The Supply Chain Management Processes

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The Supply Chain Management Processes
Article in The International Journal of Logistics Management · June 2001

DOI: 10.1108/09574090110806271
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The Supply Chain Management
Processes
Keely L. Croxton, Sebastián J. García-Dastugue and Douglas M. Lambert
The Ohio State University
Dale S. Rogers
University of Nevada, Reno
Increasingly, supply chain management is being recognized as the management of

key business processes across the network of organizations that comprise the
supply chain. While many have recognized the benefits of a process approach to
managing the business and the supply chain, most are vague about what
processes are to be considered, what sub-processes and activities are contained
in each process, and how the processes interact with each other and with the
traditional functional silos. In this paper, we provide strategic and operational
descriptions of each of the eight supply chain processes identified by members of
The Global Supply Chain Forum, as well as illustrations of the interfaces among the
processes and an example of how a process approach can be implemented within
an organization. Our aim is to provide managers with a framework to be used in
implementing supply chain management, instructors with material useful in
structuring a supply chain management course, and researchers with a set of
opportunities for further development of the field.
Supply chain management is comprehensive definition of the processes

increasingly being recognized as the that constitute supply chain management.
integration of key business processes across How can companies achieve supply chain
the supply chain. For example, Hammer integration if there is not a common
argues that now that companies have understanding of the key business processes?
implemented processes within the firm, they It seems that in order to build links between
need to integrate them between firms: supply chain members it is necessary for
“Streamlining cross- Streamlining cross-company companies to implement a standard set of
company processes is processes is the next great frontier supply chain processes. Practitioners and
the next great frontier for reducing costs, enhancing educators need a common definition of
for reducing costs, quality, and speeding operations. It supply chain management, and a shared
enhancing quality, and is where this decade’s productivity understanding of the processes.
speeding operations”. wars will be fought. The victors will We recommend the definition of supply
be those companies that are able to chain management developed and used by
take a new approach to business, The Global Supply Chain Forum:
working closely with partners to Supply Chain Management is the
design and manage processes that integration of key business
extend across traditional corporate processes from end user through
boundaries. They will be the ones original suppliers that provides
that make the leap from efficiency products, services, and information
to super efficiency [1]. that add value for customers and
Monczka and Morgan also focus on the other stakeholders [3].
importance of process integration in supply The Forum members identified eight key
chain management [2]. The piece that seems processes that need to be implemented within
to be missing from the literature is a and across firms in the supply chain. To date,
Volume 12, Number 2 2001 Page 13

the published descriptions of these processes • Order Fulfillment
were limited to one-paragraph summaries • Manufacturing Flow Management
that provide little guidance on how to • Procurement
implement a process approach [4]. Our • Product Development and Commercialization Our purpose in this
purpose in this paper is to provide more detail • Returns. paper is to provide more
on the sub-processes and activities that The term “procurement” is a source of detail on the sub-
comprise the supply chain processes. The confusion. Novak and Simco highlight the processes and activities
goal is to provide management with confusion by citing studies in which that comprise the supply
guidelines to help with implementation, procurement is defined as “...the act of chain processes.
instructors with material for structuring a buying... all those activities necessary to
supply chain management course and acquire goods and services consistent with
researchers with a detailed framework for user requirements” [6]. Other authors use
future research on supply chain management. similar definitions [7]. Because these
The paper is organized as follows. First, definitions do not adequately represent our
there is a brief review of the supply chain view of the supply chain process, we have
framework. Next, there is a section on each of renamed the procurement process “supplier
the eight processes. This is followed by a section relationship management”. Also, for further
on implementation. Finally, opportunities for clarification we have changed the name of
the returns process to returns management.
future research and conclusions are presented.
The eight key business processes run the
length of the supply chain and cut across
Supply Chain Management firms and functional silos within each firm
The Global Supply Chain Forum (see Figure 1). Functional silos include
identified eight key processes that make up Marketing, Research and Development,
the core of supply chain management [5]: Finance, Production, Purchasing and
• Customer Relationship Management Logistics. Activities in these processes reside
• Customer Service Management inside a functional silo, but an entire process
• Demand Management will not be contained within one function.
Figure 1
Supply Chain Management:
Integrating and Managing Business Processes Across the Supply Chain
Information Flow
Tier 2 Manufacturer
Tier 1
Supplier Customer Consumer/
Supplier Logistics End-user
Purchasing Marketing
PRODUCTION FLOW
Production Finance
R&D
Supply Chain Business Processes
CUSTOMER RELATIONSHIP MANAGEMENT
CUSTOMER SERVICE MANAGEMENT
DEMAND MANAGEMENT
ORDER FULFILLMENT
MANUFACTURING FLOW MANAGEMENT
SUPPLIER RELATIONSHIP MANAGEMENT
PRODUCT DEVELOPMENT AND COMMERCIALIZATION
RETURNS MANAGEMENT
Source: Adapted from Douglas M. Lambert, Martha C. Cooper, and Janus D. Pagh, “Supply Chain Management: Implementation
Issues and Research Opportunities,” The International Journal of Logistics Management, Vol. 9, No. 2 (1998), p. 2.
Page 14 The International Journal of Logistics Management

While management of all firms in Customer Relationship Management
each supply chain should consider these
The customer relationship The customer relationship management
management process eight processes, the relative importance process provides the structure for how the
provides the structure for of each process and the specific relationship with the customer is developed
how the relationship with activities included may vary. The sub- and maintained. Management identifies key
the customer is developed processes and activities we describe customers and customer groups to be targeted
and maintained. are designed from the perspective of as part of the firm’s business mission [8].
a manufacturing company sitting near Customer teams tailor Product and Service
the middle of the supply chain (see Figure 1). Agreements (PSA) to meet the needs of key
Each process is described at strategic accounts and segments of other customers [9].
and operational levels. The strategic Teams work with key accounts to improve
portion consists of the establishment processes, and eliminate demand variability
and strategic management of each process, and non-value-added activities. Performance
and provides a blueprint for implementation. reports are designed to measure the
This is a necessary first step in integrating profitability of individual customers as well as
the firm with other members of the the firm’s financial impact on those customers.
supply chain. The operational portion is the
actualization of the process once it has The Strategic Process
been established. At the strategic level, the customer
Next, we will describe the sub-processes relationship management process provides
and activities that make up each of the eight the framework for managing relationships
processes as well as the interactions between with customers, and is comprised of five sub-
processes, functions, and key members of the processes (see Figure 2). In the first, the
supply chain. The description of each process process team reviews the corporate and
is accompanied by a figure that illustrates the marketing strategies to identify customer
sub-processes and the interfaces between the segments that are key to the organization’s
processes. success now and in the future.
Figure 2
Customer Relationship Management
Strategic Sub-Processes Processes Interfaces Operational Sub-Processes
Customer Differentiate Customers

Review Corporate and Service Management
Marketing Strategy
Demand Prepare the Account/Segment

Management Management Team
Identify Criteria for

Categorizing Customers
Order Fulfillment Internally Review the Accounts
Provide Guidelines for the

Degree of Differentiation in the Manufacturing Flow Identify Opportunities with the
Product/Service Agreement Management Accounts
Supplier Relationship Develop the Product/

Management Service Agreement
Develop Framework
of Metrics
Product Development Implement the Product/Service

& Commercialization Agreement
Develop Guidelines for Sharing

Process Improvement Benefits
with Customers Returns Management Measure Performance and
Generate Profitability Reports

Next, the team identifies the criteria for The Operational Process
categorizing customers and provides At the operational level, the customer At the operational level,
guidelines for determining which customers relationship management process deals with the customer relationship
qualify for tailored PSAs and which customers writing and implementing the PSAs. It is management process
will be grouped into segments and offered a comprised of seven sub-processes. First, deals with writing and
standard PSA that is developed to provide customers are differentiated based on the implementing the PSAs.
value to the segment. Potential criteria criteria developed at the strategic level. Key
include: profitability, growth potential, customers are identified and other customers
competitive positioning issues, access to are grouped into customer segments.
market knowledge, market share goals, margin Next, the account or segment
levels, level of technology, resources and management teams are formed, including the
capabilities, compatibility of strategies, and salesperson who will be the account or
channel of distribution. As part of this sub- segment manager. The teams are cross
process, the team develops the firm’s strategy functional with representation from each of
for dealing with segments of customers who the functional areas. In the case of key
do not qualify for individually tailored PSAs. accounts, each team is dedicated to a specific
In the third sub-process, the team account and meets regularly with the
develops guidelines for the degree of customer. In the case of customer segments,
differentiation in the PSA. This involves a team manages a group of customers and
developing the differentiation alternatives and develops and manages the standard PSA for
considering the revenue and cost implications the segment.
of each. The output is the degree of Each account team reviews their
customization that can be offered to account or segment of accounts to determine
customers. The goal is to offer PSAs that the products purchased, sales growth and
enhance the profitability of the firm and the their position in the industry. Once the
customers. To find and understand the team has an understanding of the customer(s),
differentiation opportunities, this sub-process they work with each account or segment
will interface with all of the other processes. of accounts to develop improvement
Developing the framework of metrics opportunities in sales, costs and service. These
involves outlining the metrics of interest and opportunities might arise anywhere, so the
relating them to the customer’s impact on the account teams need to interface with each of
firm’s profitability as well as the firm’s impact the other processes.
on the customer’s profitability. The customer In the fifth sub-process, each team
relationship management process has the develops the PSA for their account or segment
responsibility for assuring that the metrics used of accounts. This team first outlines and drafts
to measure all of the other processes are not the PSA, and then gains commitment from the
conflicting. Management needs to insure that internal functions. For key accounts, they
all internal and external measures are driving present the PSA for acceptance, and work
consistent and appropriate behavior [10]. with the customer until agreement has been
In the final sub-process, the team reached. It is important that the PSAs for key
develops the guidelines for sharing process accounts include a communication and
improvement benefits with customers. The continuous improvement plan. For other
goal is to make these process improvements accounts, the PSA is presented to the
win-win solutions for both the firm and the customer.
customer. In the sixth sub-process, the team
In summary, the objective of customer implements the PSA, including regular
relationship management at the strategic level meetings with key customers. At this point,
is to identify customer segments, provide input is provided to each of the other
criteria for categorizing customers, provide processes that are affected by the
customer teams with guidelines for customizations in the PSA.
customizing the product and service offering, In the last operational sub-process, the
develop a framework for metrics, and provide team captures and reports the process
guidelines for the sharing of process performance measures. Metrics from each of
improvement benefits with the customers. the other processes also are captured in order

to generate the customer profitability provides the set of products and services the
reports. These profitability reports provide firm can offer its customers. The strategic
information for measuring and selling the customer service management process is
value of the relationship to each customer and responsible for planning how each of the
internally to upper management. The value possible products and services to be included
provided should be measured in terms of in the PSA is going to be delivered and
costs, impact on sales, and associated managed.
investment, otherwise the efforts incurred will Strategic customer service management
go unrewarded [11]. has four sub-processes (see Figure 3). In the
first, the customer service strategy is
Customer Service Management developed for the set of PSA features
The customer service The customer service management identified in the customer relationship
management process is process is the firm’s face to the customer. It management process. The team identifies the
the firm’s face to the provides the single source of customer deliverables of the customer service process,
customer. It provides information, such as product availability, operationalizes the triggers for initiating
the single source of shipping dates and order status. Real-time action, and defines the staffing needs. The
customer information, information is provided to the customer deliverables of the process are standardized
such as product through interfaces with the firm’s functions, responses to standardized events that occur
availability, shipping such as manufacturing and logistics. while administering the PSA.
dates and order status. Customer service management is responsible The output of this first sub-process is a
for administering the PSA. list of events with its corresponding triggers
and deliverables. In the second sub-process,
The Strategic Process the team develops response procedures for
At the strategic level, the customer each of these events. This includes
service management process is concerned developing the internal and external
with designing the process for managing the coordination required to respond.
PSA. Customer relationship management Next, the process team identifies the
Figure 3
Customer Service Management
Customer
Relationship Management
Develop Customer Service
Recognize Event
Strategy
Demand
Management
Develop Response Order Fulfillment Evaluate Situation and

Procedures Alternatives
Manufacturing Flow
Management
Develop Infrastructure for

Implementing Response Implement Solution
Procedures Supplier Relationship
Management
Product Development
& Commercialization
Develop Framework Monitor and Report

of Metrics
Returns Management

infrastructure for implementing the response of alternative actions working jointly with the
procedures. This involves identifying the specialists in each of the functions affected by
sources of the information needed to handle the event or that can contribute to
each of the events and determining the implementing the solution. This requires
appropriate communication means for interfacing with other processes that are
internal and external coordination. This sub- affected by the alternative responses. The
process provides the information technology implementation of the selected alternative is
and communication needs for managing the coordination intensive, as other business
PSAs efficiently and effectively. If there are process owners or function managers often
technical constraints restricting the need to participate in the implementation. At
establishment of this infrastructure, the this point, the actual response to the event is
products and services that are affected have to executed.
be re-evaluated and eventually modified to Finally, the customer service management
make them feasible. process includes monitoring and reporting the
As in the other processes, the last process performance. This sub-process
sub-process of customer service management includes recording the event in a database that
at the strategic level is to develop the can be used for future reference, and
framework of metrics. The metrics should monitoring the evolution of the event in order
provide management with the information to know to what extent the response has been
necessary to identify problems and implemented. Part of the sub-process is
improvement opportunities in the collecting information and informing the
administration of the PSA. These customer about how the issue is being
measurements are used not only for managing resolved. Performance of the process is
the process, but also for improving its measured and conveyed to the customer
efficiency. The team interfaces with the relationship management and supplier
customer relationship management team to relationship management teams.
assure that the metrics developed are
consistent with the firm’s objectives.
Demand Management
In short, the objective of customer
service management at the strategic level is to The demand management process needs The demand
develop the necessary infrastructure and to balance the customers’ requirements with management process
coordination means for implementing the the firm’s supply capabilities. This includes needs to balance the
PSA and providing a key point of contact to forecasting demand and synchronizing customers’ requirements
the customer. it with production, procurement, and with the firm’s supply
distribution. “Demand Management coor- capabilities.
The Operational Process dinates all acts of the business that place
At the operational level, the customer demand on manufacturing capacity” [12]. The
service management process is responsible process is also concerned with developing and
for responding to both internal and external executing contingency plans when operations
events. The first step is to recognize the event. are interruped.
This might seem trivial but the goal of being
proactive makes this a challenging part of The Strategic Process
administering the PSA. The team needs to Demand management is about
have a thorough understanding of the firm’s forecasting and synchronizing (see Figure 4).
operations, and try to foresee the effects The process team first determines which
of a given event on the customer and forecasting approaches to use. This includes
on the internal operations of the firm. determining the levels and timeframes of the
Events that require action might originate forecasts needed throughout the firm.
in any one of the other processes so Different parts of the organization might need
coordination is essential. different forecasts [13]. The team determines
Once the event is recognized, the team the sources of the data required to generate
evaluates alternatives for managing the event the forecasts [14]. These might include
with the least disruption to the customer and historical data, sales projections, promotion
internal operations. The team determines a set plans, corporate objectives, market share

Figure 4
Demand Management
Customer
Relationship Management
Determine Forecasting
Collect Data/Information
Approaches
Customer Service
Management
Plan Information Flow Forecast

Order Fulfillment
Determine Synchronization Manufacturing Flow

Management Synchronize
Procedures
Supplier Relationship
Management
Develop Contingency Increase Flexibility and
Managment System Reduce Variability
Product Development
& Commercialization
Develop Framework Measure Performance

of Metrics
Returns Management
data, trade inventory, market research, and this point in the process, the team might
new categories of growth. If systems such as recognize future capacity issues and make
collaborative planning, forecasting and recommendations to proactively address
replenishment (CPFR) or vendor managed them before they cause problems.
Another important inventory (VMI) are being implemented, the Another important component of the
component of the customer is a direct source of data. strategic demand management process is
strategic demand Once the team decides on the method of developing contingency plans in the event of
management process is forecasting and the sources of data, they plan either internal or external events that disrupt
developing contingency the information flow. Several functional silos the balance of supply and demand [15]. The
plans in the event of and customer relationship management need team develops guidelines or rules to deal with
either internal or to provide input to the forecasting process. unexpected demand or interruptions to
external events that The forecasts are then communicated to the supply. These guidelines should be
disrupt the balance of other process teams that are affected by them, developed in accordance with the
supply and demand.
including customer service management, expectations of the customers outlined in the
order fulfillment, manufacturing flow, and customer relationship management process,
product development and commercialization. and with input from manufacturing flow and
Next, the team determines the supplier relationship management. The team
synchronization procedures required to determines the guidelines and communicates
match the demand forecast to the firm’s them to the customer service management
production, sourcing and distribution team, since they address the concerns of
capabilities. To do this, they need to customers when these events occur.
understand the capacity and flexibility Finally, as with the other processes, the
available at all points along the supply chain. team develops the framework of metrics to be
They also need to determine the long-term used to measure and monitor the performance
planning requirements, particularly in the of the process. Typical process measures
case of demand with high seasonality or long- might include forecast error and capacity
term changes, such as sustained growth. At utilization. Again, the team confirms these

measures with the customer relationship and variability is likely to be most successful “The supply chain which
management team to assure consistency. in improving its competitive position” [16]. best succeeds in
For example, to gain flexibility, the team reducing uncertainty
The Operational Process might work with the manufacturing flow team and variability is likely
At the operational level, the process to find ways to introduce postponement into to be most successful in
team executes the forecasting and the manufacturing process. To reduce improving its
synchronization as it was designed at the demand variability, the team might work with competitive position.”
strategic level. This begins with collecting the the customer relationship management team
data. To do this, the team interfaces with the to help customer’s better plan promotions. In
marketing functional silo as well as the order order to find ways to increase flexibility and
fulfillment and customer service management reduce variability, the process team works
processes. These sources are close to the with the sales, marketing and manufacturing
customer and provide critical information on organizations, customers and suppliers. This
sales projections and anticipated demand. involves process interfaces with customer
With all the required data in hand, the relationship management, customer service
team develops the forecasts. They track and management, manufacturing flow and
analyze the forecast error and incorporate this supplier relationship management.
feedback to fine-tune the forecasting method. Finally, the process team is responsible
This is an important component of the learning for measuring the performance of the process
process associated with good forecasting. with the metrics developed at the strategic
The forecast provides the input for level. These metrics are used to improve the
matching demand with supply. Some firms process and are conveyed to the customer
refer to this as aggregate planning. Sources of relationship management and supplier
information for the synchronization sub- relationship management teams.
process include customer relationship
management, customer service management, Order Fulfillment
manufacturing flow, and product
A key to effective supply chain
development and commercialization. The
management is to meet customer requirements
output of the synchronization sub-process is
in terms of order fulfillment [17]. Effective Effective order
an aggregate production plan and an
order fulfillment requires integration of the fulfillment requires
inventory-positioning plan. The team also
firm’s manufacturing, logistics and marketing integration of the firm’s
develops a rough-cut capacity plan for any
plans. The firm should develop partnerships manufacturing, logistics
new products soon to be launched. These
with key members of the supply chain to meet and marketing plans.
plans need to be communicated throughout
customer requirements and reduce total
the firm, and therefore there are interfaces
delivered cost to customers.
with customer relationship management,
customer service management, order
The Strategic Process
fulfillment, manufacturing flow, supplier
relationship management, and product The strategic order fulfillment process
development and commercialization. In considers manufacturing, logistics and
addition, any internal or external event that marketing requirements to design the
causes a disruption to supply or large forecast distribution network (see Figure 5).
errors needs to be handled with the In the first sub-process, the team reviews
contingency management plans developed at the role of customer service in the marketing
the strategic level. strategy, customer service goals, and the
Another key component to demand supply chain structure [18]. This requires an
management is an ongoing process aimed at interface with the customer relationship
increasing flexibility and reducing variability management process.
(in demand, lead-times, capacity, etc). The Next, the requirements for order
former helps management respond quickly to fulfillment are specified, including the order-
both internal and external events, and the to-cash cycle. Key inputs include
latter aids in consistent planning and manufacturing capabilities, lead-times and
minimizing surprises. “The supply chain customer service requirements [19]. At this
which best succeeds in reducing uncertainty stage, the customer relationship management

and manufacturing flow processes provide process team to make sure that all customer
input. The team evaluates the core expectations are met.
competencies within order fulfillment and In the final sub-process, a framework of
determines which aspects of the process are metrics is developed and communicated to
potentially service differentiating. the customer relationship management
Evaluating the logistics networks is an process. Typical process measures might
The design and important step in order fulfillment. The design include order-to-cash cycle time, order fill
operation of the and operation of the network has a significant rate, and order completeness.
network has a influence on the cost and performance of the
significant influence system [20]. It has been estimated that up to The Operational Process
on the cost and 80% of the total cost of the final product is The order fulfillment operational process
performance of determined in the design of the network [21]. defines the specific steps regarding how
the system. It is necessary to evaluate the network customer orders are: generated and
including: which plants produce which communicated, entered, processed, docu-
products; where warehouses, plants, and mented, picked, delivered, and handled post
suppliers are located; and, which delivery. There are three steps to accepting and
transportation modes should be used. processing an order. First, orders are generated
Important input to this sub-process comes and communicated. Generally, these orders
from the demand management and returns come from customer service management.
processes. The resulting network is provided Second, a member of the order fulfillment team
to the manufacturing flow process. receives, enters, edits the orders, and transmits
The next strategic sub-process is to these data to the customer service
define the plan for order fulfillment, management and demand management
determining how orders from various processes. Third, the inventory and customers’
customers or segments of customers will be credit are checked and the order is processed.
filled. The process team communicates with Information about these orders is provided to
the customer relationship management the manufacturing flow process.
Figure 5
Order Fulfillment
Customer Generate &

Review Marketing Strategy, Relationship Management Communicate Order
Supply Chain Structure &
Customer Service Goals
Customer Service Enter Order

Management
Define Requirements for

Order Fulfillment
Demand Management Process Order
Evaluate Logistics Network Manufacturing Flow Handle Documentation

Management
Supplier Relationship Pick Order

Management
Define Plan for
Order Fulfillment
Product Development
& Commercialization Deliver Order
Develop Framework
of Metrics
Returns Management Perform Post Delivery Activities
& Measure Performance

In the next sub-process, the team target markets. The process includes all
handles all documentation. They acknowl- activities necessary for managing the product
edge the order and prepare the bill of lading, flow through the manufacturing facilities and
picking instructions, packing slips and for obtaining, implementing and managing
generate the invoice. At the order picking flexibility.
stage, the merchandise is picked, packed, and
staged for loading. The load confirmation is The Strategic Process
prepared and feedback is provided to At the strategic level, the objective of
customer service management. manufacturing flow is to determine the
The order fulfillment team is responsible manufacturing infrastructure needed for
for preparing shipping documents, transmitting fulfilling the customers’ needs and wants (see
delivery confirmation, and auditing and Figure 6). The process begins with the team
paying the freight bill. They also provide reviewing the functional business strategies
delivery information to the customer service from marketing, logistics, manufacturing and
management team. purchasing. This sub-process requires
In the final sub-process, the team interfaces with customer relationship
performs post-delivery activities, including management, where the corporate and
receiving and posting payment, recording bad marketing strategies are reviewed. These
debt expense, and measuring performance. strategies help identify the expertise and the
Feedback is provided to customer relationship changes in the manufacturing technology that
management, supplier relationship manage- are needed to operationalize manufacturing
ment and returns management. flow. Incompatibility between the
manufacturing process and market charac-
Manufacturing Flow Management teristics may have “unfavorable impact on
The manufacturing flow process deals business performance” [22]. In the same vein, The manufacturing flow
with making the products and establishing the environmental aspects of manufacturing set by process deals with
manufacturing flexibility needed to serve the the business plan, corporate strategy, and the making the products
and establishing the
manufacturing flexibility
Figure 6 needed to serve the
Manufacturing Flow Management target markets.
Review Manufacturing, Customer

Sourcing, Marketing Relationship Management
& Logistics Strategies Determine Routing & Velocity
through Manufacturing
Customer Service
Determine Degree of Management
Manufacturing Flexibiltiy
Requirement
Demand Manufacturing & Material

Management Planning
Determine Push/Pull
Boundaries
Order
Fulfillment
Identify Manufacturing
Constraints and Requirements Synchronize Capacity
Supplier Relationship and Demand
Management
Determine Manufacturing
Capabilities Product Development
& Commercialization
Measure Performance
Develop Framework
of Metrics Returns Management

environmental laws have to be taken into points, permit the downstream section of the
account. Manufacturing strategy is linked to supply chain to operate independently from
the corporate strategy since environmental the upstream section [26]. The decisions
management practices may strengthen the made in this sub-process are communicated
firm’s competitive advantage [23]. to the supplier relationship management team
The objective of the second sub-process since the push-pull boundaries affect the
is to determine the degree of manufacturing interactions with the suppliers. Similarly,
flexibility the firm and the supply chain coordination with order fulfillment is
require. This sub-process provides the necessary for establishing lead-times and
manufacturing capabilities and constraints, stocking requirements.
such as the minimum batch size and cycle The objective of the next sub-process is
time, the labor expertise needed for to identify manufacturing constraints and
manufacturing, and the quality policy and requirements to help determine the
controls. Product development and capabilities of the supply chain. The role of
commercialization, and order fulfillment suppliers and the supplier development
provide input to this sub-process. The team strategy is an important component of
defines the make/buy strategies, for example, this sub-process for defining the extent to
what manufacturing activities are regarded as which activities in the supply chain
strategic and should not be outsourced at any are synchronized. The process team
cost? These strategies provide indications to designs communication mechanisms for
supplier relationship management about synchronizing the activities with minimal
supplier selection and eventually the management effort. They also develop
guidance of partnership opportunities. In the acceptance criteria for establishing the quality
last activity of this sub-process, the team plans standards expected at each step of the
capacity growth based on the marketing manufacturing process. Performing these
strategy and the business plan. activities may lead to identifying needs for the
The degree of flexibility established in suppliers that can be included in a supplier
the previous sub-process leads to the development program; if so, this is an input
determination of the push-pull boundaries. for the supplier relationship management
The customer tolerance time (the time the process.
customer is willing to wait for an order) and In the next sub-process, the team
the customer service goals constrain the determines the manufacturing capabilities
extent to which manufacturing can be and translates them into deliverables to the
postponed in the supply chain. customer. For example, the minimum cycle
Postponement promises to be beneficial to time and the minimum economically viable
the supply chain, but might lead to longer lot size is a result of the design of the
delivery times [24]. The degree to which the manufacturing capabilities. For a strategy to
firm postpones manufacturing and logistics be effective, it must be communicated and
activities depend to a great extent on the understood throughout the organization [27].
design of the products; therefore, the product At this point, the manufacturing flow
development and commercialization process and customer relationship management
provides input for setting the push-pull teams discuss the possible features of
boundaries. In order to determine the push- the PSA, and adjust infeasible features. The
pull boundaries for the supply chain, the team capabilities are communicated to the
identifies the decoupling point separating the demand management, order fulfillment,
part of the supply chain operating in a make- and returns process teams. Further, the
The push-pull to-order environment from the part of the customer service management team
boundaries help to supply chain based on planning [25], which receives the order acceptance guidelines.
determine the stocking is the typical make-to-stock operating The team uses these guidelines every time
points in the supply environment. The push-pull boundaries help a customer has a request. They help
chain for servicing to determine the stocking points in the supply to identify which customers’ requests can
manufacturing chain for servicing manufacturing facilities, be fulfilled. Some requests require
facilities, distribution distribution centers and customers. These additional management time to evaluate their
centers and customers. stocking points, referred to as decoupling economic and technical viability.

In the final sub-process, the team management and supplier relationship
develops the metrics framework and management teams. It includes analyzing
communicates it to the customer relationship product quality and examining the root causes
management team. These metrics measure of quality problems. The manufacturing flow
the effectiveness of the manufacturing flow process team is responsible for finding
process and might include cycle time, solutions to quality issues. This might involve
inventory levels, and product quality. working with supplier relationship
management, product development and
The Operational Process commercialization, or returns management.
Manufacturing flow at the operational Manufacturing flow at
level looks like operations management Supplier Relationship Management the operational level
internal to the firm. However, certain Supplier relationship management is the looks like operations
characteristics of the process are designed to process that defines how a company interacts
management internal to
integrate internal operations management the firm. However,
with its suppliers. As the name suggests, this
with activities in the supply chain. In the first certain characteristics of
is a mirror image of customer relationship
sub-process, the team determines the routing the process are designed
management. Just as a company needs to
and velocity through manufacturing. This step to integrate internal
develop relationships with its customers, it
includes developing a master production operations management
needs to foster relationships with its suppliers. with activities in the
schedule by translating the output of demand As in the case of customer relationship
management into resource and production supply chain.
management, a company should forge close
planning. The team integrates the capacity of
relationships with a small subset of its
the manufacturing facilities into these
suppliers, and maintain more traditional
decisions to assure no disruptions in the
relationships with the others [29]. Each
product flow. This sub-process interacts with
supplier agrees to a PSA that defines the terms
demand management to establish manufact-
of the relationship. Supplier relationship
uring priorities, and with supplier relationship
management is about defining and managing
management to set priorities for suppliers and
these PSAs.
to gain their commitment of resources.
In the next step, manufacturing and
The Strategic Process
material planning, the process team produces a
detailed capacity plan and a time-phased At the strategic level, the output of the
requirement plan. Interfaces with the customer process is an understanding of the levels of
relationship management and supplier relationships the firm will maintain, and the
relationship management processes extend the process for segmenting the suppliers and
focus of this sub-process to other supply chain working with them to develop appropriate
members. Manufacturing planning and PSAs. To do this, the process team first
control encompasses creating the overall reviews the corporate, manufacturing and
manufacturing plan, performing the detailed sourcing strategies, and identifies product and
planning of materials and capacity needs, and service components that are key to the
executing these plans [28]. organization’s success now and in the future
Next, capacity and demand are (see Figure 7).
synchronized. This step identifies what With these key components driving the
inventory levels are needed for synchronizing decisions, the team identifies criteria for
the activities of the many supply chain categorizing suppliers. Criteria to examine
members. Inventory includes raw materials, might include, but are not limited to: the
work-in-process, sub-components, and supplier’s profitability, growth and stability;
packaging at the different tiers. This step the criticality or required service level of the
requires input from demand management and components purchased; the sophistication
order fulfillment, and provides output to and compatibility of the supplier’s process
customer service management. implementation; the supplier’s technological
The final step in the manufacturing flow capabilities and compatibility; the volume
process, measuring performance, includes purchased from the supplier; the capacity
more than just tracking process measures, and available from the supplier; the culture of
reporting them to the customer relationship innovation at the supplier; and, the supplier’s

anticipated quality levels. some of the suppliers, but doing so might
The team determines which of these require implementing new technology and
criteria should be used and how a supplier making changes to the existing demand
will be measured on each one. They develop management process.
a categorization scheme that will guide the As with each of the other supply chain
operational team on determining the firm’s processes, an important step at the strategic
key suppliers, and grouping other suppliers level is developing the metrics framework.
into segments. This is particularly critical in the supplier
Key suppliers work with Key suppliers work with customized relationship management process because
customized PSAs; other PSAs; other suppliers work with standard these metrics measure the success of the
suppliers work with PSAs with little to no customization. firm’s relationship with its suppliers. With
standard PSAs with little Therefore, a standard PSA is written for each these metrics management sees the impact of
to no customization. supplier segment. For key suppliers, the team the integration in the supply chain. It is
provides guidelines for the degree of important that the team relates these metrics
customization that is acceptable. To do this, to the supplier’s impact on the firm’s
they consider the quality and cost profitability as well as the profitability of the
implications of various differentiation supplier. It is key that the team performs
alternatives, and select the boundaries for the profitability analyses because management
degree of customization that might be can use these to sell the value of supply chain
required or desired. At this step, the team activities [30]. Improvements from suppliers
interfaces with each of the other processes may have impact throughout the organization
because they need to understand the degree and these should be reflected in supplier cost
of differentiation that is desirable as well as be or profitability reports.
It is important for the ready to design systems for supporting these It is important for the supplier
supplier relationships to alternatives. For example, examining the relationships to be win-win. If both parties do
be win-win. If both demand management process might lead the not gain from the relationship, the incentive to
parties do not gain from team to consider implementing CPFR with be in the relationship is diminished and it will
the relationship, the
incentive to be in the
relationship is Figure 7
diminished and it will Supplier Relationship Management
likely dissolve.
Customer
Review Corporate, Relationship Management Differentiate Suppliers
Manufacturing and
Sourcing Strategies
Customer Service Prepare the Supplier/Segment

Management Management Team
Identify Criteria for

Categorizing Suppliers
Internally Review the Supplier/
Demand Management Supplier Segment
Provide Guidelines for the

Degree of Customization in the Order Fulfillment Identify Opportunities
Product/Service Agreement with the Suppliers
Develop Product/Service
Manufacturing Flow Agreement and
Management Communication Plan
Develop Framework
of Metrics
Product Development Implement the Product/Service

& Commercialization Agreement
Develop Guidelines for Sharing

Process Improvement Benefits
with Suppliers Measure Performance and
Returns Management Generate Supplier
Cost/Profitability Reports

likely dissolve. The supplier relationship implementing and managing it. This involves
management process team must develop working with the other processes to assure
guidelines for sharing process improvement that the PSA is being adhered to, and meeting
benefits with the suppliers. For example, Wal- with the suppliers regularly to monitor
Mart decided to split cost savings with Procter progress and performance.
& Gamble three ways: 1/3 to Wal-Mart, 1/3 to Measuring performance is a critical part
the supplier and 1/3 to the customer [31]. A of the supplier relationship management
key to this step of the process is finding ways to process because management needs to assess
easily quantify benefits in financial terms. the success of the firm’s relationships. The
other process teams communicate supplier-
The Operational Process related performance to the account teams
Once the process team determines the who tie these metrics back to the profit of
criteria for categorization of suppliers and the both the firm and the supplier, and report the
levels of customization at the strategic level, results both internally and to the supplier.
the operational supplier relationship
management process develops and manages Product Development and
the PSAs. First, the team implements the Commercialization
categorization scheme in order to identify key
Product development is critical to the
suppliers and supplier segments. This
continuing success of the firm [32].
involves analyzing how suppliers impact
Developing new products quickly and getting
the firm’s profitability and measuring each
them to the marketplace in an efficient manner
supplier on the appropriate criteria.
is a major component of corporate success.
Each key supplier is assigned to a
Time to market is a critical objective of this
supplier management team. Other suppliers
process [33]. Supply chain management Supply chain
are grouped into segments and a
includes integrating customers [34] and management includes
management team is assigned to each
suppliers [35] into the product development integrating customers
segment. Each supplier/segment team is
process in order to reduce time to market. As and suppliers into the
comprised of a team manager and a cross-
product life cycles shorten, the right products product development
functional set of team members.
must be developed and successfully launched process in order to
Each supplier/segment team internally
in ever-shorter timeframes in order to remain reduce time to market.
reviews the suppliers to assure that they
understand the role of that supplier in the competitive [36].
supply chain. A supplier team works with
each key supplier to identify improvement The Strategic Process
opportunities within the account. The team The first step in the strategic portion of the
examines each of the other supply chain product development and commercialization
processes, both at the firm and at the supplier, process is to review the sourcing,
looking for opportunities to increase sales, manufacturing and marketing strategies to
reduce costs, and improve service. determine how those plans will likely impact
Next, each team works with a key product development (see Figure 8). The
supplier to negotiate the PSA. Recall marketing strategy contains the needs
that segments of other suppliers receive a assessment of customers.
standard PSA. For key suppliers, the team Next, the process team develops the idea
customizes the agreement according to the generation and screening processes. This
improvement opportunities identified. An stage can include determining sources for
important step in developing the PSA for key ideas, considering incentives for developing
suppliers is gaining commitment of the new products for the focal firm and their
company’s internal functions, particularly suppliers and customers, beginning to
those affected by the customized PSAs. The develop formalized customer feedback
PSA includes a communication plan between programs, and establishing guidelines for
the firm and the supplier and a continuous strategic fit. At this point, the product
improvement plan. development and commercialization process
Once the suppliers have agreed to the interfaces with the customer relationship
PSA, the supplier teams are responsible for management process to provide the

framework that will be used to determine how The fourth step is to develop product
new products will impact customers and the rollout issues and constraints. The team
level of acceptance of those products. identifies pinch points that could hamper the
The process team then establishes product development and commercialization
guidelines for the membership of the cross- process. Activities within this sub-process
It is critical to have functional product development team. It is include market and promotion planning,
the right people from critical to have the right people from the sales force training, inventory deployment
the internal functional internal functional silos along with key planning, and transportation planning. In this
silos along with key customers and suppliers involved in the stage of the process, each of the internal
customers and product development and commercialization functional silos have to be involved to avoid
suppliers involved in process. This step includes determining the poor product rollouts. In addition, the team
the product extent of involvement from both key obtains input from the order fulfillment team
development and customers and suppliers. Empirical studies to assess how new products will impact the
commercialization
found that firms may form alliances to network flow.
process.
complement their existing internal Next, the team establishes new product
knowledge and help them learn about project guidelines. This includes determining
new markets and technologies as well as to time-to-market and profitability expectations,
reduce overall risk in the product and estimating the drain on human resources
development process [37]. In this stage resulting from new product projects. The
of the process, the team assesses relative team establishes guidelines for examining the
strengths, weaknesses, and roles of strategic fit of potential new products and for
personnel to determine who should be making the make/buy decision.
involved in the product development and The final step to the strategic product
commercialization process. The team development and commercialization process
examines constraints to determine which is to develop the framework of metrics.
resources the firm can utilize on specific new Typical process metrics might include time to
product projects. market, time to profitability and first year
Figure 8
Product Development and Commercialization
Customer Define New Products

Relationship Management & Assess Fit
Review Sourcing, Manufacturing
& Marketing Strategies
Establish Cross-functional
Customer Service Product Development Team
Management
Develop Idea Generation and
Screening Processes
Formalize New Product
Development Project
Demand
Management
Establish Guidelines for
Cross-functional Product
Development Team Membership Design & Build Prototypes
Order Fulfillment
Develop Product Rollout Make/Buy Decision

Issues & Constraints
Manufacturing Flow
Management
Determine Channels
Establish New Product
Project Guidelines
Management Product Rollout
Develop Framework
of Metrics
Returns Management Measure
Process Performance

sales. The metrics are communicated to the Once the team evaluates the prototypes,
customer relationship management team to they determine how much of the new
assure they do not conflict with other metrics product should be manufactured in-house.
or the firm’s objectives. Many firms adopt a short-term perspective for
making make/buy decisions. However, these
The Operational Process decisions may have strategic implications
The first step in the operational product for the firm. For example, during the
development and commercialization process development of the personal computer, IBM
is to define new products and assess fit. outsourced the operating system to a small
Using the means defined at the strategic level, company named Microsoft. This decision
new product ideas are generated and may have enabled IBM to bring the PC to
screened. In this initial screening, the team market quicker, but with hindsight, it was
completes a market assessment, consults with clearly a strategic error. The make/buy
key customers and suppliers, and determines decision “...should be formulated from a
the fit with existing channels, manufacturing, strategic perspective with senior management
and logistics environments. This involves involvement” [38]. Once it is determined
interfaces with customer relationship what will be sourced, the team assesses
management and supplier relationship supply capabilities and manages requests for
management, as well as with the functional quotations. Sourcing decisions require
silos in the firm. interfaces with the customer relationship
Using the guidelines developed at the management, manufacturing flow and
strategic level, a cross-functional product supplier relationship management processes.
development team is established for each In the sixth sub-process, the team
product idea that passes the screening determines the marketing and distribution
process. Key suppliers and customers are channels for the new product. These
included on the team as early as possible in channels are defined with input from
order to compress time to market. Therefore, customer relationship management and order
this sub-process includes an interface with fulfillment. Then, the team develops the
supplier relationship management and market plan for the product and does initial
customer relationship management. The focal inventory planning. The focal company
company might also participate in the product The next step is the actual product might also participate in
development process of a key customer. For rollout. Many products are unsuccessful due the product
example, a supplier of salad dressings may to poor management of product rollout. In development process of
participate in the product development this step, the team sources materials, positions a key customer.
process of a restaurant chain. In such cases, inventory, and manufactures the product.
the customer relationship management They also implement the market plan, train
process team is actively involved. the sales force on the new product offering,
The team is responsible for formalizing and execute the promotion plan. Inventory is
the product development project. This step deployed using methodologies developed in
includes determining time-to-market demand management. It is important that the
expectations, identifying likely product other process teams are involved in planning
profitability scenarios, and further examining and executing the product rollout.
the strategic fit of the product within the firm In the final step, the team measures
and its key markets. process performance through the metrics
The product development team manages developed at the strategic level, and
the process of designing and building communicates results to the customer
prototypes of the product ideas. For example, relationship management and supplier
the auto companies develop concept cars to relationship management teams.
test new product ideas. In this phase, each
team works with suppliers and performs a Returns Management
value analysis to determine what portions of Effective returns management is a
the product design and rollout process add critical part of supply chain management.
value. They then source materials and While many firms neglect the returns process
manufacture prototypes. because management does not believe it

While many firms is important, this process can assist the firm their final disposition. For some firms,
neglect the returns in achieving a sustainable competitive products may be routed to central returns
process because advantage. Effective management of the centers where returned items are
management does not returns process enables the firm to identify consolidated and examined. The team also
believe it is important, productivity improvement opportunities and determines what transportation programs the
this process can breakthrough projects [39]. firm will employ. For example, supply chain
assist the firm in managers might decide that utilizing
achieving a sustainable The Strategic Process backhauls may be the most efficient way of
competitive advantage. In the first step of the strategic returns transporting returns. Developing the returns
process, the team reviews environmental and network requires input from customer service
legal compliance guidelines (see Figure 9). management, order fulfillment, and supplier
Team members need to understand laws that relationship management.
apply to used products and products planned In the fourth step, the process team
for disposal. They also need to recognize develops credit rules governing the returns
rules associated with recall campaigns and process. At this stage, the finance
packaging issues. organizations of the focal firm, and key
Next, the team develops return suppliers and customers negotiate how
avoidance, gatekeeping and disposition returned merchandise will be credited. The
guidelines. Return avoidance means team establishes credit authorization
manufacturing and selling the product in a guidelines and credit policies. Since this
manner such that returns are minimized. This involves both suppliers and customers,
avoidance can be derived from improved supplier relationship management and
quality or better instructions to the consumer customer relationship management are
as to how to properly operate the product. involved in determining the rules.
Gatekeeping is the screening of defective and The last step of the strategic returns
unwarranted returned merchandise at the process is developing the framework of
entry point into the reverse logistics process metrics and communicating it to the customer
[40]. Improved gatekeeping is a critical factor relationship management team. Possible
in making the entire reverse flow manageable metrics are return rates and financial impact of
As part of this sub- and efficient. It assures that only product that returns. As part of this sub-process, the team
process, the team should be returned to a specific point in the develops procedures for analyzing return rates
develops procedures for returns network is indeed returned to that and tracing the returns back to the root causes.
analyzing return rates point. Disposition guidelines define as
and tracing the returns clearly as possible the returned item’s ultimate The Operational Process
back to the root causes. destiny. Typical disposition options include At the operational level, the returns
return to supplier, refurbish or remanufacture, process is about managing the day-to-day
recycle, and landfill. The team can examine returns activities. The process is initiated when
potential secondary markets including a return request is received from a customer.
Internet-based auctions or retailers that This customer may be a consumer returning
specialize in returned goods or “seconds”. an item, or a retailer or distributor sending
A firm should be able to make disposition back items that did not sell. In some cases,
decisions quickly. The team develops the rules these returns come through the customer
in conjunction with other members of the service management process.
supply chain, as well as with input from other Once a return request is received, it is
processes, such as customer relationship necessary to determine the routing for the
management, product development and returned product and generate the return
commercialization, and supplier relationship material authorization (RMA) derived from
management. Disposition and return reason the request. Advanced ship notices are sent,
codes compliant with company policy are signaling to the receiving firm that the returns
developed during this stage of the process. are on their way.
Next, the team develops the returns Once the item is returned, it is verified,
network and flow options. During this stage, inspected, and processed. This processing
the team develops plans for transporting and should be completed as quickly as possible so
holding returned products until they reach that product value does not decrease any

Figure 9
Returns Management
Customer
Review Environmental & Legal Relationship Management
Compliance Guidelines Receive Return Request
Customer Service
Management
Develop Avoidance, Gatekeeping Determine Routing
& Disposition Guidelines
Demand
Management
Develop Return Network
and Flow Options Receive Returns
Order Fulfillment
Develop Credit Rules Select Disposition
Manufacturing Flow
Management
Determine Secondary Markets Credit Consumer/Supplier

Management
Develop Framework Analyze Returns and

of Metrics Product Development Measure Performance
& Commercialization
more than necessary. The order fulfillment management, or product development and
team may become involved at this point to commercialization processes. This analysis
assist in managing the return flow back to the should be used in the ongoing strategic
warehouse or central returns center. returns process to help develop avoidance
Employees analyze the returns and select guidelines.
the appropriate dispositions using the rules
developed in the strategic returns process. The Implementing Integrated Supply
disposition of the product can include return Chain Management
to the supplier, refurbishment, remanufacture,
recycling, reselling as is, reselling through a The implementation of supply chain The implementation of
secondary market, or sending the product to management involves identifying the supply supply chain
a landfill. chain members with whom it is critical to link, management involves
Once the returns are processed, credit is the processes to be linked with each of these identifying the supply
key members, and the type/level of integration chain members with
given to the appropriate customer, consumer
that applies to each process link. The objective whom it is critical to
or supplier. In some circumstances, a
of supply chain management is to create the link, the processes to be
supplier might be crediting the firm for a
most value for the entire supply chain network, linked with each of
return. This sub-process will use the credit these key members, and
authorization guidelines developed in the including the end-customer. Successful supply
the type/level of
strategic returns process. chain management involves the coordination
integration that applies
In the final step of the returns process, of activities within the firm and between
to each process link.
the team analyzes the causes of the returns members of the supply chain. Consequently,
and measures process performance. The data supply chain process integration and
on returns are used to make improvements to reengineering initiatives should be aimed at
the product and the processes. This analysis boosting total process efficiency and
might result in feedback to the customer effectiveness across the supply chain.
relationship management, manufacturing Although the functional expertise
flow management, supplier relationship remains in place, implementing supply chain

If the proper management requires making the transition If the proper coordination mechanisms
coordination from a functional organization to one focused are not in place across the various functions,
mechanisms are not in on business processes first inside the firm and the supply chain processes will be neither
place across the then across firms in the supply chain. Figure effective nor efficient. By taking a process
various functions, the 10 illustrates how each function within the focus, all functions that touch the product or
supply chain processes organization can be mapped with the eight provide information must work together. For
will be neither supply chain processes. This figure provides example, purchasing depends on sales and
effective nor efficient. examples of activities that might exist at each marketing data fed through a production
junction of a functional area and process. For schedule to assess specific order levels and
example, in the customer relationship timing of requirements. These orders drive
management process marketing provides production requirements that, in turn, are
the account management expertise, transmitted upstream to suppliers.
research and development provides the The increasing use of outsourcing has
specifications which define the requirements, accelerated the need to coordinate supply
logistics provides knowledge of customer chain processes since the organization
service requirements, production provides becomes more dependent on suppliers [41].
the manufacturing strategy, purchasing Consequently, coordination mechanisms must
provides the sourcing strategy, and finance be in place within the organization. Where to
provides customer profitability reports. The place these coordination mechanisms, and
customer service requirements are used as which teams and functions are responsible for
input to sourcing, manufacturing, and managing them become critical decisions.
logistics strategies. The requirements for successful
Figure 10
Implementation of Supply Chain Management
Typical
Functional Silos
Business Processes
Research &
Marketing Development Logistics Production Purchasing Finance
Customer Relationship Account Requirements Requirements Manufacturing Sourcing Customer
Management Management Definition Definition Strategy Strategy Profitability
Customer Service Account Technical Performance Coordinated Priority Cost

Management Administration Service Specifications Execution Assessment To Serve
Demand Demand Process Forecasting Capability Sourcing Tradeoff

Management Planning Requirements Planning Analysis
CUSTOMERS
SUPPLIERS
Order Fulfillment Special Environmental Network Plant Selected Distribution

Orders Requirements Planning Direct Supplier(s) Cost
Manufacturing Flow Packaging Process Prioritization Production Integrated Manufacturing

Management Specifications Stability Criteria Planning Supply Cost
Supplier Relationship Order Material Inbound Integrated Supplier Materials

Management Booking Specifications Flow Planning Management Cost
Product Development Business Product Movement Process Material R & D Cost

and Commercialization Plan Design Requirements Specifications Specifications
Returns Management Product Product Reverse Re- Material Revenue &

Life Cycle Design Logistics manufactuing Specification Costs
Information Architecture, Data Base Strategy, Information Visibility
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.
Source: Adapted from Douglas M. Lambert, Larry C. Guinipero and Gary J. Ridenhower, “Supply Chain Management: A Key to Achieving Business Excellence in the 21st
Century,” unpublished manuscript.

implementation of supply chain management and reward structure or organizational
include: structures?
• Executive support, leadership and • What specific metrics should be introduced
commitment to change. to evaluate performance beyond the
• An understanding of the degree of change borders of the firm? How can firms
that is necessary. within the supply chain optimize total
• Agreement on the supply chain supply chain performance while
management vision and the key processes. maximizing the measurement of their own
• The necessary commitment of resources and operations [42]?
empowerment to achieve the stated goals.
Conclusions
Implications and Since the concept of supply chain
Research Opportunities management was introduced, there has been
There are several implications for a great deal of confusion about what it
practitioners and researchers. While marketing actually involves. While some managers and While some managers
researchers continue to use supply chain and researchers
strategy has always considered internal and
management interchangeably with logistics, continue to use supply
external constraints, supply chain management
there is an increasing understanding that it is chain management
makes the explicit evaluation of these factors
much more than logistics. In recent years, interchangeably with
even more critical. Additionally, traditional
many authors have stressed the importance logistics, there is an
functional roles within the firm are changing.
of implementing supply chain management increasing
Team efforts are becoming more common for
as part of a process orientation to understanding that it is
developing and marketing new products, as
management. However, most of what is much more than
well as managing current ones. The role of the
written about supply chain management logistics.
firm’s sales force is becoming one of measuring
advocates business process reengineering and
and selling the value proposition for the
integration without specifying the processes
customer.
that are to be included in these efforts. It
This article builds on previous work
would be much easier for management to
supported by The Global Supply Chain implement a process orientation within their
Forum, in which the structure of supply chain firm if there were clear guidelines as to what
management was described, by providing a the processes ought to be, what sub-processes
more detailed description of the eight and activities are included, and how the
processes and their relationships to each processes interact with each other and with
other. However, there is much more work that the traditional functional silos. Further,
needs to be completed. Research how can the members of a supply chain
opportunities include: practice process integration if there is not a
• How can the relationships between sub- common understanding of what the business
processes and the functional silos be processes are?
operationalized within firms? The members of The Global Supply
• How can cross-functional teams best work Chain Forum identified eight business
together to optimize supply chain processes that must be implemented within a
management processes? firm and then linked up, as appropriate, with
• How should the implementation effort key supply chain members [43]. In this
across the multiple firms and functions be paper, we provide strategic and operational
organized? descriptions of each of these processes. Our
• What research is needed to further define goal is to provide: 1) companies with a
each process? common structure for implementing supply
• What are the implications for supply chain chain management, 2) instructors with
management given the shape and length of material that can be used in teaching supply
supply chains in which the firm is involved? chain management, and 3) researchers with
• How should firms in the supply share fertile groundwork for delving more deeply
costs and benefits? What is the detailed into the issues within each process and with
interaction between the sub-processes and their integration between companies. We
management components such as the risk believe this article provides the framework

necessary to develop the theory that will Lives of Your Customers,” Harvard Business
move supply chain management to its next Review, Vol. 78, No. 5 (2001), pp. 81-89.
evolutionary stage. [10] Lambert, Douglas M. and Terrance
L. Pohlen, “Supply Chain Metrics,” The
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Acknowledgement
The authors would like to thank the members of The Global Supply Chain Forum: 3M,
Cargill, Cemex Mexico, Coca-Cola USA, Colgate-Palmolive Company, Fletcher Challenge
Building, Ford Motor Company, Hewlett-Packard, International Paper, Limited Logistics
Services, Lucent Technologies, Shell, Taylor Made-adidas Golf Company, Wendy’s International
Inc., and Whirlpool Corporation. Their contributions included dedicating time in Forum
meetings 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 State
University, for their suggestions on earlier drafts of this paper.
Keely L. Croxton is an Assistant Professor of Logistics in the Department of

Marketing and Logistics at The Ohio State University. Her research interests
are at the intersection of optimization and supply chain management. She teaches
in 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 in
Industrial Engineering from Northwestern University and a Ph.D. in Operations
Research from MIT. She was the recipient of a National Science
Foundation Fellowship and an Eisenhower Fellowship from the Department of
Transportation. 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: croxton@cob.osu.edu.
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 chain
management and logistics. Sebastián has more than 10 years of experience in
industry; he worked as an IT and communications specialist, as a logistics analyst,
and as a change management agent. He worked for Ryder Argentina, Cementos
Avellaneda, Solutions Informatiques Francaises, Sud America Seguros, and as a
part-time lecturer at the Instituto de Estudios para la Excelencia Competitiva.
Sebastián received his MBA from IAE - Universidad Austral; he holds a BA in MIS
from Universidad CAECE, both in Buenos Aires, Argentina. He can be reached at
The Ohio State University, 256 Fisher Hall, 2100 Neil Avenue, Columbus, OH
43210-1399. Phone: 614/247-6271. Fax: 614/292-0440. E-mail: sebastian@garcia-
dastugue.com.

Douglas M. Lambert is the Raymond E. Mason Chair in Transportation and
Logistics and Director of The Global Supply Chain Forum, Fisher College of
Business, The Ohio State University; and the Prime F. Osborn III Eminent Scholar
Chair in Transportation and Logistics, Professor of Marketing and Logistics and
Director, The International Center for Competitive Excellence at the University of
North Florida. Dr. Lambert has served as a faculty member for over 500 executive
development programs in North and South America, Europe, Asia, Australia and
New Zealand. His publications include seven books and more than 100 articles. In
1986, Dr. Lambert received the CLM Distinguished Service Award for his
contributions to logistics management. He holds an honors BA and MBA from the
Ivey School of Business at the University of Western Ontario and a Ph.D. from The
Ohio State University. He can be reached at The Ohio State University, 506 Fisher
Hall, 2100 Neil Avenue, Columbus, OH 43210-1399. Phone: 614/292-0331. Fax:
614/292-0440. Email: lambert.119@osu.edu. He also can be reached at the
University of North Florida, 4567 St. Johns Bluff Road South, Jacksonville, FL
32224. Phone: 904/620-2585. Fax: 904/620-2586.E-mail: dlambert@unf.edu.
Dale Rogers is the Director of the Center for Logistics Management and a
Professor of Supply Chain Management at the University of Nevada. In 2001, he
was the Paper Foundation Visiting Eminent Scholar Chair in Supply Chain
Management at the University of North Florida. Dr. Rogers is also the chairman of
the Reverse Logistics Executive Council (http://www.rlec.org), a professional
organization devoted to the improvement of reverse logistics practices and the
Supply Chain Technology Council, an organization that provides continued
understanding of how internet technologies can positively impact the supply chain.
He received his BA, MBA and Ph.D. from Michigan State University. Dr. Rogers has
published in several logistics journals and is the co-author of the 1999 book Going
Backwards: Reverse Logistics Trends and Practices and two previous books on
logistics. He can be reached at The Center for Logistics Management, University
of Nevada, Reno, NV 89557. Phone: 775/784-6814. Fax: 775/784-1769.
E-mail: mickey@unr.edu.
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The Supply Chain Management Processes

Article in The International Journal of Logistics Management · June 2001

Keely L. Croxton Sebastian Garcia-Dastugue

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Douglas M. Lambert Dale Rogers

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Assessing the impacts of Technology Innovations on Supply Chain View project

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Increasingly, supply chain management is being recognized as the management of

Supply chain management is comprehensive definition of the processes

Volume 12, Number 2 2001 Page 13

CUSTOMER RELATIONSHIP MANAGEMENT

CUSTOMER SERVICE MANAGEMENT

MANUFACTURING FLOW MANAGEMENT

SUPPLIER RELATIONSHIP MANAGEMENT

PRODUCT DEVELOPMENT AND COMMERCIALIZATION

Page 14 The International Journal of Logistics Management

Strategic Sub-Processes Processes Interfaces Operational Sub-Processes

Customer Differentiate Customers

Demand Prepare the Account/Segment

Identify Criteria for

Provide Guidelines for the

Supplier Relationship Develop the Product/

Product Development Implement the Product/Service

Develop Guidelines for Sharing

Volume 12, Number 2 2001 Page 15

Page 16 The International Journal of Logistics Management

Strategic Sub-Processes Processes Interfaces Operational Sub-Processes

Develop Response Order Fulfillment Evaluate Situation and

Develop Infrastructure for

Develop Framework Monitor and Report

Volume 12, Number 2 2001 Page 17

Page 18 The International Journal of Logistics Management

Strategic Sub-Processes Processes Interfaces Operational Sub-Processes

Plan Information Flow Forecast

Determine Synchronization Manufacturing Flow

Develop Framework Measure Performance

Volume 12, Number 2 2001 Page 19

Page 20 The International Journal of Logistics Management

Strategic Sub-Processes Processes Interfaces Operational Sub-Processes

Customer Generate &

Customer Service Enter Order

Define Requirements for

Evaluate Logistics Network Manufacturing Flow Handle Documentation

Supplier Relationship Pick Order

Volume 12, Number 2 2001 Page 21

Review Manufacturing, Customer

Demand Manufacturing & Material

Page 22 The International Journal of Logistics Management

Volume 12, Number 2 2001 Page 23

Page 24 The International Journal of Logistics Management

Customer Service Prepare the Supplier/Segment

Identify Criteria for

Provide Guidelines for the

Product Development Implement the Product/Service

Develop Guidelines for Sharing

Volume 12, Number 2 2001 Page 25

Page 26 The International Journal of Logistics Management