NORTH CAROLINA STATE UNIVERSITY LIBRARIES RESERVE ROOM Filename: 14044 Item 1D; 1673400 — 108], “BEST COPY AVAILABLE”* WARNING CONCERNING COPYRIGHT RESTRICTIONS The copyright law of the United States (Title 17, United States Code) governs the making of photocopies or other reproduction of copyrighted material Under certain conditions specified in the law, libraries and archives are authorized to furnish a photocopy or other reproduction. One of these specified conditions is that the photocopy or reproduction is not to be used for any purpose other than private study, scholarship or research. If an electronic transmission of reserve material is used for purposes in excess of what constitutes “fair use", that user may be liable for copyright infringement. Instructo Wexscay‘32 10/2002 CLO/Chist Logistice Otlicer ogistics does not equal supply chain management (SCM), though the terms are often used inter cchangeably. While the de- bate rages about the pre- cise definition of SCM, what exper can agree on isthat t'smore than a function of logistics. Understanding the interdependence ofits components will ead to better business processes and relationships. “Let's stop calling logistics supply chain management,” urges Douglas M. Lambert Raymond E. Mason professor of transporta tion and logistics at Ohio State University. “While logistics plays probably the most im- portant role in the supply chain, SCM encom: passes much more and requires a company’s imegrtion with suppliers and customers,” he says. “Managing logistics is not the same as ‘managing the supply chain, "Suietly speaking,” he continues, “the sup- ply chain isnot a chain of businesses with one toone, businessto>business relationships, but a network of multiple businesses and relation- ships. SCM offers the opportunity i Sf to capture the synergy of intra-and intercompany integration and managemer ‘SCM sone ofthe mostsignficant drivers in busi- ness today, and, as logistics executives, you must ‘understand your role in supporting the initiative. ‘What exactly is SCM? A single definition does not exist. “People have legitimate diferences in what they think SCM should be," says James R. Stock, professor of marketing and logistics at The Univer- sity of South Florida. But the most widely pub: lished model of SCM, he points out, comes from the Supply Chain Council Called Supply Chain Operations Reference or SCOR, the model, “incorporates four management processes—plan, source, make, deliver—and a num ber of business activities, including all customer inter actions, from order entry through paid ihvoice;all phys ical material transactions, rom the suppliers supplier ‘0 customer’ customer, and all market interactions, trom the understanding of aggregate demand to the fulfil ment of each order.” For practitioners, busy working with suppliers and cus- tomers at multiple levels, the definition of SCM doesn't re- ally influence their day-toslay operations. What it does in- fluence, however, is their ability to produce savings and better service. "If they're viewing SCM partially or incor- rectly, they are not going to optimize their efforts,” Stock says. ‘According to Lambert, until recently, most practitioners, ‘wore totateupplyehain.comconsultants, andacademics viewed SCM —_pany’s network structure are: members of the supply chain; the in terms ofa 1986 definition of logistics, structural dimensions ofthe network; and the diferent types of developed by the Council of Logistics process links across the supply chai Management (CLM), But even that def- Any firm with whom your company interacts is a member of nition was updated in 1998 to recognize your supply chain. But managing the links with each member the emerging distinction between SCM would be counterproductive, if not impossible, Lambert says. and logistics. ‘You mus determine which members are critical to your success (CLM states logistics is that part ofthe and should be given managerial attention and resources, supply chain process that plans, imple- How isthat done? Distinguish between primary and supporting ments, and controls the efficient, eflec- members of your supply chain, Each firm's supply chain or net~ tive flow and storage of goods, services, work looks different because each views itself at the center. land related information from the point Therefore, from your perspective, you are the tree trunk. Your ‘of origin to the point of consumption in suppliers are the roots, ‘order to meet customers requirements. and your customers are Po “The CLM definition of logis the branches. But in isfine managing ll the material flows and all bert advises.“ information flows from point of origin to gration and manage- point of consumption, I's easy tosay, ment of business ‘hard to do," he explains. processes actoss com: “Think about how complexit gets” he pany boundaries will be continues. “Tm retailer, have hun- successful only if it dreds, maybe thousands, of suppliers. makes sense from each How am [going to manage all of their company’s perspective.” suppliets,too? And itsharderityou're Lambert suggests re a neaeoee ace ease For most manufacturer pply chain looks ‘For most manufacturers, the supply identified by like an uprooted tree whg branches and chain looks less ike a pipeline or chain members of Foots are the extensive nq@iprk of customers than an uprooted tree where the The Global and suppliers. You must branchesandrootsaretheextensivenet SupplyChain these branches and rootgllgad to be managed. work of customers and suppliers" he Forum, a says.“Thequestionishow many ofthese group of 15 noncompet- branches and roots need to be man- ing companies, which aged™ support an OSU research Stock concuss.When you think of center—that you can im the total supply chain, itcould be hun- plement within your firm ‘dreds of firms, Can you ever really man- first and then across ‘age that” he asks “At thisstage of SCM firms in your network. development, no.” The processes, he be- lieves, optimize product Methods to SCM and information flow among supply chain links. They are: Both scholars agree that manufacturers 1 Customer Relationship Management (CRM). Tis provides a and cistibutors mus identify key suppli- stricture fora relationship wth the customer. “Every company frsand customers with whom to team. ought tohavea strategy forhow it deals with customers” Lambert Lambert and his fellow OSU researchers say. developed a framework for SCM that 2. Customer Serie Management. This isthe fim’ face tothe Consists of three supply chain elements; customer. Itprovides the customer with realtime information on vetwork structure; business processes; promised shipping dates and product availabilty through inter- nd management components faces with functions, such as manufacturing and logistics. “It's important to have an explicit. 3. Demand Management. Inventory i either essential or vari knowledge and understanding of how ability driven. Essential inventory includes workinrprocessin fac the supply chain network structure is tories and products in the supply chain pipeline. Variability stock configured,” Lambertsays.Itis made up is due to variance in process, supply, and demand. Customer de- fof member firms and links between mand isthe largest source of variability and stems from irregular them, Three primary aspects of a com- order pattems. ee CLO/Chief Logistics OFlicer 10/2002 384 Onder Fuliment. Implementation ofthis process requires in-_ Minformation flow facility structure— tegration ofthe company’s manufacturing, logics, and market- the kindof information passed along ing plans The objective sto develop aseamless process fromthe _tosupply chain members and the fe- ‘supplie tothe organization and then tits customer segments. quency of information updates; 3 Manulactunig Flow Management, Maketostock companies Management methods supply products to the distribution channel based on historical i power and leadership structure; forevasts Products are pushed through the planttomeetasched- anticipation of sharing risks and re tule. This often results in excess inventory. With SCM, products wardsacrossthe supply chain; pulled through the plant based on customer needs. Manufactur WMculture and attitude ing processes must be flexible to respond to market changes, ‘While the debate goes on about the + Supplier Relationship Management (SRV). “The mimorimage definition of SCM, keep in mind that the of CRM ts SRM, a strategy for dealing with suppliers and deter- groundwork for successful SCM is estab fining which ones are key.” Lambert says. A company willorge lished by understanding each ofits com- ‘Close relationships with a small subset of suppliers and manage ponents and their interdependence. ‘anmlength relationships with others "7 Product Development and Commercialization. Customers Working Together and suppliers must be integrated into the product development "Logistics executives need to know how process in order to reduce time to market. Managers ofthis pro- to interface with other functional areas Ress coordinate with CRM to identify customer articulated and of the firm,” says Stock, reinforcing the Gnaticulated needs, select materials and suppliers in conjune- concept of interdependence. “They tion with the SRM process; and develop production technology need to step beyond the logistics cost in manufacturing flow to manufacture and integrate into the best trade-offs and interfaces they manage, supply chain fow for the product/market combination and think about how their department 8 Reums Management Effective retumsmanagement enables influences production operations, mar: identification of productivity improvement opportunities keting, sales, et” “Toreally getSCM right, ounave tomanageallofthetouches’ _ Functional areas, such as marketing by way of these business processes, Lambert says. "ltyou simply and sales, logistics, accounting and ft try to manage logistics without coordinat nance, operations, and procurement, all impact the final customer. They affect product quality, service level, and price. “If the proper coordination mecha- While logisties plays probably nisms are no in place across the various ‘the most important role in the functions, the process will be neither et supply cain, SCM encompasses fective nor efficient,” Lambert says. ‘much more and requires a.com- Logistics, like every functional area pany integration with suppliers within SCM, sees itself as the focal point and customers. Each player views the supply chain as extending out from itself. Bu this view will only lead to trouble, For example, ing marketing efforts within your own firm one company's inbound logistics is an- ‘and actoss firs, you are not really man- other's outbound logistics. Who will aging the supply chain.” ‘manage it? Their viewpoints will differ. ‘Youhaveto decide which businesspro-_ “When logistics is viewed individually, cesses to adapt to your own circum- Its output is customer service,” Stock Stances and how deep to go within the says. When other functions —nom-logis- process. The number of processes to inte- tics activities that influence whether a grate will vary among companies, so executives must analyze customer buys from you—are added, aid discuss which business processes to integrate and manage. the output becomes customer satisfac “The third element of the OSU SCM framework-—supply chain tion, which isa much lager and broader management components—encompasses the variables by concept hich business processes are integrated and managed acrossthe _There are potentially huge benefits if ‘supply chain, The OSU research team identified nine manage: you adopt SCM correctly. “But we stil ‘ment components they believe lead to successful SCM: have a long way to go.” Stock says. “It ‘m planning and control of operations ‘you stand on the shores of Lake Michi work sucture.indicatinghhow a company performs itstasks; gan, you can see the water's edge but organizational structure you can’t see what's on the other side. 1B product flow facility structure, referring to the structure for That's where we are in supply chain Tooreing, manufacturing, and distbution across the supply management. We're ust atthe edge and chain; there isso much more toi. 34 10/2002 CLO/Chief Logiaties Officer