Former Arsenal forward Serge Gnabry scored twice in three minutes after the break before Robert Lewandowski added a third to put the tie almost out of Chelsea's reach.
The Blues suffered a double whammy as defender Marcos Alonso was shown a red card on the 83rd minute mark.
In an interview with the media after the game, Lampard believes the defeat in the hands of Bayern Munich was a reality check for Chelsea and insists the hosts were very poor.
"The levels of Bayern Munich were fantastic, they are a really strong team and unless we were to get everything right and bang on, it was going to be a tough night potentially," the 41-year-old said.
"We didn't get everything bang on. We weren't confident on the ball. That was my biggest disappointment from start to finish."
"We want to play here, we've shown that all season, but today we went away from that."
"That can happen sometimes in an intense atmosphere when all eyes are on you, so it was a harsh lesson for the players about the levels we want to get to.
"We as a club haven't been fighting in the knockout stages and getting through to the back-end of it for some years and that's the reality of what it takes."
Lampard added: "Sometimes you have to be brutally honest about it and they outclassed us. It's quite sobering."
"I'm disappointed we couldn't have done better against them, but it's a real reality check for everyone individually in the dressing room."
"We have to take it on the chin and look at yourself and no one else, and the levels we need to attain at this club, which this club has attained in the past and we have to work to get back there."
