| Supply chain business process integration involves | | | | The management components of SCM |
| collaborative work between buyers and suppliers, | | | | The SCM management components are the third |
| joint product development, common systems and | | | | element of the four-square circulation framework. |
| shared information. According to Lambert and Cooper | | | | The level of integration and management of a |
| (2000) operating an integrated supply chain requires | | | | business process link is a function of the number and |
| continuous information flows, which in turn assist to | | | | level, ranging from low to high, of components added |
| achieve the best product flows. However, in many | | | | to the link (Ellram and Cooper, 1990; Houlihan, 1985). |
| companies, management has reached the conclusion | | | | Consequently, adding more management components |
| that optimizing the product flows cannot be | | | | or increasing the level of each component can |
| accomplished without implementing a process | | | | increase the level of integration of the business |
| approach to the business. The key supply chain | | | | process link. The literature on business process |
| processes stated by Lambert (2004) are: | | | | reengineering,[4] buyer-supplier relationships,[5] and |
| • Customer relationship management | | | | SCM[6] suggests various possible components that |
| • Customer service management | | | | must receive managerial attention when managing |
| • Demand management | | | | supply relationships. Lambert and Cooper (2000) |
| • Order fulfillment | | | | identified the following components which are: |
| • Manufacturing flow management | | | | • Planning and control |
| • Supplier relationship management | | | | • Work structure |
| • Product development and commercialization | | | | • Organization structure |
| • Returns management | | | | • Product flow facility structure |
| One could suggest other key critical supply business | | | | • Information flow facility structure |
| processes combining these processes stated by | | | | • Management methods |
| Lambert such as:a. Customer service managementb. | | | | • Power and leadership structure |
| Procurementc. Product development and | | | | • Risk and reward structure |
| commercializationd. Manufacturing flow management | | | | • Culture and attitude |
| supporte. Physical distributionf. Outsourcing | | | | • However, a more careful examination of the |
| partnershipsg. Performance measurementa) Customer | | | | existing literature[7] will lead us to a more |
| service management process | | | | comprehensive structure of what should be the key |
| Customer Relationship Management concerns the | | | | critical supply chain components, the "branches" of |
| relationship between the organization and its | | | | the previous identified supply chain business |
| customers.Customer service provides the source of | | | | processes, that is what kind of relationship the |
| customer information. It also provides the customer | | | | components may have that are related with suppliers |
| with real-time information on promising dates and | | | | and customers accordingly. Bowersox and Closs |
| product availability through interfaces with the | | | | states that the emphasis on cooperation represents |
| company's production and distribution operations. | | | | the synergism leading to the highest level of joint |
| Successful organizations use following steps to build | | | | achievement (Bowersox and Closs, 1996). A primary |
| customer relationships: | | | | level channel participant is a business that is willing to |
| • determine mutually satisfying goals between | | | | participate in the inventory ownership responsibility or |
| organization and customers | | | | assume other aspects financial risk, thus including |
| • establish and maintain customer rapport | | | | primary level components (Bowersox and Closs, |
| • produce positive feelings in the organization and | | | | 1996). A secondary level participant (specialized), is a |
| the customersb) Procurement process | | | | business that participates in channel relationships by |
| Strategic plans are developed with suppliers to | | | | performing essential services for primary participants, |
| support the manufacturing flow management process | | | | thus including secondary level components, which are |
| and development of new products. In firms where | | | | supporting the primary ones. Also, third level channel |
| operations extend globally, sourcing should be | | | | participants and components may be included, that |
| managed on a global basis. The desired outcome is a | | | | will support the primary level channel participants, and |
| win-win relationship, where both parties benefit, and | | | | which are the fundamental branches of the |
| reduction times in the design cycle and product | | | | secondary level components. |
| development is achieved. Also, the purchasing | | | | Consequently, Lambert and Cooper's framework of |
| function develops rapid communication systems, such | | | | supply chain components, does not lead us to the |
| as electronic data interchange (EDI) and Internet | | | | conclusion about what are the primary or secondary |
| linkages to transfer possible requirements more | | | | (specialized) level supply chain components ( see |
| rapidly. Activities related to obtaining products and | | | | Bowersox and Closs, 1996, p.g. 93), that is what |
| materials from outside suppliers. This requires | | | | supply chain components should be viewed as |
| performing resource planning, supply sourcing, | | | | primary or secondary, and how should these |
| negotiation, order placement, inbound transportation, | | | | components be structured in order to have a more |
| storage and handling and quality assurance. Also, | | | | comprehensive supply chain structure and to examine |
| includes the responsibility to coordinate with suppliers | | | | the supply chain as an integrative one (See above |
| in scheduling, supply continuity, hedging, and research | | | | sections 2.1 and 3.1). |
| to new sources or programmes.c) Product | | | | 1. For customer service management: Includes the |
| development and commercialization | | | | primary level component of customer relationship |
| Here, customers and suppliers must be united into | | | | management, and secondary level components such |
| the product development process, thus to reduce | | | | as benchmarking and order fulfillment. |
| time to market. As product life cycles shorten, the | | | | 2. For product development and commercialization: |
| appropriate products must be developed and | | | | Includes the primary level component of Product |
| successfully launched in ever shorter time-schedules | | | | Data Management (PDM), and secondary level |
| to remain competitive. According to Lambert and | | | | components such as market share, customer |
| Cooper (2000), managers of the product | | | | satisfaction, profit margins, and returns to |
| development and commercialization process must: | | | | stakeholders. |
| 1. coordinate with customer relationship management | | | | 3. For physical distribution, Manufacturing support and |
| to identify customer-articulated needs; | | | | Procurement: Includes the primary level component |
| 2. select materials and suppliers in conjunction with | | | | of enterprise resource planning (ERP), with secondary |
| procurement, and | | | | level components such as warehouse management, |
| 3. develop production technology in manufacturing | | | | material management, manufacturing planning, |
| flow to manufacture and integrate into the best | | | | personnel management, and postponement (order |
| supply chain flow for the product/market | | | | management). |
| combination.d) Manufacturing flow management | | | | 4. For performance measurement: This includes the |
| process | | | | primary level component of logistics performance |
| The manufacturing process is produced and supplies | | | | measurement, which is correlated with the |
| products to the distribution channels based on past | | | | information flow facility structure within the |
| forecasts. Manufacturing processes must be flexible | | | | organization. Secondary level components may include |
| to respond to market changes, and must | | | | four types of measurement such as: variation, |
| accommodate mass customization. Orders are | | | | direction, decision and policy measurements. More |
| processes operating on a just-in-time (JIT) basis in | | | | specifically, in accordance with these secondary level |
| minimum lot sizes. Also, changes in the manufacturing | | | | components total cost analysis (TCA), customer |
| flow process lead to shorter cycle times, meaning | | | | profitability analysis (CPA), and Asset management |
| improved responsiveness and efficiency of demand | | | | could be concerned as well. In general, information |
| to customers. Activities related to planning, scheduling | | | | flow facility structure is regarded by two important |
| and supporting manufacturing operations, such as | | | | requirements, which are a) planning and Coordination |
| work-in-process storage, handling, transportation, and | | | | flows, and b)operational requirements. |
| time phasing of components, inventory at | | | | 5. For outsourcing: This includes the primary level |
| manufacturing sites and maximum flexibility in the | | | | component of management methods and the |
| coordination of geographic and final assemblies | | | | company's cutting-edge strategy and its vital |
| postponement of physical distribution operations.e) | | | | strategic objectives that the company will identify |
| Physical distribution | | | | and adopt for particular strategic initiatives in key the |
| This concerns movement of a finished product | | | | areas of technology information, operations, |
| service to customers. In physical distribution, the | | | | manufacturing capabilities, and logistics (secondary |
| customer is the final destination of a marketing | | | | level components). |
| channel, and the availability of the product/service is | | | | Vendor Managed Inventory (VMI) is a family of |
| a vital part of each channel participant's marketing | | | | business models in which the buyer of a product |
| effort. It is also through the physical distribution | | | | provides certain information to a supplier of that |
| process that the time and space of customer service | | | | product and the supplier takes full responsibility for |
| become an integral part of marketing, thus it links a | | | | maintaining an agreed inventory of the material, |
| marketing channel with its customers (e.g. links | | | | usually at the buyer's consumption location (usually a |
| manufacturers, wholesalers, retailers).f) Outsourcing | | | | store). A third party logistics provider is involved who |
| partnerships | | | | makes sure that the buyer have the required level of |
| This is not just outsourcing the procurement of | | | | inventory by adjusting the demand and supply gaps. |
| materials and components, but also outsourcing of | | | | As a symbiotic relationship, VMI makes it less likely |
| services that traditionally have been provided | | | | that a business will unintentionally become out of |
| in-house. The logic of this trend is that the company | | | | stock of a good and reduces inventory in the supply |
| will increasingly focus on those activities in the value | | | | chain. Furthermore, vendor (supplier) representatives |
| chain where it has a distinctive advantage and | | | | in a store benefit the vendor by ensuring the product |
| everything else it will outsource. This movement has | | | | is properly displayed and store staff are familiar with |
| been particularly evident in logistics where the | | | | the features of the product line, all the while helping |
| provision of transport, warehousing and inventory | | | | to clean and organize their product lines for the store. |
| control is increasingly subcontracted to specialists or | | | | One of the keys to making VMI work is shared risk. |
| logistics partners. Also, to manage and control this | | | | Often if the inventory does not sell, the vendor |
| network of partners and suppliers requires a blend of | | | | (supplier) will repurchase the product from the buyer |
| both central and local involvement. Hence, strategic | | | | (retailer). In other cases, the product may be in the |
| decisions need to be taken centrally with the | | | | possession of the retailer but is not owned by the |
| monitoring and control of supplier performance and | | | | retailer until the sale takes place, meaning that the |
| day-to-day liaison with logistics partners being best | | | | retailer simply houses (and assists with the sale of) |
| managed at a local level.g) Performance | | | | the product in exchange for a predetermined |
| measurement | | | | commission or profit. A special form of this |
| Experts found a strong relationship from the largest | | | | commission business is scan-based trading whereas |
| arcs of supplier and customer integration to market | | | | VMI is usually applied but not mandatory to be used. |
| share and profitability. By taking advantage of supplier | | | | This is one of the successful business models used |
| capabilities and emphasizing a long-term supply chain | | | | by Wal-Mart and many other big box retailers. Home |
| perspective in customer relationships can be both | | | | Depot uses the technique with larger suppliers of |
| correlated with firm performance. As logistics | | | | manufactured goods (ie. Moen, Delta, RIDGID, Paulin). |
| competency becomes a more critical factor in | | | | VMI helps foster a closer understanding between the |
| creating and maintaining competitive advantage, | | | | supplier and manufacturer by using Electronic Data |
| logistics measurement becomes increasingly important | | | | Interchange formats, EDI software and statistical |
| because the difference between profitable and | | | | methodologies to forecast and maintain correct |
| unprofitable operations becomes more narrow. A.T. | | | | inventory in the supply chain. Vendors benefit from |
| Kearney Consultants (1985) noted that firms | | | | more control of displays and more contact to impart |
| engaging in comprehensive performance | | | | knowledge on employees; retailers benefit from |
| measurement realized improvements in overall | | | | reduced risk, better store staff knowledge (which |
| productivity. According to experts internal measures | | | | builds brand loyalty for both the vendor and the |
| are generally collected and analyzed by the firm | | | | retailer), and reduced display maintenance outlays. |
| including | | | | Consumers benefit from knowledgeable store staff |
| 1. Cost | | | | who are in frequent and familiar contact with |
| 2. Customer Service | | | | manufacturer (vendor) representatives when parts or |
| 3. Productivity measures | | | | service are required, store staff with good |
| 4. Asset measurement, and | | | | knowledge of most product lines offered by the |
| 5. Quality. | | | | entire range of vendors and therefore the ability to |
| External performance measurement is examined | | | | help the customer choose amongst competing |
| through customer perception measures and "best | | | | products for items most suited to them, |
| practice" benchmarking, and includes 1) customer | | | | manufacturer-direct selection and service support |
| perception measurement, and 2) best practice | | | | being offered by the store, and finally the relatively |
| benchmarking. | | | | frequent occurrence of "Well, I'm pretty sure this is |
| Components of supply chain management are 1. | | | | right for your needs but let me take you over to |
| Standardisation 2. Postponement 3. Customisation | | | | Luc; Luc works for Company X and he's the real |
| [edit] Supply chain management components | | | | expert on their stuff". |
| integration | | | | |