the supply chain management article4

Volume 12, Number 2 2001 3

Supply chain management isincreasingly being recognized as theintegration of key business processes acrossthe supply chain. For example, Hammerargues that now that companies haveimplemented processes within the firm, theyneed to integrate them between firms:

Streamlining cross-companyprocesses is the next great frontierfor reducing costs, enhancingquality, and speeding operations. Itis where this decade’s productivitywars will be fought. The victors willbe those companies that are able totake a new approach to business,working closely with partners todesign and manage processes thatextend across traditional corporateboundaries. They will be the onesthat make the leap from efficiencyto super efficiency [1]. Monczka and Morgan also focus on the

importance of process integration in supplychain management [2]. The piece that seemsto be missing from the literature is a

comprehensive definition of the processesthat constitute supply chain management.How can companies achieve supply chainintegration if there is not a commonunderstanding of the key business processes?It seems that in order to build links betweensupply chain members it is necessary forcompanies to implement a standard set ofsupply chain processes. Practitioners andeducators need a common definition ofsupply chain management, and a sharedunderstanding of the processes.

We recommend the definition of supplychain management developed and used byThe Global Supply Chain Forum:

Supply Chain Management is theintegration of key businessprocesses from end user throughoriginal suppliers that providesproducts, services, and informationthat add value for customers andother stakeholders [3].The Forum members identified eight key

processes that need to be implemented withinand across firms in the supply chain. To date,

The Supply Chain ManagementProcesses

Keely L. Croxton, Sebastián J. García-Dastugue and Douglas M. LambertThe Ohio State University

Dale S. RogersUniversity of Nevada, Reno

Increasingly, supply chain management is being recognized as the management ofkey business processes across the network of organizations that comprise thesupply chain. While many have recognized the benefits of a process approach tomanaging the business and the supply chain, most are vague about whatprocesses are to be considered, what sub-processes and activities are containedin each process, and how the processes interact with each other and with thetraditional functional silos. In this paper, we provide strategic and operationaldescriptions of each of the eight supply chain processes identified by members ofThe Global Supply Chain Forum, as well as illustrations of the interfaces among theprocesses and an example of how a process approach can be implemented withinan organization. Our aim is to provide managers with a framework to be used inimplementing supply chain management, instructors with material useful instructuring a supply chain management course, and researchers with a set ofopportunities for further development of the field.

“Streamlining cross-company processes is

the next great frontierfor reducing costs,

enhancing quality, andspeeding operations”.

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The International Journal of Logistics Management

the published descriptions of these processeswere limited to one-paragraph summariesthat provide little guidance on how toimplement a process approach [4]. Ourpurpose in this paper is to provide more detailon the sub-processes and activities thatcomprise the supply chain processes. Thegoal is to provide management withguidelines to help with implementation,instructors with material for structuring asupply chain management course andresearchers with a detailed framework forfuture research on supply chain management.

The paper is organized as follows. First,there is a brief review of the supply chainframework. Next, there is a section on each ofthe eight processes. This is followed by a sectionon implementation. Finally, opportunities forfuture research and conclusions are presented.

Supply Chain ManagementThe Global Supply Chain Forum

identified eight key processes that make upthe core of supply chain management [5]:• Customer Relationship Management• Customer Service Management• Demand Management

• Order Fulfillment• Manufacturing Flow Management• Procurement• Product Development and Commercialization• Returns.

The term “procurement” is a source ofconfusion. Novak and Simco highlight theconfusion by citing studies in whichprocurement is defined as “...the act ofbuying... all those activities necessary toacquire goods and services consistent withuser requirements” [6]. Other authors usesimilar definitions [7]. Because thesedefinitions do not adequately represent ourview of the supply chain process, we haverenamed the procurement process “supplierrelationship management”. Also, for furtherclarification we have changed the name ofthe returns process to returns management.

The eight key business processes run thelength of the supply chain and cut acrossfirms and functional silos within each firm(see Figure 1). Functional silos includeMarketing, Research and Development,Finance, Production, Purchasing andLogistics. Activities in these processes resideinside a functional silo, but an entire processwill not be contained within one function.

Figure 1Supply Chain Management:

Integrating and Managing Business Processes Across the Supply Chain

CUSTOMER RELATIONSHIP MANAGEMENT

CUSTOMER SERVICE MANAGEMENT

DEMAND MANAGEMENT

ORDER FULFILLMENT

MANUFACTURING FLOW MANAGEMENT

SUPPLIER RELATIONSHIP MANAGEMENT

PRODUCT DEVELOPMENT AND COMMERCIALIZATION

RETURNS MANAGEMENT

Information Flow

Tier 2Supplier

Su

pp

ly C

hai

n B

usi

nes

s P

roce

sses

Tier 1Supplier

ManufacturerCustomer

Logistics

PRODUCTION FLOW

R & DProduction

Purchasing

Finance

Marketing

Consumer/End-user

Source: Adapted from Douglas M. Lambert, Martha C. Cooper, and Janus D. Pagh, “Supply Chain Management: ImplementationIssues and Research Opportunities,” The International Journal of Logistics Management, Vol. 9, No. 2 (1998), p. 2.

Our purpose in thispaper is to provide moredetail on the sub-processes and activitiesthat comprise the supplychain processes.

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Volume 12, Number 2 2001 Page 15

While management of all firms in each supply chain should consider these eight processes, the relative importance of each process and the specific activities included may vary. The sub-processes and activities we describe are designed from the perspective of a manufacturing company sitting near the middle of the supply chain (see Figure 1).Each process is described at strategic and operational levels. The strategic portion consists of the establishment and strategic management of each process,and provides a blueprint for implementation.This is a necessary first step in integrating the firm with other members of the supply chain. The operational portion is theactualization of the process once it has been established.

Next, we will describe the sub-processesand activities that make up each of the eightprocesses as well as the interactions betweenprocesses, functions, and key members of thesupply chain. The description of each processis accompanied by a figure that illustrates thesub-processes and the interfaces between theprocesses.

Customer Relationship ManagementThe customer relationship management

process provides the structure for how therelationship with the customer is developedand maintained. Management identifies keycustomers and customer groups to be targetedas part of the firm’s business mission [8].Customer teams tailor Product and ServiceAgreements (PSA) to meet the needs of keyaccounts and segments of other customers [9].Teams work with key accounts to improveprocesses, and eliminate demand variabilityand non-value-added activities. Performancereports are designed to measure theprofitability of individual customers as well asthe firm’s financial impact on those customers.

The Strategic Process

At the strategic level, the customerrelationship management process providesthe framework for managing relationshipswith customers, and is comprised of five sub-processes (see Figure 2). In the first, theprocess team reviews the corporate andmarketing strategies to identify customersegments that are key to the organization’ssuccess now and in the future.

The customer relationshipmanagement process

provides the structure forhow the relationship with

the customer is developedand maintained.

Figure 2Customer Relationship Management

Review Corporate and Marketing Strategy

CustomerService Management

DemandManagement

Order Fulfillment

Manufacturing FlowManagement

Product Development& Commercialization

Returns Management

Supplier Relationship Management

Differentiate Customers

Strategic Sub-Processes Processes Interfaces Operational Sub-Processes

Identify Criteria for Categorizing Customers

Prepare the Account/SegmentManagement Team

Identify Opportunities with theAccounts

Implement the Product/ServiceAgreement

Measure Performance andGenerate Profitability Reports

Internally Review the Accounts

Provide Guidelines for theDegree of Differentiation in the

Product/Service Agreement

Develop Guidelines for SharingProcess Improvement Benefits

with Customers

Develop the Product/Service Agreement

Develop Framework of Metrics

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Next, the team identifies the criteria forcategorizing customers and providesguidelines for determining which customersqualify for tailored PSAs and which customerswill be grouped into segments and offered astandard PSA that is developed to providevalue to the segment. Potential criteriainclude: profitability, growth potential,competitive positioning issues, access tomarket knowledge, market share goals, marginlevels, level of technology, resources andcapabilities, compatibility of strategies, andchannel of distribution. As part of this sub-process, the team develops the firm’s strategyfor dealing with segments of customers whodo not qualify for individually tailored PSAs.

In the third sub-process, the teamdevelops guidelines for the degree ofdifferentiation in the PSA. This involvesdeveloping the differentiation alternatives andconsidering the revenue and cost implicationsof each. The output is the degree ofcustomization that can be offered tocustomers. The goal is to offer PSAs thatenhance the profitability of the firm and thecustomers. To find and understand thedifferentiation opportunities, this sub-processwill interface with all of the other processes.

Developing the framework of metricsinvolves outlining the metrics of interest andrelating them to the customer’s impact on thefirm’s profitability as well as the firm’s impacton the customer’s profitability. The customerrelationship management process has theresponsibility for assuring that the metrics usedto measure all of the other processes are notconflicting. Management needs to insure thatall internal and external measures are drivingconsistent and appropriate behavior [10].

In the final sub-process, the teamdevelops the guidelines for sharing processimprovement benefits with customers. Thegoal is to make these process improvementswin-win solutions for both the firm and thecustomer.

In summary, the objective of customerrelationship management at the strategic levelis to identify customer segments, providecriteria for categorizing customers, providecustomer teams with guidelines forcustomizing the product and service offering,develop a framework for metrics, and provideguidelines for the sharing of processimprovement benefits with the customers.

The Operational Process

At the operational level, the customerrelationship management process deals withwriting and implementing the PSAs. It iscomprised of seven sub-processes. First,customers are differentiated based on thecriteria developed at the strategic level. Keycustomers are identified and other customersare grouped into customer segments.

Next, the account or segmentmanagement teams are formed, including thesalesperson who will be the account orsegment manager. The teams are crossfunctional with representation from each ofthe functional areas. In the case of keyaccounts, each team is dedicated to a specificaccount and meets regularly with thecustomer. In the case of customer segments,a team manages a group of customers anddevelops and manages the standard PSA forthe segment.

Each account team reviews their account or segment of accounts to determinethe products purchased, sales growth and their position in the industry. Once the team has an understanding of the customer(s),they work with each account or segment of accounts to develop improvementopportunities in sales, costs and service. Theseopportunities might arise anywhere, so theaccount teams need to interface with each ofthe other processes.

In the fifth sub-process, each teamdevelops the PSA for their account or segmentof accounts. This team first outlines and draftsthe PSA, and then gains commitment from theinternal functions. For key accounts, theypresent the PSA for acceptance, and workwith the customer until agreement has beenreached. It is important that the PSAs for keyaccounts include a communication andcontinuous improvement plan. For otheraccounts, the PSA is presented to thecustomer.

In the sixth sub-process, the teamimplements the PSA, including regularmeetings with key customers. At this point,input is provided to each of the otherprocesses that are affected by thecustomizations in the PSA.

In the last operational sub-process, theteam captures and reports the processperformance measures. Metrics from each ofthe other processes also are captured in order

At the operational level,the customer relationshipmanagement processdeals with writing andimplementing the PSAs.


to generate the customer profitability reports. These profitability reports provideinformation for measuring and selling thevalue of the relationship to each customer andinternally to upper management. The valueprovided should be measured in terms ofcosts, impact on sales, and associatedinvestment, otherwise the efforts incurred willgo unrewarded [11].

Customer Service ManagementThe customer service management

process is the firm’s face to the customer. Itprovides the single source of customerinformation, such as product availability,shipping dates and order status. Real-timeinformation is provided to the customerthrough interfaces with the firm’s functions,such as manufacturing and logistics.Customer service management is responsiblefor administering the PSA.


At the strategic level, the customerservice management process is concernedwith designing the process for managing thePSA. Customer relationship management

provides the set of products and services thefirm can offer its customers. The strategiccustomer service management process isresponsible for planning how each of thepossible products and services to be includedin the PSA is going to be delivered andmanaged.

Strategic customer service managementhas four sub-processes (see Figure 3). In thefirst, the customer service strategy isdeveloped for the set of PSA featuresidentified in the customer relationshipmanagement process. The team identifies thedeliverables of the customer service process,operationalizes the triggers for initiatingaction, and defines the staffing needs. Thedeliverables of the process are standardizedresponses to standardized events that occurwhile administering the PSA.

The output of this first sub-process is alist of events with its corresponding triggersand deliverables. In the second sub-process,the team develops response procedures foreach of these events. This includesdeveloping the internal and externalcoordination required to respond.

Next, the process team identifies the

The customer servicemanagement process is

the firm’s face to thecustomer. It provides

the single source ofcustomer information,

such as productavailability, shipping

dates and order status.

Figure 3Customer Service Management

Develop Customer ServiceStrategy

CustomerRelationship Management

DemandManagement

Order Fulfillment



Returns Management


Recognize Event


Develop ResponseProcedures

Implement Solution

Monitor and Report

Evaluate Situation andAlternatives

Develop Infrastructure forImplementing Response

Procedures



infrastructure for implementing the responseprocedures. This involves identifying thesources of the information needed to handleeach of the events and determining theappropriate communication means forinternal and external coordination. This sub-process provides the information technologyand communication needs for managing thePSAs efficiently and effectively. If there aretechnical constraints restricting theestablishment of this infrastructure, theproducts and services that are affected have tobe re-evaluated and eventually modified tomake them feasible.

As in the other processes, the last sub-process of customer service managementat the strategic level is to develop theframework of metrics. The metrics shouldprovide management with the informationnecessary to identify problems andimprovement opportunities in theadministration of the PSA. Thesemeasurements are used not only for managingthe process, but also for improving itsefficiency. The team interfaces with thecustomer relationship management team toassure that the metrics developed areconsistent with the firm’s objectives.

In short, the objective of customerservice management at the strategic level is todevelop the necessary infrastructure andcoordination means for implementing thePSA and providing a key point of contact tothe customer.


At the operational level, the customerservice management process is responsiblefor responding to both internal and externalevents. The first step is to recognize the event.This might seem trivial but the goal of beingproactive makes this a challenging part ofadministering the PSA. The team needs tohave a thorough understanding of the firm’soperations, and try to foresee the effects of a given event on the customer and on the internal operations of the firm. Events that require action might originate in any one of the other processes socoordination is essential.

Once the event is recognized, the teamevaluates alternatives for managing the eventwith the least disruption to the customer andinternal operations. The team determines a set

of alternative actions working jointly with thespecialists in each of the functions affected bythe event or that can contribute toimplementing the solution. This requiresinterfacing with other processes that areaffected by the alternative responses. Theimplementation of the selected alternative iscoordination intensive, as other businessprocess owners or function managers oftenneed to participate in the implementation. Atthis point, the actual response to the event isexecuted.

Finally, the customer service managementprocess includes monitoring and reporting theprocess performance. This sub-processincludes recording the event in a database thatcan be used for future reference, andmonitoring the evolution of the event in orderto know to what extent the response has beenimplemented. Part of the sub-process iscollecting information and informing thecustomer about how the issue is beingresolved. Performance of the process ismeasured and conveyed to the customerrelationship management and supplierrelationship management teams.

Demand ManagementThe demand management process needs

to balance the customers’ requirements withthe firm’s supply capabilities. This includesforecasting demand and synchronizing it with production, procurement, anddistribution. “Demand Management coor-dinates all acts of the business that placedemand on manufacturing capacity” [12]. Theprocess is also concerned with developing andexecuting contingency plans when operations are interruped.


Demand management is aboutforecasting and synchronizing (see Figure 4).The process team first determines whichforecasting approaches to use. This includesdetermining the levels and timeframes of theforecasts needed throughout the firm.Different parts of the organization might needdifferent forecasts [13]. The team determinesthe sources of the data required to generatethe forecasts [14]. These might includehistorical data, sales projections, promotionplans, corporate objectives, market share

The demandmanagement processneeds to balance thecustomers’ requirementswith the firm’s supplycapabilities.


data, trade inventory, market research, andnew categories of growth. If systems such ascollaborative planning, forecasting andreplenishment (CPFR) or vendor managedinventory (VMI) are being implemented, thecustomer is a direct source of data.

Once the team decides on the method offorecasting and the sources of data, they planthe information flow. Several functional silosand customer relationship management needto provide input to the forecasting process.The forecasts are then communicated to theother process teams that are affected by them,including customer service management,order fulfillment, manufacturing flow, andproduct development and commercialization.

Next, the team determines thesynchronization procedures required tomatch the demand forecast to the firm’sproduction, sourcing and distributioncapabilities. To do this, they need tounderstand the capacity and flexibilityavailable at all points along the supply chain.They also need to determine the long-termplanning requirements, particularly in thecase of demand with high seasonality or long-term changes, such as sustained growth. At

this point in the process, the team mightrecognize future capacity issues and makerecommendations to proactively addressthem before they cause problems.

Another important component of thestrategic demand management process isdeveloping contingency plans in the event ofeither internal or external events that disruptthe balance of supply and demand [15]. Theteam develops guidelines or rules to deal withunexpected demand or interruptions tosupply. These guidelines should bedeveloped in accordance with theexpectations of the customers outlined in thecustomer relationship management process,and with input from manufacturing flow andsupplier relationship management. The teamdetermines the guidelines and communicatesthem to the customer service managementteam, since they address the concerns ofcustomers when these events occur.

Finally, as with the other processes, theteam develops the framework of metrics to beused to measure and monitor the performanceof the process. Typical process measuresmight include forecast error and capacityutilization. Again, the team confirms these

Another importantcomponent of thestrategic demand

management process isdeveloping contingency

plans in the event ofeither internal or

external events thatdisrupt the balance of

supply and demand.

Figure 4Demand Management

Determine ForecastingApproaches


Customer ServiceManagement

Order Fulfillment



Returns Management

Supplier RelationshipManagement

Collect Data/Information


Plan Information Flow

Synchronize

Measure Performance

Forecast

Determine SynchronizationProcedures

Develop ContingencyManagment System

Increase Flexibility and Reduce Variability



measures with the customer relationshipmanagement team to assure consistency.


At the operational level, the processteam executes the forecasting andsynchronization as it was designed at thestrategic level. This begins with collecting thedata. To do this, the team interfaces with themarketing functional silo as well as the orderfulfillment and customer service managementprocesses. These sources are close to thecustomer and provide critical information onsales projections and anticipated demand.

With all the required data in hand, theteam develops the forecasts. They track andanalyze the forecast error and incorporate thisfeedback to fine-tune the forecasting method.This is an important component of the learningprocess associated with good forecasting.

The forecast provides the input formatching demand with supply. Some firmsrefer to this as aggregate planning. Sources ofinformation for the synchronization sub-process include customer relationshipmanagement, customer service management,manufacturing flow, and productdevelopment and commercialization. Theoutput of the synchronization sub-process isan aggregate production plan and aninventory-positioning plan. The team alsodevelops a rough-cut capacity plan for anynew products soon to be launched. Theseplans need to be communicated throughoutthe firm, and therefore there are interfaceswith customer relationship management,customer service management, orderfulfillment, manufacturing flow, supplierrelationship management, and productdevelopment and commercialization. Inaddition, any internal or external event thatcauses a disruption to supply or large forecasterrors needs to be handled with thecontingency management plans developed atthe strategic level.

Another key component to demandmanagement is an ongoing process aimed atincreasing flexibility and reducing variability(in demand, lead-times, capacity, etc). Theformer helps management respond quickly toboth internal and external events, and thelatter aids in consistent planning andminimizing surprises. “The supply chainwhich best succeeds in reducing uncertainty

and variability is likely to be most successfulin improving its competitive position” [16].For example, to gain flexibility, the teammight work with the manufacturing flow teamto find ways to introduce postponement intothe manufacturing process. To reducedemand variability, the team might work withthe customer relationship management teamto help customer’s better plan promotions. Inorder to find ways to increase flexibility andreduce variability, the process team workswith the sales, marketing and manufacturingorganizations, customers and suppliers. Thisinvolves process interfaces with customerrelationship management, customer servicemanagement, manufacturing flow andsupplier relationship management.

Finally, the process team is responsiblefor measuring the performance of the processwith the metrics developed at the strategiclevel. These metrics are used to improve theprocess and are conveyed to the customerrelationship management and supplierrelationship management teams.

Order FulfillmentA key to effective supply chain

management is to meet customer requirementsin terms of order fulfillment [17]. Effectiveorder fulfillment requires integration of thefirm’s manufacturing, logistics and marketingplans. The firm should develop partnershipswith key members of the supply chain to meetcustomer requirements and reduce totaldelivered cost to customers.


The strategic order fulfillment processconsiders manufacturing, logistics andmarketing requirements to design thedistribution network (see Figure 5).

In the first sub-process, the team reviewsthe role of customer service in the marketingstrategy, customer service goals, and thesupply chain structure [18]. This requires aninterface with the customer relationshipmanagement process.

Next, the requirements for orderfulfillment are specified, including the order-to-cash cycle. Key inputs includemanufacturing capabilities, lead-times andcustomer service requirements [19]. At thisstage, the customer relationship management

“The supply chain whichbest succeeds inreducing uncertaintyand variability is likelyto be most successful inimproving itscompetitive position.”

Effective orderfulfillment requiresintegration of the firm’smanufacturing, logisticsand marketing plans.


and manufacturing flow processes provideinput. The team evaluates the corecompetencies within order fulfillment anddetermines which aspects of the process arepotentially service differentiating.

Evaluating the logistics networks is animportant step in order fulfillment. The designand operation of the network has a significantinfluence on the cost and performance of thesystem [20]. It has been estimated that up to80% of the total cost of the final product isdetermined in the design of the network [21].It is necessary to evaluate the networkincluding: which plants produce whichproducts; where warehouses, plants, andsuppliers are located; and, whichtransportation modes should be used.Important input to this sub-process comesfrom the demand management and returnsprocesses. The resulting network is providedto the manufacturing flow process.

The next strategic sub-process is todefine the plan for order fulfillment,determining how orders from variouscustomers or segments of customers will befilled. The process team communicates withthe customer relationship management

process team to make sure that all customerexpectations are met.

In the final sub-process, a framework ofmetrics is developed and communicated tothe customer relationship managementprocess. Typical process measures mightinclude order-to-cash cycle time, order fillrate, and order completeness.


The order fulfillment operational processdefines the specific steps regarding howcustomer orders are: generated andcommunicated, entered, processed, docu-mented, picked, delivered, and handled postdelivery. There are three steps to accepting andprocessing an order. First, orders are generatedand communicated. Generally, these orderscome from customer service management.Second, a member of the order fulfillment teamreceives, enters, edits the orders, and transmitsthese data to the customer servicemanagement and demand managementprocesses. Third, the inventory and customers’credit are checked and the order is processed.Information about these orders is provided tothe manufacturing flow process.

Figure 5Order Fulfillment

Review Marketing Strategy,Supply Chain Structure &Customer Service Goals



Demand Management



Returns Management


Generate &Communicate Order


Define Requirements for Order Fulfillment

Pick Order

Handle Documentation

Process Order

Enter Order

Perform Post Delivery Activities& Measure Performance

Deliver Order

Evaluate Logistics Network

Define Plan for Order Fulfillment


The design andoperation of the

network has asignificant influence

on the cost andperformance of

the system.


In the next sub-process, the teamhandles all documentation. They acknowl-edge the order and prepare the bill of lading,picking instructions, packing slips andgenerate the invoice. At the order pickingstage, the merchandise is picked, packed, andstaged for loading. The load confirmation isprepared and feedback is provided tocustomer service management.

The order fulfillment team is responsiblefor preparing shipping documents, transmittingdelivery confirmation, and auditing and paying the freight bill. They also providedelivery information to the customer servicemanagement team.

In the final sub-process, the teamperforms post-delivery activities, includingreceiving and posting payment, recording baddebt expense, and measuring performance.Feedback is provided to customer relationshipmanagement, supplier relationship manage-ment and returns management.

Manufacturing Flow Management The manufacturing flow process deals

with making the products and establishing themanufacturing flexibility needed to serve the

target markets. The process includes allactivities necessary for managing the productflow through the manufacturing facilities andfor obtaining, implementing and managingflexibility.


At the strategic level, the objective ofmanufacturing flow is to determine themanufacturing infrastructure needed forfulfilling the customers’ needs and wants (seeFigure 6). The process begins with the teamreviewing the functional business strategiesfrom marketing, logistics, manufacturing andpurchasing. This sub-process requiresinterfaces with customer relationshipmanagement, where the corporate andmarketing strategies are reviewed. Thesestrategies help identify the expertise and thechanges in the manufacturing technology thatare needed to operationalize manufacturingflow. Incompatibility between themanufacturing process and market charac-teristics may have “unfavorable impact onbusiness performance” [22]. In the same vein,environmental aspects of manufacturing set bythe business plan, corporate strategy, and the

The manufacturing flowprocess deals withmaking the productsand establishing themanufacturing flexibilityneeded to serve thetarget markets.

Figure 6Manufacturing Flow Management

Review Manufacturing,Sourcing, Marketing

& Logistics Strategies



Demand Management

Order Fulfillment


Returns Management


Determine Routing & Velocitythrough Manufacturing

Manufacturing & MaterialPlanning

Synchronize Capacityand Demand

Measure Performance


Determine Degree ofManufacturing Flexibiltiy

Requirement

Determine Push/Pull Boundaries

Identify ManufacturingConstraints and Requirements

Determine ManufacturingCapabilities



environmental laws have to be taken intoaccount. Manufacturing strategy is linked tothe corporate strategy since environmentalmanagement practices may strengthen thefirm’s competitive advantage [23].

The objective of the second sub-processis to determine the degree of manufacturingflexibility the firm and the supply chainrequire. This sub-process provides themanufacturing capabilities and constraints,such as the minimum batch size and cycletime, the labor expertise needed formanufacturing, and the quality policy andcontrols. Product development andcommercialization, and order fulfillmentprovide input to this sub-process. The teamdefines the make/buy strategies, for example,what manufacturing activities are regarded asstrategic and should not be outsourced at anycost? These strategies provide indications tosupplier relationship management aboutsupplier selection and eventually theguidance of partnership opportunities. In thelast activity of this sub-process, the team planscapacity growth based on the marketingstrategy and the business plan.

The degree of flexibility established inthe previous sub-process leads to thedetermination of the push-pull boundaries.The customer tolerance time (the time thecustomer is willing to wait for an order) andthe customer service goals constrain theextent to which manufacturing can bepostponed in the supply chain.Postponement promises to be beneficial tothe supply chain, but might lead to longerdelivery times [24]. The degree to which thefirm postpones manufacturing and logisticsactivities depend to a great extent on thedesign of the products; therefore, the productdevelopment and commercialization processprovides input for setting the push-pullboundaries. In order to determine the push-pull boundaries for the supply chain, the teamidentifies the decoupling point separating thepart of the supply chain operating in a make-to-order environment from the part of thesupply chain based on planning [25], whichis the typical make-to-stock operatingenvironment. The push-pull boundaries helpto determine the stocking points in the supplychain for servicing manufacturing facilities,distribution centers and customers. Thesestocking points, referred to as decoupling

points, permit the downstream section of thesupply chain to operate independently fromthe upstream section [26]. The decisionsmade in this sub-process are communicatedto the supplier relationship management teamsince the push-pull boundaries affect theinteractions with the suppliers. Similarly,coordination with order fulfillment isnecessary for establishing lead-times andstocking requirements.

The objective of the next sub-process isto identify manufacturing constraints andrequirements to help determine thecapabilities of the supply chain. The role ofsuppliers and the supplier developmentstrategy is an important component of this sub-process for defining the extent towhich activities in the supply chain are synchronized. The process team designs communication mechanisms forsynchronizing the activities with minimalmanagement effort. They also developacceptance criteria for establishing the qualitystandards expected at each step of themanufacturing process. Performing theseactivities may lead to identifying needs for thesuppliers that can be included in a supplierdevelopment program; if so, this is an inputfor the supplier relationship managementprocess.

In the next sub-process, the teamdetermines the manufacturing capabilitiesand translates them into deliverables to thecustomer. For example, the minimum cycletime and the minimum economically viablelot size is a result of the design of themanufacturing capabilities. For a strategy tobe effective, it must be communicated andunderstood throughout the organization [27].At this point, the manufacturing flow and customer relationship managementteams discuss the possible features of the PSA, and adjust infeasible features. Thecapabilities are communicated to the demand management, order fulfillment, and returns process teams. Further, thecustomer service management team receives the order acceptance guidelines. The team uses these guidelines every time a customer has a request. They help to identify which customers’ requests can be fulfilled. Some requests require additional management time to evaluate theireconomic and technical viability.

The push-pullboundaries help to

determine the stockingpoints in the supplychain for servicing

manufacturingfacilities, distribution

centers and customers.


In the final sub-process, the teamdevelops the metrics framework andcommunicates it to the customer relationshipmanagement team. These metrics measurethe effectiveness of the manufacturing flowprocess and might include cycle time,inventory levels, and product quality.


Manufacturing flow at the operationallevel looks like operations managementinternal to the firm. However, certaincharacteristics of the process are designed tointegrate internal operations managementwith activities in the supply chain. In the firstsub-process, the team determines the routingand velocity through manufacturing. This stepincludes developing a master productionschedule by translating the output of demandmanagement into resource and productionplanning. The team integrates the capacity ofthe manufacturing facilities into thesedecisions to assure no disruptions in theproduct flow. This sub-process interacts withdemand management to establish manufact-uring priorities, and with supplier relationshipmanagement to set priorities for suppliers andto gain their commitment of resources.

In the next step, manufacturing andmaterial planning, the process team produces adetailed capacity plan and a time-phasedrequirement plan. Interfaces with the customerrelationship management and supplierrelationship management processes extend thefocus of this sub-process to other supply chainmembers. Manufacturing planning andcontrol encompasses creating the overallmanufacturing plan, performing the detailedplanning of materials and capacity needs, andexecuting these plans [28].

Next, capacity and demand aresynchronized. This step identifies whatinventory levels are needed for synchronizingthe activities of the many supply chainmembers. Inventory includes raw materials,work-in-process, sub-components, andpackaging at the different tiers. This steprequires input from demand management andorder fulfillment, and provides output tocustomer service management.

The final step in the manufacturing flowprocess, measuring performance, includesmore than just tracking process measures, andreporting them to the customer relationship

management and supplier relationshipmanagement teams. It includes analyzingproduct quality and examining the root causesof quality problems. The manufacturing flowprocess team is responsible for findingsolutions to quality issues. This might involveworking with supplier relationshipmanagement, product development andcommercialization, or returns management.

Supplier Relationship ManagementSupplier relationship management is the

process that defines how a company interactswith its suppliers. As the name suggests, thisis a mirror image of customer relationshipmanagement. Just as a company needs todevelop relationships with its customers, itneeds to foster relationships with its suppliers.As in the case of customer relationshipmanagement, a company should forge closerelationships with a small subset of itssuppliers, and maintain more traditionalrelationships with the others [29]. Eachsupplier agrees to a PSA that defines the termsof the relationship. Supplier relationshipmanagement is about defining and managingthese PSAs.


At the strategic level, the output of theprocess is an understanding of the levels ofrelationships the firm will maintain, and theprocess for segmenting the suppliers andworking with them to develop appropriatePSAs. To do this, the process team firstreviews the corporate, manufacturing andsourcing strategies, and identifies product andservice components that are key to theorganization’s success now and in the future(see Figure 7).

With these key components driving thedecisions, the team identifies criteria forcategorizing suppliers. Criteria to examinemight include, but are not limited to: thesupplier’s profitability, growth and stability;the criticality or required service level of thecomponents purchased; the sophisticationand compatibility of the supplier’s processimplementation; the supplier’s technologicalcapabilities and compatibility; the volumepurchased from the supplier; the capacityavailable from the supplier; the culture ofinnovation at the supplier; and, the supplier’s

Manufacturing flow atthe operational levellooks like operationsmanagement internal tothe firm. However,certain characteristics ofthe process are designedto integrate internaloperations managementwith activities in thesupply chain.

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anticipated quality levels.The team determines which of these

criteria should be used and how a supplierwill be measured on each one. They developa categorization scheme that will guide theoperational team on determining the firm’skey suppliers, and grouping other suppliersinto segments.

Key suppliers work with customizedPSAs; other suppliers work with standardPSAs with little to no customization.Therefore, a standard PSA is written for eachsupplier segment. For key suppliers, the teamprovides guidelines for the degree ofcustomization that is acceptable. To do this,they consider the quality and costimplications of various differentiationalternatives, and select the boundaries for thedegree of customization that might berequired or desired. At this step, the teaminterfaces with each of the other processesbecause they need to understand the degreeof differentiation that is desirable as well as beready to design systems for supporting thesealternatives. For example, examining thedemand management process might lead theteam to consider implementing CPFR with

some of the suppliers, but doing so mightrequire implementing new technology andmaking changes to the existing demandmanagement process.

As with each of the other supply chainprocesses, an important step at the strategiclevel is developing the metrics framework.This is particularly critical in the supplierrelationship management process becausethese metrics measure the success of thefirm’s relationship with its suppliers. Withthese metrics management sees the impact ofthe integration in the supply chain. It isimportant that the team relates these metricsto the supplier’s impact on the firm’sprofitability as well as the profitability of thesupplier. It is key that the team performsprofitability analyses because managementcan use these to sell the value of supply chainactivities [30]. Improvements from suppliersmay have impact throughout the organizationand these should be reflected in supplier costor profitability reports.

It is important for the supplierrelationships to be win-win. If both parties donot gain from the relationship, the incentive tobe in the relationship is diminished and it will

Figure 7Supplier Relationship Management

Review Corporate,Manufacturing and Sourcing Strategies



Demand Management

Order Fulfillment


Returns Management


Differentiate Suppliers

Prepare the Supplier/SegmentManagement Team

Internally Review the Supplier/Supplier Segment

Identify Opportunities with the Suppliers

Implement the Product/ServiceAgreement

Develop Product/ServiceAgreement and

Communication Plan

Measure Performance andGenerate Supplier

Cost/Profitability Reports


Identify Criteria for Categorizing Suppliers

Provide Guidelines for theDegree of Customization in the

Product/Service Agreement


Develop Guidelines for SharingProcess Improvement Benefits

with Suppliers

Key suppliers work withcustomized PSAs; other

suppliers work withstandard PSAs with little

to no customization.

It is important for thesupplier relationships to

be win-win. If bothparties do not gain from

the relationship, theincentive to be in the

relationship isdiminished and it will

likely dissolve.

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likely dissolve. The supplier relationshipmanagement process team must developguidelines for sharing process improvementbenefits with the suppliers. For example, Wal-Mart decided to split cost savings with Procter& Gamble three ways: 1/3 to Wal-Mart, 1/3 tothe supplier and 1/3 to the customer [31]. Akey to this step of the process is finding ways toeasily quantify benefits in financial terms.


Once the process team determines thecriteria for categorization of suppliers and thelevels of customization at the strategic level,the operational supplier relationshipmanagement process develops and managesthe PSAs. First, the team implements thecategorization scheme in order to identify keysuppliers and supplier segments. Thisinvolves analyzing how suppliers impact the firm’s profitability and measuring eachsupplier on the appropriate criteria.

Each key supplier is assigned to asupplier management team. Other suppliersare grouped into segments and amanagement team is assigned to eachsegment. Each supplier/segment team iscomprised of a team manager and a cross-functional set of team members.

Each supplier/segment team internallyreviews the suppliers to assure that theyunderstand the role of that supplier in thesupply chain. A supplier team works witheach key supplier to identify improvementopportunities within the account. The teamexamines each of the other supply chainprocesses, both at the firm and at the supplier,looking for opportunities to increase sales,reduce costs, and improve service.

Next, each team works with a keysupplier to negotiate the PSA. Recall that segments of other suppliers receive astandard PSA. For key suppliers, the teamcustomizes the agreement according to theimprovement opportunities identified. Animportant step in developing the PSA for keysuppliers is gaining commitment of thecompany’s internal functions, particularlythose affected by the customized PSAs. ThePSA includes a communication plan betweenthe firm and the supplier and a continuousimprovement plan.

Once the suppliers have agreed to thePSA, the supplier teams are responsible for

implementing and managing it. This involvesworking with the other processes to assurethat the PSA is being adhered to, and meetingwith the suppliers regularly to monitorprogress and performance.

Measuring performance is a critical partof the supplier relationship managementprocess because management needs to assessthe success of the firm’s relationships. Theother process teams communicate supplier-related performance to the account teamswho tie these metrics back to the profit ofboth the firm and the supplier, and report theresults both internally and to the supplier.

Product Development andCommercialization

Product development is critical to thecontinuing success of the firm [32].Developing new products quickly and gettingthem to the marketplace in an efficient manneris a major component of corporate success.Time to market is a critical objective of thisprocess [33]. Supply chain managementincludes integrating customers [34] andsuppliers [35] into the product developmentprocess in order to reduce time to market. Asproduct life cycles shorten, the right productsmust be developed and successfully launchedin ever-shorter timeframes in order to remaincompetitive [36].


The first step in the strategic portion of theproduct development and commercializationprocess is to review the sourcing,manufacturing and marketing strategies todetermine how those plans will likely impactproduct development (see Figure 8). Themarketing strategy contains the needsassessment of customers.

Next, the process team develops the ideageneration and screening processes. Thisstage can include determining sources forideas, considering incentives for developingnew products for the focal firm and theirsuppliers and customers, beginning todevelop formalized customer feedbackprograms, and establishing guidelines forstrategic fit. At this point, the productdevelopment and commercialization processinterfaces with the customer relationshipmanagement process to provide the

Supply chainmanagement includesintegrating customersand suppliers into theproduct developmentprocess in order toreduce time to market.

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It is critical to havethe right people from

the internal functionalsilos along with key

customers andsuppliers involved in

the productdevelopment and

commercializationprocess.

framework that will be used to determine hownew products will impact customers and thelevel of acceptance of those products.

The process team then establishesguidelines for the membership of the cross-functional product development team. It iscritical to have the right people from theinternal functional silos along with keycustomers and suppliers involved in theproduct development and commercializationprocess. This step includes determining theextent of involvement from both keycustomers and suppliers. Empirical studiesfound that firms may form alliances tocomplement their existing internal knowledge and help them learn about new markets and technologies as well as toreduce overall risk in the productdevelopment process [37]. In this stage of the process, the team assesses relativestrengths, weaknesses, and roles of personnel to determine who should beinvolved in the product development andcommercialization process. The teamexamines constraints to determine whichresources the firm can utilize on specific newproduct projects.

The fourth step is to develop productrollout issues and constraints. The teamidentifies pinch points that could hamper theproduct development and commercializationprocess. Activities within this sub-processinclude market and promotion planning,sales force training, inventory deploymentplanning, and transportation planning. In thisstage of the process, each of the internalfunctional silos have to be involved to avoidpoor product rollouts. In addition, the teamobtains input from the order fulfillment teamto assess how new products will impact thenetwork flow.

Next, the team establishes new productproject guidelines. This includes determiningtime-to-market and profitability expectations,and estimating the drain on human resourcesresulting from new product projects. Theteam establishes guidelines for examining thestrategic fit of potential new products and formaking the make/buy decision.

The final step to the strategic productdevelopment and commercialization processis to develop the framework of metrics.Typical process metrics might include time tomarket, time to profitability and first year

Figure 8Product Development and Commercialization

Review Sourcing, Manufacturing& Marketing Strategies



DemandManagement

Order Fulfillment


Returns Management


Define New Products & Assess Fit

Establish Cross-functionalProduct Development Team

Formalize New ProductDevelopment Project

Design & Build Prototypes

Make/Buy Decision

Determine Channels

Product Rollout

Measure Process Performance


Develop Idea Generation andScreening Processes

Establish Guidelines for Cross-functional Product

Development Team Membership

Develop Product Rollout Issues & Constraints

Establish New Product Project Guidelines



sales. The metrics are communicated to thecustomer relationship management team toassure they do not conflict with other metricsor the firm’s objectives.


The first step in the operational productdevelopment and commercialization processis to define new products and assess fit.Using the means defined at the strategic level,new product ideas are generated andscreened. In this initial screening, the teamcompletes a market assessment, consults withkey customers and suppliers, and determinesthe fit with existing channels, manufacturing,and logistics environments. This involvesinterfaces with customer relationshipmanagement and supplier relationshipmanagement, as well as with the functionalsilos in the firm.

Using the guidelines developed at thestrategic level, a cross-functional productdevelopment team is established for eachproduct idea that passes the screeningprocess. Key suppliers and customers areincluded on the team as early as possible inorder to compress time to market. Therefore,this sub-process includes an interface withsupplier relationship management andcustomer relationship management. The focalcompany might also participate in the productdevelopment process of a key customer. Forexample, a supplier of salad dressings mayparticipate in the product developmentprocess of a restaurant chain. In such cases,the customer relationship managementprocess team is actively involved.

The team is responsible for formalizingthe product development project. This stepincludes determining time-to-marketexpectations, identifying likely productprofitability scenarios, and further examiningthe strategic fit of the product within the firmand its key markets.

The product development team managesthe process of designing and buildingprototypes of the product ideas. For example,the auto companies develop concept cars totest new product ideas. In this phase, eachteam works with suppliers and performs avalue analysis to determine what portions ofthe product design and rollout process addvalue. They then source materials andmanufacture prototypes.

Once the team evaluates the prototypes,they determine how much of the new product should be manufactured in-house.Many firms adopt a short-term perspective formaking make/buy decisions. However, thesedecisions may have strategic implications for the firm. For example, during thedevelopment of the personal computer, IBMoutsourced the operating system to a smallcompany named Microsoft. This decisionmay have enabled IBM to bring the PC tomarket quicker, but with hindsight, it wasclearly a strategic error. The make/buydecision “...should be formulated from astrategic perspective with senior managementinvolvement” [38]. Once it is determinedwhat will be sourced, the team assessessupply capabilities and manages requests forquotations. Sourcing decisions requireinterfaces with the customer relationshipmanagement, manufacturing flow andsupplier relationship management processes.

In the sixth sub-process, the teamdetermines the marketing and distributionchannels for the new product. Thesechannels are defined with input fromcustomer relationship management and orderfulfillment. Then, the team develops themarket plan for the product and does initialinventory planning.

The next step is the actual productrollout. Many products are unsuccessful dueto poor management of product rollout. Inthis step, the team sources materials, positionsinventory, and manufactures the product.They also implement the market plan, trainthe sales force on the new product offering,and execute the promotion plan. Inventory isdeployed using methodologies developed indemand management. It is important that theother process teams are involved in planningand executing the product rollout.

In the final step, the team measuresprocess performance through the metricsdeveloped at the strategic level, andcommunicates results to the customerrelationship management and supplierrelationship management teams.

Returns ManagementEffective returns management is a

critical part of supply chain management.While many firms neglect the returns processbecause management does not believe it

The focal companymight also participate inthe productdevelopment process ofa key customer.


is important, this process can assist the firm in achieving a sustainable competitiveadvantage. Effective management of thereturns process enables the firm to identifyproductivity improvement opportunities andbreakthrough projects [39].


In the first step of the strategic returnsprocess, the team reviews environmental andlegal compliance guidelines (see Figure 9).Team members need to understand laws thatapply to used products and products plannedfor disposal. They also need to recognizerules associated with recall campaigns andpackaging issues.

Next, the team develops returnavoidance, gatekeeping and dispositionguidelines. Return avoidance meansmanufacturing and selling the product in amanner such that returns are minimized. Thisavoidance can be derived from improvedquality or better instructions to the consumeras to how to properly operate the product.Gatekeeping is the screening of defective andunwarranted returned merchandise at theentry point into the reverse logistics process[40]. Improved gatekeeping is a critical factorin making the entire reverse flow manageableand efficient. It assures that only product thatshould be returned to a specific point in thereturns network is indeed returned to thatpoint. Disposition guidelines define asclearly as possible the returned item’s ultimatedestiny. Typical disposition options includereturn to supplier, refurbish or remanufacture,recycle, and landfill. The team can examinepotential secondary markets includingInternet-based auctions or retailers thatspecialize in returned goods or “seconds”.

A firm should be able to make dispositiondecisions quickly. The team develops the rulesin conjunction with other members of thesupply chain, as well as with input from otherprocesses, such as customer relationshipmanagement, product development andcommercialization, and supplier relationshipmanagement. Disposition and return reasoncodes compliant with company policy aredeveloped during this stage of the process.

Next, the team develops the returnsnetwork and flow options. During this stage,the team develops plans for transporting andholding returned products until they reach

their final disposition. For some firms,products may be routed to central returnscenters where returned items areconsolidated and examined. The team alsodetermines what transportation programs thefirm will employ. For example, supply chainmanagers might decide that utilizingbackhauls may be the most efficient way oftransporting returns. Developing the returnsnetwork requires input from customer servicemanagement, order fulfillment, and supplierrelationship management.

In the fourth step, the process teamdevelops credit rules governing the returnsprocess. At this stage, the financeorganizations of the focal firm, and keysuppliers and customers negotiate howreturned merchandise will be credited. Theteam establishes credit authorizationguidelines and credit policies. Since thisinvolves both suppliers and customers,supplier relationship management andcustomer relationship management areinvolved in determining the rules.

The last step of the strategic returnsprocess is developing the framework ofmetrics and communicating it to the customerrelationship management team. Possiblemetrics are return rates and financial impact ofreturns. As part of this sub-process, the teamdevelops procedures for analyzing return ratesand tracing the returns back to the root causes.


At the operational level, the returnsprocess is about managing the day-to-dayreturns activities. The process is initiated whena return request is received from a customer.This customer may be a consumer returningan item, or a retailer or distributor sendingback items that did not sell. In some cases,these returns come through the customerservice management process.

Once a return request is received, it isnecessary to determine the routing for thereturned product and generate the returnmaterial authorization (RMA) derived fromthe request. Advanced ship notices are sent,signaling to the receiving firm that the returnsare on their way.

Once the item is returned, it is verified,inspected, and processed. This processingshould be completed as quickly as possible sothat product value does not decrease any

While many firmsneglect the returns

process becausemanagement does notbelieve it is important,

this process can assist the firm in

achieving a sustainablecompetitive advantage.

As part of this sub-process, the team

develops procedures foranalyzing return rates

and tracing the returnsback to the root causes.


more than necessary. The order fulfillmentteam may become involved at this point toassist in managing the return flow back to thewarehouse or central returns center.

Employees analyze the returns and selectthe appropriate dispositions using the rulesdeveloped in the strategic returns process. Thedisposition of the product can include returnto the supplier, refurbishment, remanufacture,recycling, reselling as is, reselling through asecondary market, or sending the product to a landfill.

Once the returns are processed, credit isgiven to the appropriate customer, consumeror supplier. In some circumstances, asupplier might be crediting the firm for areturn. This sub-process will use the creditauthorization guidelines developed in thestrategic returns process.

In the final step of the returns process,the team analyzes the causes of the returnsand measures process performance. The dataon returns are used to make improvements tothe product and the processes. This analysismight result in feedback to the customerrelationship management, manufacturingflow management, supplier relationship

management, or product development andcommercialization processes. This analysisshould be used in the ongoing strategicreturns process to help develop avoidanceguidelines.

Implementing Integrated SupplyChain Management

The implementation of supply chainmanagement involves identifying the supplychain members with whom it is critical to link,the processes to be linked with each of thesekey members, and the type/level of integrationthat applies to each process link. The objectiveof supply chain management is to create themost value for the entire supply chain network,including the end-customer. Successful supplychain management involves the coordinationof activities within the firm and betweenmembers of the supply chain. Consequently,supply chain process integration andreengineering initiatives should be aimed atboosting total process efficiency andeffectiveness across the supply chain.

Although the functional expertiseremains in place, implementing supply chain

Figure 9Returns Management

Review Environmental & LegalCompliance Guidelines



DemandManagement

Order Fulfillment




Receive Returns

Receive Return Request

Determine Routing

Select Disposition

Credit Consumer/Supplier

Analyze Returns and Measure Performance


Develop Avoidance, Gatekeeping& Disposition Guidelines

Develop Return Network and Flow Options

Develop Credit Rules

Determine Secondary Markets


The implementation ofsupply chainmanagement involvesidentifying the supplychain members withwhom it is critical tolink, the processes to belinked with each ofthese key members, andthe type/level ofintegration that appliesto each process link.


management requires making the transitionfrom a functional organization to one focusedon business processes first inside the firm andthen across firms in the supply chain. Figure10 illustrates how each function within theorganization can be mapped with the eightsupply chain processes. This figure providesexamples of activities that might exist at eachjunction of a functional area and process. Forexample, in the customer relationshipmanagement process marketing provides the account management expertise, research and development provides thespecifications which define the requirements,logistics provides knowledge of customerservice requirements, production provides the manufacturing strategy, purchasingprovides the sourcing strategy, and financeprovides customer profitability reports. Thecustomer service requirements are used asinput to sourcing, manufacturing, and logistics strategies.

If the proper coordination mechanismsare not in place across the various functions,the supply chain processes will be neithereffective nor efficient. By taking a processfocus, all functions that touch the product orprovide information must work together. Forexample, purchasing depends on sales andmarketing data fed through a productionschedule to assess specific order levels andtiming of requirements. These orders driveproduction requirements that, in turn, aretransmitted upstream to suppliers.

The increasing use of outsourcing hasaccelerated the need to coordinate supplychain processes since the organizationbecomes more dependent on suppliers [41].Consequently, coordination mechanisms mustbe in place within the organization. Where toplace these coordination mechanisms, andwhich teams and functions are responsible formanaging them become critical decisions.

The requirements for successful

Figure 10Implementation of Supply Chain Management

SUPP

LIER

S

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

CUST

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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.

TypicalFunctional Silos

Business ProcessesMarketing

Customer Relationship Account Requirements Requirements Manufacturing Sourcing CustomerManagement Management Definition Definition Strategy Strategy Profitability

Customer Service Account Technical Performance Coordinated Priority CostManagement Administration Service Specifications Execution Assessment To Serve

Demand Demand Process Capability TradeoffManagement Planning Requirements Forecasting Planning Sourcing Analysis

Special Environmental Network Plant Selected DistributionOrder Fulfillment Orders Requirements Planning Direct Supplier(s) Cost

Manufacturing Flow Packaging Process Prioritization Production Integrated ManufacturingManagement Specifications Stability Criteria Planning Supply Cost

Supplier Relationship Order Material Inbound Integrated Supplier MaterialsManagement Booking Specifications Flow Planning Management Cost

Product Development Business Product Movement Process Materialand Commercialization Plan Design Requirements Specifications Specifications R & D Cost

Product Product Reverse Re- Material Revenue &Returns Management Life Cycle Design Logistics manufactuing Specification Costs

Information Architecture, Data Base Strategy, Information Visibility

Research &Development Logistics Production Purchasing Finance

If the propercoordination

mechanisms are not inplace across the

various functions, thesupply chain processes

will be neithereffective nor efficient.


implementation of supply chain managementinclude: • Executive support, leadership and

commitment to change.• An understanding of the degree of change

that is necessary.• Agreement on the supply chain

management vision and the key processes.• The necessary commitment of resources and

empowerment to achieve the stated goals.

Implications and Research Opportunities

There are several implications forpractitioners and researchers. While marketingstrategy has always considered internal andexternal constraints, supply chain managementmakes the explicit evaluation of these factorseven more critical. Additionally, traditionalfunctional roles within the firm are changing.Team efforts are becoming more common fordeveloping and marketing new products, aswell as managing current ones. The role of thefirm’s sales force is becoming one of measuringand selling the value proposition for thecustomer.

This article builds on previous worksupported by The Global Supply ChainForum, in which the structure of supply chainmanagement was described, by providing amore detailed description of the eightprocesses and their relationships to eachother. However, there is much more work thatneeds to be completed. Researchopportunities include:• How can the relationships between sub-

processes and the functional silos beoperationalized within firms?

• How can cross-functional teams best worktogether to optimize supply chainmanagement processes?

• How should the implementation effortacross the multiple firms and functions beorganized?

• What research is needed to further defineeach process?

• What are the implications for supply chainmanagement given the shape and length ofsupply chains in which the firm is involved?

• How should firms in the supply share costs and benefits? What is the detailedinteraction between the sub-processes andmanagement components such as the risk

and reward structure or organizationalstructures?

• What specific metrics should be introducedto evaluate performance beyond theborders of the firm? How can firms within the supply chain optimize totalsupply chain performance whilemaximizing the measurement of their ownoperations [42]?

ConclusionsSince the concept of supply chain

management was introduced, there has beena great deal of confusion about what itactually involves. While some managers andresearchers continue to use supply chainmanagement interchangeably with logistics,there is an increasing understanding that it ismuch more than logistics. In recent years,many authors have stressed the importance of implementing supply chain managementas part of a process orientation tomanagement. However, most of what iswritten about supply chain managementadvocates business process reengineering andintegration without specifying the processesthat are to be included in these efforts. Itwould be much easier for management toimplement a process orientation within theirfirm if there were clear guidelines as to whatthe processes ought to be, what sub-processesand activities are included, and how theprocesses interact with each other and withthe traditional functional silos. Further, how can the members of a supply chainpractice process integration if there is not acommon understanding of what the businessprocesses are?

The members of The Global SupplyChain Forum identified eight businessprocesses that must be implemented within afirm and then linked up, as appropriate, withkey supply chain members [43]. In thispaper, we provide strategic and operationaldescriptions of each of these processes. Ourgoal is to provide: 1) companies with acommon structure for implementing supplychain management, 2) instructors withmaterial that can be used in teaching supplychain management, and 3) researchers withfertile groundwork for delving more deeplyinto the issues within each process and withtheir integration between companies. Webelieve this article provides the framework

While some managersand researcherscontinue to use supplychain managementinterchangeably withlogistics, there is anincreasingunderstanding that it ismuch more thanlogistics.


necessary to develop the theory that willmove supply chain management to its nextevolutionary stage.

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[3] Lambert, Douglas M., Martha C.Cooper and Janus D. Pagh, “Supply ChainManagement: Implementation Issues andResearch Opportunities,” The InternationalJournal of Logistics Management, Vol. 9, No.2 (1998), p. 1.

[4] Cooper, Martha C., Douglas M.Lambert and Janus D. Pagh, “Supply ChainManagement: More than a New Name forLogistics,” The International Journal ofLogistics Management, Vol. 8, No. 1 (1997),pp. 1-14; James R. Stock and Douglas M.Lambert, Strategic Logistics Mangement, NewYork, NY: McGraw-Hill, 2001; and, DouglasM. Lambert and Martha C. Cooper, “Issues inSupply Chain Management,” IndustrialMarketing Management, Vol. 29, No. 1(2001), pp. 65-83.

[5] Cooper, Martha C., Douglas M.Lambert and Janus D. Pagh, “Supply ChainManagement: More than a New Name forLogistics,” The International Journal ofLogistics Management, Vol. 8, No. 1 (1997),pp. 1-14.

[6] Novack, Robert A. and Stephen W.Simco, “The Industrial Procurement Process:A Supply Chain Perspective,” Journal ofBusiness Logistics, Vol. 12, No. 1 (1991), p. 145.

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[26] Graves, Stephen C. and Sean P.Willems, “Optimizing Strategic Safety StockPlacement in Supply Chains,” Manufacturingand Service Operations Management, Vol. 2,No. 1 (2000), pp. 68-83.

[27] Boyer, Kenneth K. and ChristopherMcDermott, “Strategic Consensus inOperations Strategy,” Journal of OperationsManagement, Vol. 17, No. 3 (1999), pp. 289-305.

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[29] Dyer, Jeffrey H. Dong Sung Cho andWujin Chu, “Strategic Supplier Segmentation:The Next “Best Practice” in Supply ChainManagement,” California ManagementReview, Vol. 40, No. 2 (1998), pp. 57-77.

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[31] Conversation with Lou Pritchett,former Vice President of Procter & Gamble,15th hole, Plantation Golf Course, PonteVedra Beach, Florida, April 21, 2001. For

more information on the Wal-Mart andProcter & Gamble relationship see: LouPritchett, Stop Paddling and Start Rocking theBoat, New York, NY: Harper Business, 1995.

[32] Cooper, Robert, “BenchmarkingNew Product Performance: Results of the BestPractice Study,” European ManagementJournal, Vol. 16, No. 1 (1998), pp. 1-17; and,Philip C. Ruffles, “Improving the NewProduct Introduction Process inManufacturing Companies,” InternationalJournal of Manufacturing Technology &Management, Vol. 1, No. 1 (2000), pp. 1-19.

[33] Schilling, Melissa A. and Charles W.L. Hill, “Managing the New ProductDevelopment Process: Strategic Imperatives,”The Academy of Management Executive, Vol.12, No. 3 (1998), pp. 67-81.

[34] Karkkainen, Hannu, Petteri Piippoand Markku Tuominen, “Ten Tools forCustomer-driven Product Development inIndustrial Companies,” International Journalof Production Economics, Vol. 69, No. 2(2001), pp. 161-176.

[35] Schilling, Melissa A. and Charles W.L. Hill, “Managing the New ProductDevelopment Process: Strategic Imperatives,”The Academy of Management Executive, Vol.12, No. 3 (1998), pp. 67-81.

[36] Hutt, Ken and Graham Ross,“Collaborative Product Commerce,”Manufacturing Systems, Vol. 18, No. 12(2000), pp. 64-68.

[37] McDermott, Charles M., “ManagingRadical Product Development in LargeManufacturing Firms: A Longitudinal Study,”Journal of Operations Management, Vol. 17,No. 6 (1999), pp. 631-644.

[38] Humphreys, P. K., V. H. Y. Lo and R.T. McIvor, “A Decision Support Framework forStrategic Purchasing,” Journal of MaterialsProcessing Technology, Vol. 107, No. 1-3(2000), p. 361.

[39] Rogers, Dale S. and Ronald S.Tibben-Lembke, “An Examination of ReverseLogistics Practices,” Journal of BusinessLogistics, Vol. 22, No. 2 (2001), pp. 129-148.

[40] Rogers, Dale S. and Ronald S.Tibben-Lembke, Going Backwards: ReverseLogistics Trends and Practices, Reno, Nevada:Reverse Logistics Executive Council, 1998.

[41] Auguste, Byron G., Yvonne Hao,Marc Singer and Michael Wiegand, “TheOther Side of Outsourcing,” The McKinsey


Quarterly, No. 1 (2002), pp. 52-63; and,Charles H. Fine, “Clockspeed-basedStrategies for Supply Chain Design,”Production & Operations Management, Vol.9, No. 3 (2000), pp. 213-221.

[42] Lambert, Douglas M. and RenanBurduroglu, “Measuring and Selling the Valueof Logistics,”The International Journal ofLogistics Management, Vol. 11, No. 1 (2000),pp. 1-17; and, Douglas M. Lambert andTerrance L. Pohlen, “Supply Chain Metrics,”The International Journal of Logistics

Management, Vol. 12, No. 1 (2001), pp. 1-19.[43] Cooper, Martha C., Douglas M.

Lambert and Janus D. Pagh, “Supply ChainManagement: More than a New Name forLogistics,” The International Journal ofLogistics Management, Vol. 8, No. 1 (1997),pp. 1-14; and, Douglas M. Lambert, MarthaC. Cooper and Janus D. Pagh, “Supply ChainManagement: Implementation Issues andResearch Opportunities,” The InternatioalJournal of Logistics Management, Vol. 9, No.2 (1998), pp. 1-19.

AcknowledgementThe authors would like to thank the members of The Global Supply Chain Forum: 3M,

Cargill, Cemex Mexico, Coca-Cola USA, Colgate-Palmolive Company, Fletcher ChallengeBuilding, Ford Motor Company, Hewlett-Packard, International Paper, Limited LogisticsServices, Lucent Technologies, Shell, Taylor Made-adidas Golf Company, Wendy’s InternationalInc., and Whirlpool Corporation. Their contributions included dedicating time in Forummeetings to review and evaluate the research. We would also like to thank our colleagues,Terrance L. Pohlen, University of North Florida, and Thomas J. Goldsby, The Ohio StateUniversity, for their suggestions on earlier drafts of this paper.

Sebastián J. García-Dastugue is a Doctoral Candidate at The Ohio State University.His research interests are in the use of information technology in supply chainmanagement and logistics. Sebastián has more than 10 years of experience inindustry; he worked as an IT and communications specialist, as a logistics analyst,and as a change management agent. He worked for Ryder Argentina, CementosAvellaneda, Solutions Informatiques Francaises, Sud America Seguros, and as apart-time lecturer at the Instituto de Estudios para la Excelencia Competitiva.Sebastián received his MBA from IAE - Universidad Austral; he holds a BA in MISfrom Universidad CAECE, both in Buenos Aires, Argentina. He can be reached atThe Ohio State University, 256 Fisher Hall, 2100 Neil Avenue, Columbus, OH43210-1399. Phone: 614/247-6271. Fax: 614/292-0440. E-mail: [email protected].

Keely L. Croxton is an Assistant Professor of Logistics in the Department ofMarketing and Logistics at The Ohio State University. Her research interests are at the intersection of optimization and supply chain management. She teachesin the undergraduate, MBA and Ph.D programs as well as on a number of executive development programs. Her industry experience is in the automotive,paper and packaging, and third-party logistics industries. She holds a BS inIndustrial Engineering from Northwestern University and a Ph.D. in OperationsResearch from MIT. She was the recipient of a National Science Foundation Fellowship and an Eisenhower Fellowship from the Department ofTransportation. She can be reached at The Ohio State University, 518 Fisher Hall,2100 Neil Ave., Columbus, OH 43210. Phone: 614/292-6610. Fax: 614/292-0440.E-mail: [email protected].


Dale Rogers is the Director of the Center for Logistics Management and aProfessor of Supply Chain Management at the University of Nevada. In 2001, hewas the Paper Foundation Visiting Eminent Scholar Chair in Supply ChainManagement at the University of North Florida. Dr. Rogers is also the chairman ofthe Reverse Logistics Executive Council (http://www.rlec.org), a professionalorganization devoted to the improvement of reverse logistics practices and theSupply Chain Technology Council, an organization that provides continuedunderstanding of how internet technologies can positively impact the supply chain.He received his BA, MBA and Ph.D. from Michigan State University. Dr. Rogers haspublished in several logistics journals and is the co-author of the 1999 book GoingBackwards: Reverse Logistics Trends and Practices and two previous books onlogistics. He can be reached at The Center for Logistics Management, Universityof Nevada, Reno, NV 89557. Phone: 775/784-6814. Fax: 775/784-1769.E-mail: [email protected].

Douglas M. Lambert is the Raymond E. Mason Chair in Transportation andLogistics and Director of The Global Supply Chain Forum, Fisher College ofBusiness, The Ohio State University; and the Prime F. Osborn III Eminent ScholarChair in Transportation and Logistics, Professor of Marketing and Logistics andDirector, The International Center for Competitive Excellence at the University ofNorth Florida. Dr. Lambert has served as a faculty member for over 500 executivedevelopment programs in North and South America, Europe, Asia, Australia andNew Zealand. His publications include seven books and more than 100 articles. In1986, Dr. Lambert received the CLM Distinguished Service Award for hiscontributions to logistics management. He holds an honors BA and MBA from theIvey School of Business at the University of Western Ontario and a Ph.D. from TheOhio State University. He can be reached at The Ohio State University, 506 FisherHall, 2100 Neil Avenue, Columbus, OH 43210-1399. Phone: 614/292-0331. Fax:614/292-0440. Email: [email protected]. He also can be reached at theUniversity of North Florida, 4567 St. Johns Bluff Road South, Jacksonville, FL32224. Phone: 904/620-2585. Fax: 904/620-2586.E-mail: [email protected].

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