THIRD E
----- --·-- --·-- -D ITION
- -- - --
SU PP LY CH AI N
MA NA GE ME NT
Stra tegy , Plan ning , and Ope ratio n
Sunil Chopra
Kellogg Schoo l of Manag ement
Northwestern University
Peter Meindl
Stanfo rd University
PEAR SON
---------
Prentice
I-I all
Uppe r Saddl e River , New Jersey
·--· -- · - · - - -
, "ibrary of Congress Cataloging-in-Publication Data
:::hopra, Sunil
Supply chain management: strategy, planning, and operation I Sunil Chopra,
>eter Meind!.-3rd ed.
p. em.
Includes bibliographical references and index.
ISBN: 0-13-208608-5
1. Marketing channels-Managemen t. 2. Delivery of goods-Management.
i. Physical distribution of goods-Management. 4. Customer services-
vfanagement. 5. Industrial procurement. 6. Materials management. I.
vfeindl, Peter II. Title.
HF5415.13.C533 2007
658.7-dc22
2006004948
\VP/Executive Editor: Mark Pfaltzgraff
ii:ditorial Director: Jeff Shelstad
;enior Project Manager: Alana Bradley
E:ditorial Assistant: Barbara Witmer
Vledia Product Development Manager: Nancy Welcher
\VP/Executive Marketing Manager: Debbie Clare
Vlarketing Assistant: Joanna Sabella
;enior Managing Editor (Production): Cynthia Regan
flroduction Editor: Melissa Feimer
flermissions Supervisor: Charles Morris
Vlanufacturing Buyer: Michelle Klein
Vlanager, Print Production: Christy Mahon
Composition/Full-Service Project Management: Karen Ettinger, TechBooks, Inc.
flrinter/Binder: Hamilton Printing Company Inc.
fypeface: 10/12 Times Ten Roman
:::redits and acknowledgments borrowed from other sources and reproduced, with permission, in this text-
Jook appear on appropriate page within text.
\.1icrosoft® and Windows® are registered trademarks of the Microsoft Corporation in the U.S.A. and
Jther countries. Screen shots and icons reprinted with permission from the Microsoft Corporation. This
Jook is not sponsored or endorsed by or affiliated with the Microsoft Corporation.
Copyright© 2007, 2004, 2001 by Pearson Education, Inc., Upper Saddle River, New Jersey, 07458.
Pearson Prentice Hall. All rights reserved. Printed in the United States of America. This publication is
Jrotected by Copyright and permission should be obtained from the publisher prior to any prohibited
~eproduction, storage in a retrieval system, or transmission in any form or by any means, electronic,
nechanical, photocopying, recording, or likewise. For information regarding permission(s), write to:
Rights and Permissions Department.
Pearson Prentice Hall™ is a trademark of Pearson Education, Inc.
Pearson® is a registered trademark of Pearson pic
Prentice Hall® is a registered trademark of Pearson Education, Inc.
Pearson Education LTD. Pearson Education Australia PTY, Limited
Pearson Education Singapore, Pte. Ltd Pearson Education North Asia Ltd
Pearson Education, Canada, Ltd Pearson Educaci6n de Mexico, S.A. de C.V.
Pearson Education-Japan Pearson Education Malaysia, Pte.
PEARSON
Prentice
Hall 10987654321
ISBN: 0-13-208608-5
, DED ICA TIO N
~
I would like to thank my colleagues at Kellogg for all that I have learned from
them about
logistics and supply chain management. I am grateful for the love and encou
ragem ent my
parents, Krisha n and Pushpa, and sisters, Sudha and Swati, have always provid
ed during
every endea vor in my life. I thank my children, Ravi and Rajiv, for the joy they
have
broug ht me. Finally, none of this would have been possib le withou t the consta
nt love,
caring, and suppo rt of my wife, Maria Cristina.
Sunil Chopra
I would like to thank three mento rs-Su nil Chopra, Hau Lee, and Gerry Liebe
rman -who
have taught me a great deal. Thank you also to my paren ts and sister for their
love,
and to my sons, Jamie and Eric, for makin g me smile and teaching me what
life is
truly all about. Most important, I thank my wife, Sarah, who makes life wonde
rful
and whom I love with all of my heart.
Pete Meindl
, ABOUT THE AUTHORS
~
SUNIL CHOPRA
Sunil Chopra is the IBM Distinguished Professor of Operations Management
and Information Systems at the Kellogg School of Management. He is also the
Codirector of the Masters of Management and Manufacturing program, a joint
dual-degree program between the Kellogg School of Management and the
McCormick School of Engineering at Northwestern University. He has a PhD
in Operations Research from SUNY at Stony Brook. Prior to joining Kellogg,
he taught at New York University and spent a year at IBM Research.
Professor Chopra's research and teaching interests are in supply chain and
logistics management, operations management, and the design of telecommuni-
cation networks. He has won several teaching awards at the MBA and Executive
programs of Kellogg. He has authored more than 35 papers and two books.
He has been a Department Editor for Management Science and an Associate
Editor for Manufacturing & Service Operations Management, Operations Research,
and Decision Sciences Journal. His recent research has focused on supply chain risk to
understand sources of risk and devise mitigation strategies that buffer risk effectively
at low cost. He has also consulted for several firms in the area of supply chain and
operations management.
PETER MEINDL
Peter Meindl is a Finance and Economics PhD candidate in Stanford
University's Management Science & Engineering Department. His research
focuses on portfolio optimization and dynamic hedging using stochastic pro-
gramming, receding horizon control, and Monte Carlo simulation. He was pre-
viously a strategy consultant with the Boston Consulting Group and the
Director of Corporate Strategy for i2 Technologies, a software firm. He holds
an MBA from Northwestern University's Kellogg School and three degrees
from Stanford University.
The first edition of this book won the prestigious Book of the Year award in 2001 from
the Institute of Industrial Engineers.
----- --·-- --·-- -D ITION
- -- - --
SU PP LY CH AI N
MA NA GE ME NT
Stra tegy , Plan ning , and Ope ratio n
Sunil Chopra
Kellogg Schoo l of Manag ement
Northwestern University
Peter Meindl
Stanfo rd University
PEAR SON
---------
Prentice
I-I all
Uppe r Saddl e River , New Jersey
·--· -- · - · - - -
, "ibrary of Congress Cataloging-in-Publication Data
:::hopra, Sunil
Supply chain management: strategy, planning, and operation I Sunil Chopra,
>eter Meind!.-3rd ed.
p. em.
Includes bibliographical references and index.
ISBN: 0-13-208608-5
1. Marketing channels-Managemen t. 2. Delivery of goods-Management.
i. Physical distribution of goods-Management. 4. Customer services-
vfanagement. 5. Industrial procurement. 6. Materials management. I.
vfeindl, Peter II. Title.
HF5415.13.C533 2007
658.7-dc22
2006004948
\VP/Executive Editor: Mark Pfaltzgraff
ii:ditorial Director: Jeff Shelstad
;enior Project Manager: Alana Bradley
E:ditorial Assistant: Barbara Witmer
Vledia Product Development Manager: Nancy Welcher
\VP/Executive Marketing Manager: Debbie Clare
Vlarketing Assistant: Joanna Sabella
;enior Managing Editor (Production): Cynthia Regan
flroduction Editor: Melissa Feimer
flermissions Supervisor: Charles Morris
Vlanufacturing Buyer: Michelle Klein
Vlanager, Print Production: Christy Mahon
Composition/Full-Service Project Management: Karen Ettinger, TechBooks, Inc.
flrinter/Binder: Hamilton Printing Company Inc.
fypeface: 10/12 Times Ten Roman
:::redits and acknowledgments borrowed from other sources and reproduced, with permission, in this text-
Jook appear on appropriate page within text.
\.1icrosoft® and Windows® are registered trademarks of the Microsoft Corporation in the U.S.A. and
Jther countries. Screen shots and icons reprinted with permission from the Microsoft Corporation. This
Jook is not sponsored or endorsed by or affiliated with the Microsoft Corporation.
Copyright© 2007, 2004, 2001 by Pearson Education, Inc., Upper Saddle River, New Jersey, 07458.
Pearson Prentice Hall. All rights reserved. Printed in the United States of America. This publication is
Jrotected by Copyright and permission should be obtained from the publisher prior to any prohibited
~eproduction, storage in a retrieval system, or transmission in any form or by any means, electronic,
nechanical, photocopying, recording, or likewise. For information regarding permission(s), write to:
Rights and Permissions Department.
Pearson Prentice Hall™ is a trademark of Pearson Education, Inc.
Pearson® is a registered trademark of Pearson pic
Prentice Hall® is a registered trademark of Pearson Education, Inc.
Pearson Education LTD. Pearson Education Australia PTY, Limited
Pearson Education Singapore, Pte. Ltd Pearson Education North Asia Ltd
Pearson Education, Canada, Ltd Pearson Educaci6n de Mexico, S.A. de C.V.
Pearson Education-Japan Pearson Education Malaysia, Pte.
PEARSON
Prentice
Hall 10987654321
ISBN: 0-13-208608-5
, DED ICA TIO N
~
I would like to thank my colleagues at Kellogg for all that I have learned from
them about
logistics and supply chain management. I am grateful for the love and encou
ragem ent my
parents, Krisha n and Pushpa, and sisters, Sudha and Swati, have always provid
ed during
every endea vor in my life. I thank my children, Ravi and Rajiv, for the joy they
have
broug ht me. Finally, none of this would have been possib le withou t the consta
nt love,
caring, and suppo rt of my wife, Maria Cristina.
Sunil Chopra
I would like to thank three mento rs-Su nil Chopra, Hau Lee, and Gerry Liebe
rman -who
have taught me a great deal. Thank you also to my paren ts and sister for their
love,
and to my sons, Jamie and Eric, for makin g me smile and teaching me what
life is
truly all about. Most important, I thank my wife, Sarah, who makes life wonde
rful
and whom I love with all of my heart.
Pete Meindl
, ABOUT THE AUTHORS
~
SUNIL CHOPRA
Sunil Chopra is the IBM Distinguished Professor of Operations Management
and Information Systems at the Kellogg School of Management. He is also the
Codirector of the Masters of Management and Manufacturing program, a joint
dual-degree program between the Kellogg School of Management and the
McCormick School of Engineering at Northwestern University. He has a PhD
in Operations Research from SUNY at Stony Brook. Prior to joining Kellogg,
he taught at New York University and spent a year at IBM Research.
Professor Chopra's research and teaching interests are in supply chain and
logistics management, operations management, and the design of telecommuni-
cation networks. He has won several teaching awards at the MBA and Executive
programs of Kellogg. He has authored more than 35 papers and two books.
He has been a Department Editor for Management Science and an Associate
Editor for Manufacturing & Service Operations Management, Operations Research,
and Decision Sciences Journal. His recent research has focused on supply chain risk to
understand sources of risk and devise mitigation strategies that buffer risk effectively
at low cost. He has also consulted for several firms in the area of supply chain and
operations management.
PETER MEINDL
Peter Meindl is a Finance and Economics PhD candidate in Stanford
University's Management Science & Engineering Department. His research
focuses on portfolio optimization and dynamic hedging using stochastic pro-
gramming, receding horizon control, and Monte Carlo simulation. He was pre-
viously a strategy consultant with the Boston Consulting Group and the
Director of Corporate Strategy for i2 Technologies, a software firm. He holds
an MBA from Northwestern University's Kellogg School and three degrees
from Stanford University.
The first edition of this book won the prestigious Book of the Year award in 2001 from
the Institute of Industrial Engineers.
