SUPPLY CHAIN MANAGEMENT

Douglas M. Lambert, Ph.D. Prime F. Osborn III Eminent Scholar Chair in Transportation

University of North Florida

How are these Terms Different?

Logistics Management

Supply Chain Management

Value Chain Management

Demand Chain Management

1998 CLM DEFINITION OF LOGISTICS

….is that part of the supply chain process that

plans, implements, and controls the efficient,

effective flow and storage of goods, services,

and related information from the point-of-

origin to the point-of-consumption in order to

meet customers' requirements.

[Council of Logistics Management, 1998]

2003 CLM DEFINITION OF LOGISTICS

… is that part of Supply Chain Management

that plans, implements, and controls the

efficient, effective forward and reverse flow

and storage of goods, services, and related

information between the point of origin and

the point of consumption in order to meet

customers’ requirements.

[Council of Logistics Management, 2003]

SUPPLY CHAIN MANAGEMENT

…is the integration of key business processes

from end user through original suppliers, that

provides products, services, and information

that add value for customers and

other stakeholders.

[The International Center for Competitive Excellence, 1994]

[The Global Supply Chain Forum, 1998]

n

2

3

1

2

1

1

n

2

1

3

n

2

1

3 1

n

2

n

1

2

n

1

Co

nsu

mers

/En

d-c

usto

mers

n

Init

ial S

up

pliers

Tier 1 Customers

Tier 2 Customers

Tier 3 to Consumers/

End-customers Tier 2

Suppliers Tier 1

Suppliers

Tier 3 to Initial

suppliers

n

1

n

1

n

Members of the Focal Company’s Supply Chain

Focal Company

Non-members of the Focal Company’s Supply Chain

Managed Process Links

Not-Managed Process Links

Non-Member Process Links

Monitor Process Links

Types of Inter-company Business Process Links

1

n

Source: Adapted from Douglas M. Lambert, Martha C. Cooper, and Janus D. Pagh, “Supply Chain Management: Implementation Issues

and Research Opportunities,” The International Journal of Logistics Management, Vol. 9, No. 2, 1998, p. 7.

Supply Chain Management Vision

The key to achieving an integrated flow of product and information throughout the

supply chain is to create a focused customer interface, a focused supplier interface,

and an integrated, process-oriented, supply chain which is driven by the customer.

Customer Relationship

Management

Supplier Relationship

Management Process

Fulfillment Customer Service

Management

Manufacturing Flow

Management

Demand

Management

Underlying Process Vision

Customer

Source: 3M

Su

pp

ly C

ha

in M

an

ag

emen

t P

roce

sses

Tier 1 Supplier

Tier 2 Supplier Logistics

Purchasing Marketing

R&D

Customer Consumer/ End - user

PRODUCT FLOW Production Finance

Manufacturer

Information Flow

Source: Adapted from Douglas M. Lambert, Martha C. Cooper, Janus D. Pagh , “Supply Chain Management: Implementation Issues and Research O pportunities”,

of Logistics Management , Vol. 9, No. 2, 1998, p. 2. The International Journal

RETURNS MANAGEMENT

PRODUCT DEVELOPMENT AND COMMERCIALIZATION

SUPPLIER RELATIONSHIP MANAGEMENT

MANUFACTURING FLOW MANAGEMENT

ORDER FULFILLMENT

DEMAND MANAGEMENT

CUSTOMER SERVICE MANAGEMENT

CUSTOMER RELATIONSHIP MANAGEMENT

Supply Chain Management

Integrating and Managing Processes Across the Supply Chain

IMPLEMENTATION OF SUPPLY CHAIN MANAGEMENT

Information Architecture, Data Base Strategy, Information Visibility

Research & Development Logistics Purchasing Finance Marketing

Business

Processes Production

Demand Management

Forecasting Capability Planning Sourcing

Demand Planning

Customer Relationship Management

Requirements Definition

Manufacturing Strategy

Sourcing Strategy

Customer Profitability

Account Management

Requirements Definition

Customer Service Management

Performance Specifications

Coordinated Execution

Account Administration

Technical Service

Manufacturing Flow Management

Production Planning

Integrated Supply

Manufacturing Process Stability

Order Fulfillment Network Planning

Plant Direct

Selected Supplier(s)

Distribution Cost

Special Orders

Product Development and Commercialization

Process Specifications

Material Specifications

R & D Cost Product Design

Business Plan

Movement Requirements

Priority Assessment

Cost To Serve

Tradeoff Analysis

Process Requirements

Environmental Requirements

Packaging Specifications

Prioritization Criteria

Supplier Relationship Management

Integrated Planning

Supplier Management

Materials Cost

Material Specifications

Order Booking

Inbound Flow

Cost

CU

ST

OM

ER

S

SU

PP

LIE

RS

Typical

Functional

Silos

Returns Management

Note: Process sponsorship and ownership must be established to drive the attainment of the supply chain vision and eliminate the functional barriers that artificially separate the process flows.

Information Architecture, Data Base Strategy, Information Visibility

Product Life Cycle

Product Design

Reverse Logistics

Remanu-facturing

Material Specification

Revenue & Costs

Source: Adapted from Douglas M. Lambert, Larry C. Guinipero and Gary J. Ridenhower, “Supply Chain Management: A Key to Achieving Business Excellence in the 21st Century”, unpublished

manuscript as reported in Keely L. Croxton, Sebastián J. García-Dastugue and Douglas M. Lambert, “The Supply Chain Management Processes”, The International Journal of Logistics

Management, Vol. 12, No.2 (2001), p. 31.

Managing the Supply Chain Involves Three

Closely Inter-related Elements:

The supply chain network structure

The supply chain business processes

The management components

Communication

and Information Flow

Facility Structure

Work Flow/

Activity Structure

Organization

Structure

Product Flow

Facility Structure

Planning and

Control Methods

Physical & Technical

Management Components

Management

Methods

Power and

Leadership Structure

Risk and

Reward Structure

Culture and

Attitude

Managerial & Behavioral

Management Components

SUPPLY CHAIN MANAGEMENT Fundamental Management Components

Some of the Processes

Customer Relationship Management - provides the

structure for how relationships with customers are developed & maintained, including

the PSAs between the firm & its customers.

Order Fulfillment – includes all activities necessary to define

customer requirements, design the logistics network, and fill customer orders.

Manufacturing Flow Management - includes all

activities necessary to move products through the plants & to obtain & manage

manufacturing flexibility in the supply chain.

Supplier Relationship Management - provides the

structure for how relationships with suppliers are

developed & maintained, including the PSAs between the

firm & its suppliers.

Strategic Sub-Processes Process Interfaces Operational Sub-Processes

Customer Relationship

Management

Customer Service

Management

Demand

Management

Order Fulfillment

Manufacturing Flow

Management

Product Development

& Commercialization

Returns

Management

Source: Keely L. Croxton, Sebastián J. García-Dastugue, Douglas M. Lambert, and Dale S. Rogers, “The Supply Chain Management Processes,” The International

Journal of Logistics Management, Vol. 12, No. 2, 2001, p. 25.

Review Corporate,

Manufacturing

and Sourcing Strategies

Differentiate Suppliers

Identify Criteria

for Categorizing Suppliers

Provide Guidelines for the

Degree of Customization in

the Product/Service

Agreement

Develop Framework of

Metrics

Develop Guidelines for

Sharing

Process Improvement

Benefits

with Suppliers

Prepare the

Supplier/Segment

Management Team

Internally Review the

Supplier/

Supplier Segment

Identify Opportunities

with the Suppliers

Develop Product/Service

Agreement and

Communication Plan

Measure Performance and

Generate Supplier

Cost/Profitability Reports

Implement the

Product/Service Agreement

Supplier Relationship Management

Customer Relationship

Management Process

Customer teams develop and implement customer partnering programs.

Product/service agreements are established.

New customer interfaces are used to better predict customer demand and improve the way customers are serviced.

Teams identify and eliminate sources of production variability.

Key performance evaluation criteria (both company performance and customer account profitability) are used to measure results.

Required Behaviors

Customer relationships are managed by customer teams which negotiate

mutually beneficial product / service agreements with large, strategically

significant customers.

Customer Relationship

Management

Demand Management

Process

Demand requirements and supply capabilities

are continuously modeled using point of sale

and “key” customer data.

Market requirements and production plans are

coordinated on an enterprise-wide basis.

Multiple sourcing and routing options are

considered at the time of order receipt.

Worldwide on-line/real-time inventory availability

check and promising capacity is employed.

Demand and production rates are synchronized

and inventories are managed globally.

Customer need dates and requirements drive the process.

Manufacturing, distribution, and transportation plans are integrated.

Alliances with channel members and carriers are formed to meet requirements and to reduce total-delivered-cost of the product to customers

Required Behaviors

In demand management, customer demand is continuously gathered, compiled

and renewed in order to match supply capability with requirements in the market.

Demand

Management