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

How supply chain appears?

Supply chain management emerged because of two main things:

First, conventional logistics management approaches that are adversarial in today's world are no longer applicable since they cannot provide competitive benefits. Presenting items in a wide sense is both a difficulty and an opportunity for the company's operational production system. Starting with assessing customer tastes and obtaining all input requirements from suppliers in order to develop and market the product in accordance with the target consumer's preferences.

Second, the corporate environment is changing at a rapid pace, accompanied by increased competition. Beginning with increasingly critical customers, evolving technology, globalization, and shifts in the economic landscape. These are the variables that impact changes in the business environment.

What is supply chain management?

The supply chain is a network of organizations that collaborate to develop and distribute a product to the final customer. There are suppliers, factories, distributors, stores, and retailers, as well as supporting businesses like logistics services.

Supply chain management is used to regulate and manage the supply chain, which is comprised of four components:

• Supplier: raw material supplies
• Produsen: produce products
• Distribution Centre: shops and product ships
• User: receive the product

https://www.huyett.com/blog/supply-chain-optimization Supply Chain Model

How It works?

If Supply Chain is a physical network, it consists of enterprises that supply raw materials, manufacture items, and ship them to customers. Suppy Chain management refers to a technique, tool, or management strategy. Supply Chain Management stresses an integrated pattern of product movement from suppliers, producers, and retailers to the end customer. In the Supply Chain Management idea, we seek to demonstrate that the series of operations between the supplier and the ultimate consumer are a single entity.

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.