.vac); B, a portion much magnified, showing alveolate
cytoplasm, pseudopodia with axial rods, non-nucleate cortex (cort), multiple
nuclei (nu) of endoplasm (med), and food-vacuole (chr). (From Parker and
Haswell.)

The axial rods of the pseudopodia may pass either to the

circumference of the nucleus or to a central granule, corresponding,
it would appear, to a centrosome or blepharoplast; or again, in the
plurinucleate marine genus Camptonema, each rod abuts on a
separate cap on the outer side of each nucleus. The nucleus is
single in all but the genera Actinosphaerium, Myxastrum,
Camptonema, and Gymnosphaera. The movements of this group
are very slow, and are not well understood. A slow rolling over on the
points of the rays has been noted, and in Camptonema they move
very decidedly to effect locomotion, the whole body also moving
Amoeba-fashion; but of the distinct movements of the species when
floating no explanation can be given. The richly vacuolate ectoplasm
undoubtedly helps to sustain the cell, and the extended rays must
subserve the same purpose by so widely extending the surface.
Dimorpha (Fig. 37, 5, p. 112) has the power of swimming by
protruding a pair of long flagella from the neighbourhood of the
eccentric nucleus; and Myriophrys has an investment of long
flagelliform cilia. Actinomonas has a stalk and a single flagellum in
addition to the pseudopodia; these genera form a transition to the
Flagellata.

Several species habitually contain green bodies, which multiply by

bipartition, and are probably Zoochlorellae, Chlamydomonadidae of
the same nature as we shall find in certain Ciliata (pp. 154, 158) in
fresh-water Sponges (see p. 175), in Hydra viridis (p. 256), and the
marine Turbellarian Convoluta (Vol. II. p. 43).

Reproduction by fission is not rare, and in some cases

(Acanthocystis) the cell becomes multinuclear, and buds off 1-
nucleate cells. In such cases the buds at first lack a centrosome, and
a new one is formed first in the nucleus, and passes out into the
cytoplasm. These buds become 2-flagellate before settling down. In
Clathrulina the formation of 2-flagellate zoospores has long been
known (Fig. 20, 3). In Actinosphaerium (Figs. 19, 21), a large
species, differing from Actinophrys only in the presence of numerous
nuclei in its endoplasm, a peculiar process, which we have
characterised as endogamy, results in the formation of resting
spores. The animal retracts its rays and encysts; and the number of
nuclei is much reduced by their mutual fusion, or by the solution of
many of them, or by a combination of the two processes. The body
then breaks up into cells with a single nucleus, and each of these
surrounds itself with a wall to form a cyst of the second order.