Supply Chain Management: How It Works, The Principles, The Activities

Companies in the supply chain fundamentally satisfy consumers by working together to provide low-cost, on-time, high-quality items. The current rivalry is between supplier chains rather than between companies.

The current rivalry is between supplier chains rather than between companies. The spirit of collaboration and coordination across supply chain organizations must be promoted, but not at the expense of each company's own objectives. Long-term business ties between supply chains are ideal, as they foster trust and efficiency.

Seven Principles of Supply Chain Management

• Customer segmentation based on their needs.
• Customize logistics networks to serve different customer needs.
• Listen to market signals and use these signals as the basis for demand planning so that you can produce consistent forecasts and optimal resource allocation.
• Differentiate products at points closer to consumers and accelerate conversion along the supply chain.
• Manage supply sources strategically to reduce the cost of ownership of materials and services.
• Develop a technology strategy for the entire supply chain that supports hierarchical decision making and provides a clear picture of the flow of products, services and information.
• Adoption of performance measurements for an entire supply chain with a view to improving service to end consumers.

The main activities in the Supply Chain Management classification:

• Product development
• For some innovative industries, product development is very necessary, this is because the product life cycle is short. Therefore, companies must be able to produce designs quickly and cheaply.
• Procurement 
• The purchasing department is required to have negotiation skills, it is hoped that they can create long-term collaboration with relevant suppliers, involve them in designing new products, evaluating supply risks and so on.
• Planning and control 
• This section is tasked with creating tactical and operational coordination so that production activities, material procurement and product delivery can be carried out efficiently and on time. Coordination is not only carried out internally but also in the supply chain, for example determining how many products will be produced, information on the latest sales data.
• Production
• This section is tasked with physically carrying out the transformation of raw materials, semi-finished materials or components into finished products. Production activities in the SCM context do not have to be carried out within the company. In production activities, the concept of lean manufacturing which emphasizes efficiency and agile manufacturing which emphasizes flexibility and agility in responding to change are two important things.
• Distribution
• The task within the scope of the supply chain is to send the product so that it reaches the customer at the right time and place. Companies must design the right distribution network by considering cost aspects, flexibility aspects and speed of response to customers.

Reference: Sucahyowati, H. (2011). Manajemen Rantai Pasokan (Supply Chain Management). Majalah Ilmiah Gema Maritim, 13(1), 20-28.