SCM Homework Sesión02
SCM Homework Sesión02
SCM Homework Sesión02
SUPPLY CHAIN
MANAGEMENT
Processes, Partnerships, Performance
Douglas M. Lambert
Copyright © 2008 by Supply Chain Management Institute.
All rights reserved. No part of this document may be reproduced or utilized in any form or by any
means, electronic or mechanical, including photocopying, recording, or by any information storage
and retrieval system, without permission in writing from the publisher.
For information:
Supply Chain Management Institute
3260 Fruitville Road, Suite C
Sarasota, FL 34237
Phone: (941) 957-1510
Fax: (941) 957-0900
www.scm-institute.org
Lambert, Douglas M.
An Executive Summay of Supply Chain Management: Processes, Partnerships, Performance
Douglas M. Lambert
p. cm.
Includes bibliographical references.
ISBN: 978-0-9759949-2-4
1
Drucker, Peter F. , “Management’s New Paradigms,” Forbes Magazine, October 5, 1998, pp. 152-177;
and, Martin C. Christopher, “Relationships and Alliances: Embracing the Era of Network Competition,”
in Strategic Supply Chain Management, ed. John Gattorna, Hampshire, England: Cower Press, 1998.
2
Simchi-Levy, David, Philip Kaminski, and Edith Simchi-Levy, Designing and Managing the Supply
Chain: Concepts, Strategies, and Case Studies, Boston, MA: Irwin/McGraw Hill, 2000.
3
Monczka, Robert M., Robert J. Trent and Robert B. Handfield, Purchasing and Supply Chain
Management, Cincinnati, OH: South-Western College Publishing, 1998.
4
Wisner, Joel D., G. Keong Leong and Keah-Choon Tan, Supply Chain Management: A Balanced
Approach, Mason, OH: Thomson South-Western, 2004.
5
The Global Supply Chain Forum, Fisher College of Business, The Ohio State University. See
http://fisher.osu.edu/scm
6
Blackstock, Thomas, Keynote Speech, International Association of Food Industry Suppliers, San
Francisco, CA, March 11, 2005 and John Gattorna, Supply Chains Are the Business,” Supply Chain
Management Review, Vol. 10, No. 6 (2005), pp. 42-49.
Information Flow
Manufacturer
Tier 2 Tier 1
Supplier Customer Consumer/
Supplier Logistics End-user
Purchasing Marketing & Sales
PRODUCT FLOW
Production Finance
R&D
Supply Chain Management Processes
DEMAND MANAGEMENT
ORDER FULFILLMENT
RETURNS MANAGEMENT
Source: Lambert, Douglas M., Supply Chain Management: Processes, Partnerships, Performance, Sarasota, Florida: Supply Chain
Management Institute, 2008, p. 3.
“Supply chain business functions in supply chain management when he said: “Supply chain
management is management is everybody’s job”.7 In 2006, John Gattorna expressed a similar
everybody’s job”. perspective on the breadth of management necessary for successful
implementation of supply chain management:
We have to embrace a far more liberal view of the supply chain. In
effect, the supply chain is any combination of processes, functions,
activities, relationships, and pathways along which products, services,
information, and financial transactions move in and between enterprises.
It also involves any and all movement of these from original producer to
ultimate end-user or consumer, and everyone in the enterprise is
involved in making this happen.8
In reality, a supply chain is much more complex than the row of silos depicted
in Figure 1. For a company in the middle of the supply chain like a consumer
goods manufacturer, the supply chain looks like an uprooted tree (see Figure 2)
where the root system represents the supplier network and the branches of the tree
represent the customer network. The supply chain will look different depending on
a firm’s position in it. For example, in the case of a retailer, like Wal-Mart, the end
consumers would be next to the dark square (Wal-Mart) in the center of Figure 2
making them the only tier in the customer network. For an initial supplier, such as
a shrimper, there would be no suppliers associated with the product flow.
7
Blackstock, Thomas, Keynote Speech, International Association of Food Industry Suppliers, San
Francisco, CA, March 11, 2005.
8
Gattorna, John, “Supply Chains Are the Business”, Supply Chain Management Review, Vol. 10, No. 6
(2006), pp. 42-49.
1 1
2
Tier 3 to n Suppliers
2
n n
Consumers/End-users
1 1
1
2
Initial Suppliers
n 2
1
3 1
Tier 3 to n Customers
2 3
n
3 n
n n 1
2
1
n
n
Source: Lambert, Douglas M., Supply Chain Management; Processes, Partnerships, Performance, Sarasota,
Florida: Supply Chain Management Institute, 2008, p. 6.
Managing the entire supply chain is a very challenging task. Managing all
suppliers back to the point-of-origin and all products/services out to the point-of-
consumption might appear to be overwhelming. It is probably easier to understand
why executives would want to manage their supply chains to the point-of-
consumption because whoever has the relationship with the end-user has the
power in the supply chain. Intel created a relationship with the end-user by having
computer manufacturers place an “Intel inside” label on their computers. This
affects the computer manufacturer’s ability to switch microprocessor suppliers.
However, opportunities exist to significantly improve profits by managing the
supplier network as well. For example, Coca-Cola is one of the largest purchasers
of PET resins in the world as a result of managing its suppliers of packaging
materials beyond Tier 1. Because resin costs represent such a large portion of the At the end of the
package cost, Coca-Cola contracts for PET resins directly with the resin producer. day, supply chain
This practice also results in improved availability and less price volatility. management is
At the end of the day, supply chain management is about relationship about relationship
management. A supply chain is managed, link-by-link, relationship-by-relationship, management. A
and the organizations that manage these relationships best will win. The links in the supply chain is
chain are formed by the customer relationship management process of the seller managed, link-by-link,
organization and the supplier relationship management process of the buyer relationship-by-
organization. The focus of the remainder of this executive summary will be on the relationship, and the
eight supply chain management processes, how customer relationship management organizations that
and supplier relationship management form the linkages for integrating companies manage these
in the supply chain, and how a tool known as the partnership model, can be used relationships best
to structure relationships with key customers and suppliers. will win.
9
Hakansson, Hakan and Ivan Snehota, Developing Relationships in Business Networks, London:
Routledge, 1995.
10
Blackstock, Thomas, Keynote Speech, International Association of Food Industry Suppliers, San
Francisco, CA, March 11, 2005.
11
Blackstock, Thomas, Keynote Speech, International Association of Food Industry Suppliers, San
Francisco, CA, March 11, 2005.
Demand Management
Demand management is the supply chain management process that balances
the customers’ requirements with the capabilities of the supply chain. With the
right process in place, management can match supply with demand proactively
and execute the plan with minimal disruptions. The process is not limited to
forecasting. It includes synchronizing supply and demand, increasing flexibility,
and reducing variability. For example, it involves managing all of the
organization’s practices, such as end-of-quarter loading and terms of sale which
encourage volume buys that increase demand variability. A good demand
management process uses point-of-sale and key customer data to reduce
uncertainty and provide efficient flows throughout the supply chain. Marketing
requirements and production plans should be coordinated on an enterprise-wide
basis. In advanced applications, customer demand and production rates are
synchronized to manage inventories globally.
Lambert, Douglas M. and Terrance L. Pohlen, “Supply Chain Metrics,” The International Journal of
12
Returns Management
Returns management is the supply chain management process by which
activities associated with returns, reverse logistics, gatekeeping, and avoidance are
managed within the firm and across key members of the supply chain. The correct
implementation of this process enables management not only to manage the reverse
product flow efficiently, but to identify opportunities to reduce unwanted returns
and to control reusable assets such as containers. While significant opportunities to
reduce costs are possible through better management of reverse logistics, even
greater potential to reduce costs and increase revenue are possible by eliminating
those management practices and performance failures that cause returns.
Figure 3
Functional Involvement in the Supply Chain Management Processes
Business
Functions
Business Processes Research and
Marketing Sales Development Logistics Production Purchasing Finance
Customer Relationship Marketing Plan Account Technological Logistics Manufacturing Sourcing Customer
Management & Resources Management Capabilities Capabilities Capabilities Capabilities Profitability
Capabilities
Supplier Relationship Required for Sales Growth Material Inbound Integrated Supplier Total Delivered
Management Competitive Opportunities Specifications Material Flow Planning Capabilities Cost
Positioning
CUSTOMERS
Customer Logistics
SUPPLIERS
Competing
Demand Competitors’ Programs in Process Manufacturing Sourcing Tradeoff
Management Initiatives Requirements Forecasting Capabilities Capabilities Analysis
Customer Space
Differentiation
Opportunities from Knowledge of Design
Manufacturing Flow Customer for Prioritization Production Integrated Manufacturing
Management Manufacturing Criteria Planning Supply Cost
Capabilities Requirements Manufacturability
Product Development Product/Service Customer Product Logistics Process Material R & D Cost
and Commercialization Gaps in Market Opportunities Design Requirements Specifications Specifications
Knowledge of Reverse
Returns Management Marketing Customer Product Logistics Re- Material Revenue &
Programs Knowledge Design Capabilities manufacturing Specifications Costs
Note: Process sponsorship and ownership must be established to drive the attainment of the supply chain vision and eliminate the functional silo mentality.
Source: Lambert, Douglas M., Supply Chain Management: Processes, Partnerships, Performance, Sarasota, Florida: Supply Chain Management
Institute, 2008, p. 15.
13
Lambert, Douglas M. and A. Michael Knemeyer, “We’re in This Together,” Harvard Business Review,
Vol. 82, No. 12 (2004), pp. 96-108 and Lambert, Douglas M., Margaret A. Emmelhainz, and John T.
Gardner, “Developing and Implementing Supply Chain Partnerships,” The International Journal of
Logistics Management, Vol. 7, No. 2 (1996), pp.1-17.
14
Cooper, Martha C. and John T. Gardner, “Good Business Relationships: More Than Just Partnerships
or Strategic Alliances,” International Journal of Physical Distribution and Logistics Management, Vol.
23, No. 6 (1993), pp. 14-20.
Berry, Leonard L. and A. Parasuraman, “Marketing to Existing Customers” in Marketing Services:
15
Competing Through Quality, New York, NY: The Free Press, 1991, p.132.
Total Cost
P&L for Report for P&L for P&L for P&L for P&L for
C as Customer D as Supplier B as Customer C as Supplier A as Customer B as Supplier
Source: Lambert, Douglas M., Supply Chain Management: Processes, Partnerships, Performance, Sarasota, Florida: Supply Chain
Management Institute, 2008, p. 16.
Heskett, James L., W. Earl Sasser, Fr. and Leonard A. Schlesinger, The Service Profit Chain, New York,
16
Figure 5
Sysco Sales and Earnings History
Source: Lambert, Douglas M., Supply Chain Management: Processes, Partnerships, Performance, Sarasota, Florida:
Supply Chain Management Institute, 2008, p. 18.
18
Stewart, III, G. Bennett, The Quest for Value, New York: Harper Collins Publishers, Inc., 1999.
Source: Lambert, Douglas M., Supply Chain Management: Processes, Partnerships, Performance, Sarasota, Florida: Supply
Chain Management Institute, 2008, p. 19.
Figure 7
Types of Relationships
Partnerships
Joint Vertical
Arm’s Length Type I Type II Type III
Ventures Integration
Source: Lambert, Douglas M., Supply Chain Management: Processes, Partnerships, Performance, Sarasota, Florida: Supply
Chain Management Institute, 2008, p. 20.
19
Lambert, Douglas M., and A. Michael Knemeyer, “We’re In This Together,” Harvard Business Review,
Vol. 82, No. 12 (2004), pp. 114-122 and Douglas M. Lambert, Supply Chain Management; Processes,
Partnerships, Performance, Sarasota, Florida: Supply Chain Management Institute, 2006, p. 169.
Facilitators
Drivers Decision to Supportive
Compelling create or adjust environmental
reasons to partner partnership factors that enhance
partnership growth
Source: Lambert, Douglas M., Supply Chain Management: Processes, Partnerships, Performance,
Sarasota, Florida: Supply Chain Management Institute, 2008, p. 21.
easily, the managerial effort and resources devoted to putting the correct relationship
in place will be lower for the same results. The elements that make partnership
implementation easy or hard are called facilitators. They represent the environment
of the partnership; those aspects of the two firms that will help or hinder partnership
activities. There are four major categories of facilitators: corporate compatibility,
management philosophy and techniques, mutuality and symmetry.
Components. While drivers and facilitators determine the potential for partnership,
the components are the building blocks of partnership. They are universal across
firms and across business environments and unlike drivers and facilitators, are
under the direct control of the managers involved. In other words, they are the
activities that managers in the two firms actually perform to implement the
partnership. There are eight components of partnership: planning, joint operating
controls, communications, risk/reward sharing, trust and commitment, contract
style, scope and investment. The components are implemented differently for Type
l, Type II and Type III partnerships. Action items are identified for the drivers and
the components so that both parties’ expectations are met.
A partnership, if Outcomes. A partnership, if appropriately established and effectively managed,
appropriately should improve performance for both parties. Profit enhancement, process
established and improvements, and increased competitive advantage are all likely outcomes of
effectively managed, effective partnerships. Specific outcomes will vary depending upon the drivers
should improve which initially motivated the development of the partnership. It should be noted,
performance for
however, that a partnership is not required to achieve satisfactory outcomes from a
both parties.
relationship. Typically, organizations will have multiple arm’s length relationships
which meet the needs of and provide benefits to both parties.
Figure 9
Supply Chain Management: Elements and Key Decisions
Supply Chain
Management
Processes
3) What level of integration and management 1) Who are the key supply chain members
should be applied for each process link? with whom to link processes?
Source: Lambert, Douglas M., Supply Chain Management: Processes, Partnerships, Performance, Sarasota, Florida: Supply Chain Management
Institute, 2008, p. 23.
20
Lambert, Douglas M. and Renan Burduroglu, “Measuring and Selling the Value of Logistics”, The
International Journal of Logistics Management, Vol. 11, No. 1 (2000), pp. 1-17.
Acknowledgement
The author would like to acknowledge the contribution of the members of The
Global Supply Chain Forum whose practice, insight, ideas, and comments have
contributed significantly to this work. The member companies in The Global
Supply Chain Forum are: 3M; Cargill; The Coca-Cola Company; Colgate-Palmolive
Company; Defense Logistics Agency; Hallmark; Hewlett-Packard Company;
International Paper; Limited Logistics Services; Masterfoods USA; Moen
Incorporated; Shell Global Solutions International B.V.; Taylor Made-adidas Golf
Company; and, Wendy’s International.
Chapter 1 Supply Chain Management While many books have the title Supply Chain
Chapter 2 Customer Relationship Management Management, most simply repackage old ideas.
Chapter 3 Supplier Relationship Management A unique innovative approach to the topic is presented
Chapter 4 Customer Service Management
in the book Supply Chain Management: Processes,
Partnerships, Performance. The book represents the
Chapter 5 Demand Management
combined knowledge of the authors and executives
Chapter 6 Order Fulfillment
from leading-edge companies and was developed
Chapter 7 Manufacturing Flow Management over more than 15 years.
Chapter 8 Product Development and
Commercialization
The book also includes assessment tools that can
Chapter 9 Returns Management
be used to benchmark the firm’s performance with
Chapter 10 Conducting Assessments of the respect to each of the eight cross-functional
Supply Chain Management Processes
processes to identify and prioritize improvement
Chapter 11 Mapping for Supply Chain Management
opportunities. The third edition of the book has been
Chapter 12 Lean Thinking and Supply Chain
Management
revised and expanded to include four new chapters,
providing more detail on how to implement the
Chapter 13 Implementing and Sustaining the
Supply Chain Management Processes framework.
Chapter 14 Developing and Implementing
Partnerships in the Supply Chain To purchase the book, please visit the website
Chapter 15 Supply Chain Management below or order it from Amazon.com.
Performance Measurement
Chapter 16 Supply Chain Management: “The time for action is now.”
The Next Steps
“If you are in supply chain management Now, executives in your organization have the
today, then complexity is a cancer you have opportunity to attend one of our open enrollment
to fight. Process management is the weapon.
This course enabled our organization to seminars or have us create a custom program that
understand that supply chain management is
too important to be simply a function. It is
meets your organization’s specific needs. Fisher
everybody’s job.” College customized programs were rated best in
the world by The Economist.
Tom Blackstock, Vice President
Coca-Cola North America
“If you are in supply chain management today then complexity is a cancer that you have to fight, and process
management is the weapon. This book develops a robust model of supply chain management processes and
properly defines them so that they can be managed. It has enabled our organization to understand that supply
chain management is too important to be just a function. It is everybody's job.”
Tom Blackstock
Vice President, Supply Chain Operations, Coca-Cola North America
“The authors have done an excellent job outlining the key supply chain management processes, both
at a strategic and operational level. The recognition of cross-functional teams to lead and manage these processes
is refreshing. It is the only way to create and maintain an efficient world class supply chain.”
Donald R. Klock
Vice President, Global Materials, Logistics and Sourcing, Colgate-Palmolive Company
“With the integrated view of business described in this supply chain management framework, we found
an excellent tool to map where we are and where we should be. We now have a comprehensive language
that can be understood by everyone in the firm, as well as by key customers and suppliers. It has helped us
shape the way our supply chain works in order to provide the best support for the business.”
Salvador Romo-Fragoso
Operations Director, Imaging and Printing Group, Hewlett-Packard
“In this book, we discovered a framework to help us manage business relationships and make cross-
functional integration a reality. We strongly believe that managing relationships both with customers and
suppliers represents an opportunity to achieve a competitive advantage in a market where products tend to
become commodities.”
Jorge Vazquez
Country Manager, SIKA Argentina
“This book provides a thorough review of supply chain management research interpreted in a practical
way. We have begun to use this structure and approach with our Business Units and customers in our pursuit
of supply chain excellence.”
Jenny L. Verner
Vice President, Sales, Food Ingredients & Systems, Cargill