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SUPPLY CHAINMANAGEMENTProcesses, Partnerships, PerformanceThird EditionDouglas M. Lambert, EditorFisher College of BusinessThe Ohio State UniversitySupply Chain Management InstituteSarasota, FloridaSUPPLY C H MANAGEMENTI N S T I T U T Ewww.scm-institute.org

Contents1. Supply Chain ManagementOverview1IntroductionWhat SCM Is NotJust What is Supply Chain Management?Business Process ManagementThe Supply Chain Management ProcessesCustomer Relationship ManagementSupplier Relationship ManagementCustomer Service ManagementDemand ManagementOrder FulfillmentManufacturing Flow ManagementProduct Development and CommercializationReturns ManagementThe Requirement for Standard Business ProcessesAchieving Cross-Functional and Cross-Firm Involvement Using theSupply Chain Management ProcessesThe Critical Supply Chain LinkagesMeasuring the Financial Impact of Customer Relationship Managementand Supplier Relationship ManagementBuilding High-Performance Relationship in the Supply ChainThe Partnership ModelThe Partnership Building SessionSummary of the Supply Chain Management 0212222232. The Customer Relationship Management ProcessOverview25Introduction25Customer Relationship Management as a Supply Chain Management Process27The Strategic Customer Relationship Management Process30Review Corporate and Marketing Strategies30Identify Criteria for Categorizing Customers31Provide Guidelines for the Degree of Differentiation in theProduct and Service Agreement31Develop Framework of Metrics32Develop Guidelines for Sharing Process Improvement Benefits with Customers .34The Operational Customer Relationship Management Process36Segment Customers36Prepare the Account/Segment Management Team37Contentsxiii

Internally Review the AccountsIdentify Opportunities with the AccountsDevelop the Product and Service AgreementImplement the Product and Service AgreementMeasure Performance and Generate Profitability ReportsConclusionsAppendix: Customer and Product Profitability Reports383939394040413. The Supplier Relationship Management ProcessOverview53Introduction53Supplier Relationship Management as a Supply Chain Management Process55The Strategic Supplier Relationship Management Process56Review Corporate, Marketing, Manufacturing and Sourcing Strategies56Identify Criteria for Categorizing Suppliers57Provide Guidelines for the Degree of Differentiation in theProduct and Service Agreement60Develop Framework of Metrics61Develop Guidelines for Sharing Process Improvement Benefits with Suppliers .63The Operational Supplier Relationship Management Process64Segment Suppliers64Prepare the Supplier/Segment Management Team65Internally Review the Supplier/Supplier Segment65Identify Opportunities with the Suppliers66Develop the Product and Service Agreement and Communication Plan66Implement the Product and Service Agreement68Measure Performance and Generate Supplier Cost/Profitability Reports68Conclusions684. The Customer Service Management ProcessOverviewIntroductionCustomer Service Management as a Supply Chain Management ProcessThe Strategic Customer Service Management ProcessDevelop Customer Service Management StrategyDevelop Response ProceduresDevelop Infrastructure for Implementing Response ProceduresDevelop Framework of MetricsThe Operational Customer Service Management ProcessRecognize EventEvaluate Situation and AlternativesImplement SolutionMonitor and ReportExamples of the Operational Customer Service Management ProcessStandardized Response Procedures at Gillette ArgentinaStandardized Response Procedures at 28282838486

5. The Demand Management ProcessOverviewIntroductionDemand Management as a Supply Chain Management ProcessThe Strategic Demand Management ProcessDetermine Demand Management Goals and StrategyDetermine Forecasting ProceduresPlan Information FlowDetermine Synchronization ProceduresDevelop Contingency Management SystemDevelop Framework of MetricsThe Operational Demand Management ProcessCollect Data/InformationForecastSynchronizeReduce Variability and Increase FlexibilityMeasure 011021041046. The Order Fulfillment ProcessOverviewIntroductionOrder Fulfillment as a Supply Chain Management ProcessThe Strategic Order, Fulfillment ProcessReview Marketing Strategy, Supply Chain Structure and CustomerService GoalsDefine Requirements for Order FulfillmentEvaluate Logistics NetworkDefine Plan for Order FulfillmentDevelop Framework of MetricsThe Operational Order Fulfillment ProcessGenerate and Communicate OrderEnter OrderProcess OrderHandle DocumentationFill OrderDeliver OrderPerform Post-Delivery Activities and Measure 141161171171181181181191197. The Manufacturing Flow Management ProcessOverviewIntroductionManufacturing Flow Management as a Supply Chain Management ProcessThe Strategic Manufacturing Flow Management ProcessReview Manufacturing, Sourcing, Marketing, and Logistics StrategiesDetermine Degree of Manufacturing Flexibility RequiredDetermine Push/Pull BoundariesIdentify Manufacturing Constraints and Determine CapabilitiesDevelop Framework of Metrics121121123125126129132134136Contentsxv

The Operational Manufacturing Flow Management ProcessDetermine Routing and Velocity through ManufacturingPlan Manufacturing and Material FlowExecute Capacity and Demand PlansMeasure PerformanceConclusions138138139140141142The Product Development and Commercialization ProcessOverviewIntroductionTypes of Product Development ProjectsProduct Development and Commercialization as a Supply Chain ManagementProcessThe Strategic Product Development and Commercialization ProcessReview Corporate, Marketing, Manufacturing and Sourcing StrategiesDevelop Idea Generation and Screening ProceduresEstablish Guidelines for Cross-Functional Product DevelopmentTeam MembershipIdentify Product Rollout Issues and ConstraintsEstablish New Product Project GuidelinesDevelop Framework of MetricsThe Operational Product Development and Commercialization ProcessDefine New Products and Assess FitEstablish Cross-Functional Product Development TeamFormalize New Product Development ProjectDesign, Build and Test PrototypesEvaluate Make/Buy DecisionDetermine ChannelsRollout ProductMeasure 511511531531531551551561561571571589. The Returns Management ProcessOverviewIntroductionTypes of ReturnsConsumer ReturnsMarketing ReturnsAsset ReturnsProduct RecallsEnvironmental ReturnsSummaryDefining Returns ManagementReturns Management as a Supply Chain Management ProcessThe Strategic Returns Management ProcessDetermine Returns Management Goals and StrategyDevelop Returns Avoidance, Gatekeeping and Disposition GuidelinesDevelop Returns Network and Flow OptionsDevelop Credit RulesDetermine Secondary 41651651681711721 72

Develop Framework of MetricsThe Operational Returns Management ProcessReceive Return RequestDetermine RoutingReceive ReturnsSelect DispositionCredit Customer/SupplierAnalyze Returns and Measure PerformanceConclusions1 731741 741751761761 7717717810. Conducting Assessments of theSupply Chain Management ProcessesOverview1 79IntroductionConducting an AssessmentGain Commitment for an AssessmentSelect the Process to AssessChoose the Participants for the AssessmentSchedule the AssessmentAcquaint Participants with the Framework and the Supply Chain ManagementProcess that will be AssessedComplete the Assessment Tool IndividuallySummarize Responses to Use for Discussion in theConsensus-building MeetingHold the Consensus-building MeetingPrepare a Summary of Score, Importance, Justification and PotentialAction ItemsDevelop a Plan for ActionConclusionsAppendix: Example Report of a Cross-Functional 9111. Mapping for Supply Chain ManagementOverviewIntroductionRelationship-based MapsMultiple Views of the Relationship-based MapThe Structural Dimension of the NetworkComplexity in a Supply ChainExamples of Relationship-based MapsType of Business Process LinksActivity-based MapsTime-based Process MappingPipeline Inventory Process MappingExtended Value Stream MapsFacilitating the Development of a Relationship-based 213216Contents xvii

12. Lean Thinking and Supply Chain ManagementOverviewIntroductionFundamentals of Lean ManagementApplying Lean Principles to Supply Chain OperationsExtended Value Stream MappingLean Thinking and Supply Chain ManagementA Broader View of WasteCost Allocations for Decision MakingMissed Opportunities for Value CreationDisconnects between Promise Making and Promise KeepingUnclear Expectations in Business RelationshipsLate Detection of Action RequiredMisalignment of IncentivesExcessive Product 822923023123123223313. Implementing and Sustaining theSupply Chain Management ProcessesOverviewIntroductionStructural Management ComponentsPlanningControl MethodsWorkflow StructureOrganizational StructureCommunication StructureKnowledge ManagementBehavioral Management ComponentsManagement MethodsPower and LeadershipRisk and RewardCulture and AttitudeTrust and CommitmentProcess Implementation and MaintenanceSelect ProcessBuild TeamReview Sub-processesAssess PerformanceGap AnalysisImplement 25414. Developing and Implementing Partnerships in the Supply ChainOverviewIntroductionWhat is a Partnership?Development of the ModelThe Partnership ModelxviiiContents255255257259260

Preparation for MeetingThe Partnership MeetingApplications of the ModelEstablishing a Partnership with a Supplier or CustomerAssessing an Existing RelationshipResolving Conflicts in a RelationshipCreating a Common Partnership VisionInstitutionalizing the Partnership ProcessConclusions26226327927928028028128128215. Supply Chain Management Performance MeasurementOverviewIntroductionProblems with Existing MetricsWhy Supply Chain MetricsRelationship Between Supply Chain Metrics and StrategyFramework for Developing Supply Chain Management MetricsMap the Supply ChainAnalyze Each LinkDevelop Profit and Loss StatementsRealign Supply Chain Management ProcessesAlign Non-Financial Measures with P&LsCompare Across Firms and 29830030216. Supply Chain Management: The Next StepsOverview303IntroductionProcess-Based Frameworks for Supply Chain ManagementThe GSCF FrameworkThe Supply-Chain Operations Reference (SCOR) FrameworkStrength and Weaknesses of the Two FrameworksFocusStrategic AlignmentBreadth of ActivitiesCross-Functional InvolvementProcess and Performance BenchmarkingValue CreationSummaryGuidelines for Implementing the GSCF FrameworkAssessment of the Supply Chain Management ProcessesChange 031231331431431 6319Appendix A:Assessment Tool for the Customer Relationship Management Process321Appendix B:Assessment Tool for the Supplier Relationship Management Process331Contentsxix

Appendix C:Assessment Tool for the Customer Service Management Process341Appendix D:Assessment Tool for the Demand Management Process353Appendix E:Assessment Tool for the Order Fulfillment Process365Appendix F:Assessment Tool for the Manufacturing Flow Management Process377Appendix G:Assessment Tool for the Product Development and Commercialization Process387Appendix H:Assessment Tool for the Returns Management Process407Author Index419Company Index425Subject Index427xxContents

SUPPLY CHAIN MANAGEMENT Processes, Partnerships, Performance Third Edition Douglas M. Lambert, Editor Fisher College of Business The Ohio State University Supply Chain Management Institute Sarasota, Florida SUPPLY CH MANAGEMENT www.scm-institute.org INSTITUTE. Contents 1. Supply Chain Management Overview 1 Introduction 2 What SCM Is Not 3