Supply Chain Management: Definition, Components, Objectives, and Processes

What is meant by Supply Chain Management (SCM)? The definition of Supply Chain Management is the management and supervision of the cycle chain, starting from the flow of raw materials / goods, payments, information from suppliers to producers, to wholesalers to retailers to consumers.

In SCM  the supply chain is the physical network, that is, all companies that play a role in supplying raw materials, producing goods, and sending them to end users. Meanwhile,  SCM or supply chain management / supply is a way / method, tool, or approach to its management.

Supply chain management involves the coordination and integration of all these objectives and also they must ensure that the financing of this area can be done to a minimum by making the assumption that the product is there when it is needed and is not overstocked.

Supply Chain Management According to Experts

Several management scientists have explained the definition of supply chain management or  Supply Chain Management (SCM) , including:

  1. James A. and Mona J. Fitzsimmons

According to James A and Mona J. Fitzsimmons, the definition of Supply Chain Management is a total system approach to delivering products to end consumers by using information technology in coordinating all elements of the supply chain from suppliers to retailers.

  1. Chase, Aquilano, and Jacobs

According to Chase, Aquilano, and Jacob, the notion of SCM is a system to apply a total approach in managing the entire flow of information, materials, and services from raw materials through factories and warehouses to the final consumer.

  1. Russell and Taylor

According to Russell and Taylor, the definition of SCM is the process of managing the flow of information, products and services throughout the network, be it customers, companies to suppliers.

  1. Stevenson

According to Stevenson, the definition of SCM is a strategic coordination of the supply chain with the aim of integrating supply and demand management.

  1. Robert J. Vokurka, Gail M. Zank, and Carl M. Lund III

According to Robert, Gail, and Lund, the definition of SCM is all activities involved in delivering products from raw materials through customers including sourcing of raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, incoming orders and order management, distribution across all channels. , delivery to customers, and information systems necessary to monitor all activities.

  1. Simchi-Levi, David, Philip Kaminsky, and Edith

The definition of supply chain management is a series of approaches used to integrate suppliers, manufacturers, warehouses and stores effectively so that inventory can be produced and distributed in the right amount, to the right location, and at the right time so that the overall system costs can be minimized while trying to satisfy needs and services.

  1. Heizer and Rander

According to Heizer and Rander, Supply Chain Management is the management of various activities in order to get raw materials into semi-finished and finished goods, then send these products to consumers through a distribution system.

Also read: Meaning of Implementation

Supply Chain Management Components

Referring to the definition of SCM above, there are several components that must be understood, including:

  1. Upstream Supply Chain

Upstream supply chain management takes care of the relationship between the company and vendors or other parties in terms of transfer of goods. So the goods that are produced by the company do not go directly to consumers but are distributed to other distribution companies.

For example, a company that produces smartphones. This smartphone product does not immediately reach the consumer directly, but the manufacturer will send the product to the supplier.

  1. Downstream Supply Chain

Downstream supply chain management is a management that takes care of the transfer of goods from the company directly to consumers. So if the upstream supply chain has to go through the supplier first, the downstream can be bought directly by consumers.

Examples of this management are furniture or gallery art. So they make products directly according to consumer desires.

  1. Internal Supply Chain

Internal supply chain management is concerned with importing goods. In this case, what is often considered is the management of production , manufacturing, and control of the availability of raw materials.

Purpose of Supply Chain Management

According to Stevenson, the purpose of supply chain management is to align supply and demand effectively and efficiently. Some of the main problems in the supply chain relate to:

  • Determination of the appropriate outsourcing level
  • Procurement management
  • Supplier management
  • Manage customer relationships
  • Identify problems and respond to them
  • Risk management

According to I Nyoman Pujawan, the strategic objective of the supply chain is to win market competition or at least survive. Therefore, according to I Nyoman Pujawan, to be a winner in market competition, the supply chain must be able to provide products that:

  • Cheap
  • Quality
  • On time
  • Varies

Supply Chain Management Process

The supply chain management process is divided into three types of responsibilities, including:

  1. Material Flow

This flow of materials involves the movement of raw products from suppliers to consumers as well as from consumer returned or returned products, services, recycling and disposal.

  1. Information Flow

This information flow contains prediction of demand, information on the movement of goods, and also updates on the status of the goods whether they have been sent or not.

  1. Financial Flow

Financial flows include payments, credit flows, scheduling payments to ownership approval.

Accurate information flow and move easily between the links, as well as the effective and efficient movement of goods are key success factors in supply chain management. According to Indrajit and Djokopranoto, there are several players in the supply chain, including:

  1. Supplier
  2. Manufacturer
  3. Distributor / wholesaler
  4. Retail outlets
  5. Customers

Problems in Supply Chain Management

There are several things that must be controlled by supply chain management. They must know the area of ​​the distribution network starting from the number, location of suppliers, production facilities, distribution centers, warehouses to customers. They generally think of the distribution strategy they are taking, including decentralization or centralization, direct shipping, third person logistics , cross-anchoring or tug of war strategies.

In this case, supply chain management will require an information system that can be integrated quickly so that the distribution process of these goods runs smoothly. They have to share price information, inventory to transportation matters. Not only that, this field is also required to regulate payment terms and methodologies.

Judging from the understanding of supply chain management alone, this area is classified as the most complex and busy. How could they not, they have to ensure the flow of information runs fast and is evenly integrated so that the stock of goods is not short or excess.

Sometimes what makes it difficult is getting the goods to the consumer with a detailed payment system. A special system is needed to regulate this stage in addition to communication between members and suppliers to retailers. Because, they are one of the important chains for the survival of the company.

So, by understanding supply chain management, it is hoped that it can be applied in your business. Even though it’s still in the developing stage, it doesn’t matter if you start having a neat distribution system.

Also read: Human Resource Management

This is a brief explanation of Supply Chain Management or supply chain management, its components, objectives, and processes in general. Hopefully this article is useful and adds to your insight.


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