Executive Briefings

The Real Meaning of Supply Chain Management

It's not just about logistics and purchasing. The supply chain consists of a broad network of partners who interact at every level of their organizations, says Douglas M. Lambert, director of the Global Supply Chain Forum at Ohio State University.

It's more than just a question of semantics. The failure to give the term "supply chain" a broad enough definition can cause a company to adopt a short-sighted approach to its operations. "In our view," says Lambert, "the supply chain is a network of companies that comprises your suppliers, their suppliers, customers of your company and their customers, if they exist."

Assuming that to be true, "if we want to manage [the supply chain], we can't do it with fewer functions than it takes to manage one company," Lambert says. "Logically, that makes no sense."

Effective supply chain management will address eight cross-functional business processes: customer relationship management, supplier relationship management, demand management, customer-service management, order fulfillment, manufacturing flow, new-product development and commercialization, and returns management, Lambert says.

Most of all, he says, don't think of supply chain as a new name for logistics or purchasing. And don't locate responsibility for its care to individuals too far down in the organization. The Coca-Cola Co. and Cargill Inc., for example, have "CEO-to-CEO involvement," when they're engaged in such activities as developing a new sweetener. Suppliers and customers must be factored in at every stage of the game. To Lambert, the supply chain looks more like "an uprooted tree," with the root system standing in for the supply network, and the branches representing customer channels.

He doesn't accept the conventional wisdom that sees business today as a competition between supply chains. "The only way that's true is if I wouldn't buy from anyone selling to a competitor, or sell to anyone who was a competitor of an existing customer," he says. "That doesn't happen in supply chains even where there are dedicated distributors."

The true measure of success lies in the profitability of companies throughout the chain, he says. Often that will mean treating suppliers differently, depending on their value to the underlying product.

"In our view," Lambert says, "the supply chain is all about relationship management."

To view this video interview in its entirety, Click Here.

It's more than just a question of semantics. The failure to give the term "supply chain" a broad enough definition can cause a company to adopt a short-sighted approach to its operations. "In our view," says Lambert, "the supply chain is a network of companies that comprises your suppliers, their suppliers, customers of your company and their customers, if they exist."

Assuming that to be true, "if we want to manage [the supply chain], we can't do it with fewer functions than it takes to manage one company," Lambert says. "Logically, that makes no sense."

Effective supply chain management will address eight cross-functional business processes: customer relationship management, supplier relationship management, demand management, customer-service management, order fulfillment, manufacturing flow, new-product development and commercialization, and returns management, Lambert says.

Most of all, he says, don't think of supply chain as a new name for logistics or purchasing. And don't locate responsibility for its care to individuals too far down in the organization. The Coca-Cola Co. and Cargill Inc., for example, have "CEO-to-CEO involvement," when they're engaged in such activities as developing a new sweetener. Suppliers and customers must be factored in at every stage of the game. To Lambert, the supply chain looks more like "an uprooted tree," with the root system standing in for the supply network, and the branches representing customer channels.

He doesn't accept the conventional wisdom that sees business today as a competition between supply chains. "The only way that's true is if I wouldn't buy from anyone selling to a competitor, or sell to anyone who was a competitor of an existing customer," he says. "That doesn't happen in supply chains even where there are dedicated distributors."

The true measure of success lies in the profitability of companies throughout the chain, he says. Often that will mean treating suppliers differently, depending on their value to the underlying product.

"In our view," Lambert says, "the supply chain is all about relationship management."

To view this video interview in its entirety, Click Here.