Supply Chain Management (SCM) Function

 Assalamualaikum Wr. Wb.


Good evening everyone. I hope we all always given health by God. Amin

Yesterday my friend at PPIC Dept held a sharing information to us related what and why our companies needed supply chain management or we can called SCM only. Based of his sharing at the moment, I feel SCM is not only maintain by one person or one department only. But actually we need all interested party from the vendor, our company until customer working together.

Supply Chain Management (SCM)


To provide cheap, quality and fast products, it is not enough just to make improvement within the company's internal environment. Its needed the role of suppliers, transportation companies and distribution networks.

Awareness of cheap, fast and high quality products that gave birth to a new concept in the 1990s, namely Supply Chain Management (SCM).

Supply Chain

Supply Chain is a network of companies that work together to create and deliver a product into the hands of end users.

These companies include suppliers, manufacturers, distributors, stores or retailers, and supporting companies such as logistics services.

There are 3 kinds of things that must be managed in the supply chain are materials, finance and information

Supply Chain vs SCM

  • Supply chain is the physical network, that is the companies that involved in supplying raw materials, producing goods and delivering them to end users
  • SCM is a method, tool or approach to manage supply chain
  • The approach emphasized in SCM is integrated with the spirit of collaboration.

Definition of SCM

SCM is a set of approaches used to efficiently integrate suppliers, manufacturers, warehouses and stores so that products can be produced and distributed

  • at the right quantity,
  • to the right location, and
  • at the right time

In order to

  • Minimize total system cost
  • Satisfies customer service requirements

Component in SCM

1. Upstream Supply Chain

Includes the activities of a manufacturing company with their suppliers and their connections to their suppliers.

The main activity is procurement.

2. Internal Supply Chain

Includes all in-house processes used in transforming inputs from suppliers into the company outputs. Start from the time the material enters the company until at the product distributed,

The main activities are production management, manufacturing and inventory control.

3. Downstream Supply Chain

Covers all activities that involve delivering the product to the final customer.

Activities are directed at distribution, warehousing transportation and after-sale service.

SCM Coverage Area

When refer to a manufacturing company, the main activities included in the SCM classification are:

  • Designing new products (product development)
  • Get raw materials or components (procurement)
  • Planning production and inventory (planning and control)
  • Doing the production (Production operation)
  • Make delivery (distribution)

Function of SCM

  1. SCM as physically is converts raw materials into finished products and delivers them to end users.
  2. SCM as market mediation, which ensures that what is supplied by the supply chain reflects the aspirations of the customer or end user.

Activity of SCM

Main Purpose of SCM

  1. Delivery of products in time to satisfy costumers.
  2. Reduce costs.
  3. Increase all result from the entire supply chain (not just one company).
  4. Reduce time.
  5. Centralize planning and activities distribution.

Benefit of SCM

  1. Customer satisfaction. Costumers satisfaction has an impact on customer loyalty.
  2. Increase income. The more loyal customers and partners of the company, it will also increase the company's income.
  3. Lower costs. The integration of the product flow from the company to the final consumer also means reducing costs in the distribution channel.
  4. Asset utilization is getting higher. Employees are increasingly trained and skilled in terms of knowledge / skills, so that they are able to empower the use of high technology properly.
  5. Increase in profit. The increasing number of loyal customers, will increase the company's profit.
  6. The company is getting bigger. Companies that get benefit from the product distribution process, will gradually become big & grow stronger.

SCM Problem / Challenge

1. Complexity of Supply Chain Structure

  • Involving many parties with different interests
  • Differences in language, time zone and culture between companies

2. Uncertainty

  • Buyer uncertainty regarding demand from customer
  • Uncertainty from Supplier regarding delivery, price, quality and quantity
  • Internal uncertainty that can be caused by machine breakdowns, imperfect machine performance, labor and production time and quality

Solution SCM Problem / Challenge

  1. Outsource (using external sources) rather than doing itself as long as demand increases.
  2. Buy input directly instead of having to produce first.
  3. Creating a “strategic partnership” with suppliers.
  4. Using a “just in time” approaching when doing a purchase, which supplier sends quantity / in small amount of material required.
  5. Reduce waiting time during purchase and sales.
  6. Use few/minimum suppliers as possible
  7. Improve the relationship between suppliers and buyers.
  8. Carry out the production process after there is an order.

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