PAPER ASSIGNMENT

English: Critical Thinking and Writing Proficiency, TMI 1603 (IB)

SUPPLY CHAIN MANAGEMENT

Sri Rahayu
09/284284/TK/35222

Industrial Engineering

Mechanical and Industrial Engineering

Engineering Faculty

Gadjah Mada University

2009/2010
 TABLE OF CONTENT

Cover Page .............................................................................................................. i

Table of Content ...................................................................................................... ii
I. Introduction to Supply Chain Management ................................................ 1
II. Five Basic Component of Supply Chain Management .................................... 2
III. The Main Subjects in Supply Chain Management .................................... 3
IV. Elements of the Supply Chain .................................................................. 4
V. Benefit of Implementing Supply Chain Management .................................. 5

VI. Problem in Implementation of Supply Chain Management ........................ 6

References ............................................................................................................... 7

ii
I. Introduction to Supply Chain Management

Development of the industrial world in this global era had made many companies
which producing the goods and services have to think hard how to present their products to
consumers at affordable prices. Effort from company affect on the size of the cost which
must be spent. In order to offer products that can compete at a certain price level,
companies usually try to suppress the production costs without compromising product
quality. One of the efforts being undertaken to reduce the cost of production is to optimize
material flow in production processes to the distribution of products into the hands of
consumers. This can be achieved through the implementation of the concept of Supply
Chain Management.

According to Douglas M. Lambert [2004], Supply chain management is the

integration of key business process from end-users through original suppliers that provides
products, services, and information that add value for customers and other stakeholders.
Supply Chain Management is a concept related to product distribution pattern which can
replace the patterns in an optimal product distribution. This new pattern of activity
involving the distribution, production schedules, and logistics in Supply Chain
Management.

Picture 1. Supply Chain Management

(Source: http://www.swiftwaterlogistics.com/images/supply-chain-management_1b.jpg)

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 In another definition, Supply chain is a system involving the production, delivery,
storage, distribution and sale of products in order to meet the demand for such products.

Supply chain includes all processes and activities involved in the delivery of these
products until the hands of users (consumers). All were included in the production process
of manufacturing, transportation systems that move products from manufacturers to
retailers' outlets, warehouse storage products, distribution centers where large shipments in
the party is divided into a small party to be sent back to the stores and finally to
retailers who sell such products.

The purpose of the supply chain are to ensure a product is at the right time and place
to meet consumer demand without creating excessive or lack of stocks and also achieve
cost efficiencies and activities throughout the system, the total cost of the transportation
system to the distribution of raw materials inventory, work process and finished goods
[Yayuk S.,2006].

II. Five Basic Component of Supply Chain Management

There are five basic principles that have become an important part in Supply Chain
Management [Wailgum, 2008].

1. Plan
The companies generally need to make strategy for managing all the resources
to fulfilling the customers demand for products and services that they offer.
Part of big planning can developing a set of metrics that useful for monitoring
the supply chain so that it will efficient, reducing production costs, delivers
high quality products and gives value to customers.

2. Source
It is consists of selecting right supplier which can deliver the goods and
services that needed to make products. The important things of its are establish
prices, delivery and payment process with supplier. Make good relationship
with suppliers can improve company performance indirectly. And then, The
processes put together for managing the goods and services inventory,
including receiving and verifying shipments, transferring them to the
manufacturing facilities and authorizing supplier payments.

3. Manufacture

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 The managers usually schedule the activities that necessary for production,
checking, packaging and preparation delivery. From this section, companies
can measure quality levels, production output and workers productivity.

4. Delivery

This is also called Logistic Process. This is the processes that provide finished
goods and services to meet planned or actual demand, typically including order
management, transportation management, and distribution management [IT
Business Room, 2009]
5. Return

Define as processes associated with returning or receiving returned products

for any reason. Company supporting customer’s problem with the products
they received. Thomas Wailgum [2008] explained that Supply chain planners
have to create a responsive and flexible network for receiving defective and
excess products back from their customers and supporting customers who have
problems with delivered products.

III. The Main Subjects in Supply Chain Management

There are several people who become main subjects in supply chain management
and make chain [Digital Collections, 2004a].

1. Supplier
The supply chain starts from here, which is the source of first material where
the distribution chain of goods would begin. The first material here can be in
the form of raw materials, raw materials, auxiliary materials, parts or
merchandise.

2. Manufacturer
Manufacturing as the second chain is the place to convert or finish goods. The
relationship between suppliers and manufacturing has the potential to make
savings. For example, inventory carrying cost savings by developing supplier
partnering concept.
3. Distribution
Produced goods are distributed to customers, generally use wholesale
distributor service that is usually used in large numbers.
4. Retail Outlets
From wholesalers, retailers of goods delivered to the store. Although there are
some parties who sell their products directly to customers, but relatively few in
number and mostly use the pattern as above.

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5. Customers
Customer is the last link in the supply chain through which in this context as
the end-user.

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IV. Elements of the Supply Chain

A simple supply chain is made up of several elements that are linked by the
movement of products along it. The supply chain starts and ends with the customer
[Supplychainrecruit.com, 2010].
 Purchasing
The purchasing department receives a list of raw materials and services
required by the production department to complete the customer’s orders. The
purchasing department sends purchase orders to selected suppliers to deliver
the necessary raw materials to the manufacturing site on the required date. It
can make long term relationship with top-performing suppliers. The
performance improved through determining supplier capabilities and
performance, also with internal certification to assure product quality and
service compliance.
 Operations
Decisions at this level are made each day in businesses that affect how the
products move along the supply chain. Operational decisions involve making
schedule changes to production, purchasing agreements with suppliers, taking
orders from customers and moving products in the warehouse. With use
Demand management, we can match demand to available capacity. Operations
linking buyers and suppliers via Material Requirements Planning and
Enterprise Resource Planning.
 Distribution
In transportation management, there are tradeoff decision between cost and
timing of delivery or customer service via trucks, train, water and air. And
sometimes customer relationship management used as strategies to ensure
deliveries, resolve complaints, improve communication and determines service
requirements.
 Integration
When supply chain participants work for common goals, companies use supply
chain integration. Requires intrafirm functional integration. Based on efforts to
change attitudes and adversarial relationship. Global supply chains are
advantages that accrue from sourcing from larger global market, lower cost and
higher quality suppliers.

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V. Benefit of Implementing Supply Chain Management

In general, the implementation of Supply Chain Management in company will

provide benefit like:

1. Customer satisfaction

Consumers are the main target of the production process of every product made
the company. To make customers loyal with company’s product, then the first
step that must be done is to satisfy customers with services delivered by the
company.

2. Increase revenues

More and more customers are loyal, means the more income earned by the
company. Products produced by the company there were no wasted because
consumers demand.

3. Declining costs

Integrating the flow of the company's products to end consumers will also
mean reducing the costs of distribution channels.

4. Higher asset utilization

Manpower, as one asset, gets more trained and skilled both in terms of
knowledge and skills. Manpower will be able to empower the use of high
technology as required in the implementation of Supply Chain Management.

5. Increase profits

More and more consumers who use products produced by firms, the more
income earned.

6. The bigger companies

Companies that earn a profit on its product distribution process will gradually
become bigger and grow stronger.

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VI. Problem in Implementation of Supply Chain Management

There are several problems when we execution Supply Chain Management in

company [Digital collections, 2004b]. The implementation of Supply Chain Management
needs support from another organization or groups. These are following constraints which
will be experienced during the implementation of Supply Chain Management.

1. Increasing Variety of Products

This time as though consumers will be spoiled by the companies, it can be seen
from the wide variety of products on the market. Market strategies are more
focused on consumers. If the first producer to do with the distribution of
strategies in the consumer segment, it is now spending products based on the
desire of every individual instead of by a certain segment. The wide variety of
products and the uncertain amount of each product to make manufacturers
more and more overwhelmed in satisfying consumer desires.

2. Decreasing Product Life Cycles

The company gets more trouble in arranging the supply of goods strategy
because of reduced life cycle or age of a product on the market. Because, in
order to regulate the supply of certain goods, the company also requires a
certain time.

3. Increasingly Demand Customer

Supply Chain Management trying to organize a rapid increase in demand.

Because now, customers are more and more demanding compliance with the
request quickly, although the request was very sudden and not as a standard
product.

4. Fragmentation of Supply Chain Management

This case illustrates the supply chain involves many parties that have their own
interests, so this makes the supply chain management more complicated and
complex.

5. Globalization

Globalization makes supply chain management increasingly complicated and

complex because the organization involved come from various countries that
have in various locations throughout the world.

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References:

Digital Collections, 2004a, Implementasi Manajemen Audit pada Supply Chain

Manegement, (online, accessed date 6 June 2010), URL:
http://digilib.petra.ac.id/viewer.php?
page=4&submit.x=14&submit.y=17&submit=next&qual=high&submitval=next&fn
ame=/jiunkpe/s1/eakt/2004/jiunkpe-ns-s1-2004-32499098-3564-trias-chapter2.pdf

Digital Collections, 2004b, Implementasi Manajemen Audit pada Supply Chain

Manegement, (online, accessed date 6 June 2010), URL:
http://digilib.petra.ac.id/viewer.php?page=6&qual=high&submitval=&fname=
%2Fjiunkpe%2Fs1%2Feakt%2F2004%2Fjiunkpe-ns-s1-2004-32499098-3564-trias-
chapter2.pdf&submit.x=0&submit.y=0

Douglas M. Lambert, 2004, Supply chain management: processes, partnerships,

performance, (online, accessed date 5 June 2010), URL:
http://books.google.co.id/books?
id=eue8KAZ4mn4C&printsec=frontcover&dq=supply+chain+management&source
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d5xn2ZF8vq8UVXEs&hl=id&ei=ZBgKTOCwE826rAeE1vSlDQ&sa=X&oi=book_
result&ct=result&resnum=7&ved=0CDoQ6AEwBjgK#v=onepage&q&f=false

IT Business Room, 2009, Oracle: An Overview of What is Supply Chain Management

(SCM)?, (online, accessed date 6 June 2010), URL:
http://hi.baidu.com/it_room/blog/item/ae7e58f55bfb472fbc31090c.html

Simlysty.com, 2010, Supply Chain Management, (online, accessed date 6 June 2010),
URL: http://www.simplysty.com/supply-chain-management.php

Supplychainrecruit.com, 2010, Supply Chain Explained, (online, accessed date 6 June

2010), URL: http://www.supplychainrecruit.com/content/services-for-candidates-
75.htm

Wailgum, T., 2008, Supply Chain Management Definition and Solution, (online, accessed
date 5 June 2010), URL:
http://www.cio.com/article/40940/Supply_Chain_Management_Definition_and_Solu
tions

Wikipedia.com, 2010, Supply Chain Management, (online, accessed 5 June 2010), URL:
http://en.wikipedia.org/wiki/Supply_chain_management

Yayan, 2010, Bab 8 Manajemen Rantai Pasok (Supply Chain Management-SCM), (online,
accessed date 5 June 2010), URL: http://www.scribd.com/doc/25880601/Bab-8-
MANAJEMEN-RANTAI-PASOK-SUPPLY-CHAIN-MANAGEMENT-SCM

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