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

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

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

Supply chain management involves coordinating and integrating all of these objectives and also they must ensure that this field of financing can be done to a minimum by making product assumptions available when needed and also not overstocking.

Supply Chain Management According to Experts

Some management science experts have explained about 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, understanding Supply Chain Management is a total system approach to delivering products to end customers by using information technology in coordinating all elements of the supply chain from suppliers to retailers.

2. Chase, Aquilano, and Jacobs

According to Chase, Aquilano, and Jacob, the understanding of SCM is a system for implementing a total approach in managing the entire flow of information, materials, and services from raw materials through factories and warehouses to end consumers.

3. Russell and Taylor

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

4. 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.

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

According to Robert, Gail, and Lund understanding 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 in all channels , shipping to customers, and information systems needed to monitor all activities.

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

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

7. Heizer and Rander

According to Heizer and Rander, Supply Chain Management is the management of various activities in the context of getting raw materials into semi-finished goods and finished goods, then sending the product 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 the vendor or other parties in the transfer of goods. So the goods produced by the company do not reach the consumers directly but are distributed to other distribution companies.

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

2. Downstream Supply Chain

Downstream supply chain management is management that deals with the transfer of goods from the company directly to consumers. So if the upstream supply chain must pass through the supplier first, if the downstream can be directly purchased by consumers.

Examples of this management are furniture or gallery art. So they make products directly according to the wishes of consumers.

3. Internal Supply Chain

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

The Purpose of Supply Chain Management

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

  • Determination of the right level of outsourcing
  • Goods procurement management
  • Supplier management
  • Manage customer relationships
  • Identify the problem and respond to the problem
  • 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
  • Vary

Supply Chain Management Process

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

1. Material Flow

This material flow involves the movement of raw products from suppliers to consumers and also from consumers who are returned or returned products, services, recycling and disposal.

2. Information Flow

This information flow contains predictions of requests, information on moving goods, and also updating the status of goods whether they have been sent or not.

3. Financial Flow

Financial flows include payments, lending flows, payment scheduling and ownership agreements.

The flow of information that is accurate and moves easily between links, and the movement of goods effectively and efficiently is a key success factor 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 the supply chain management. They must know the distribution network area, starting from the number, location of suppliers, production facilities, distribution centers, warehouses to customers. They generally think of a distribution strategy undertaken, including decentralization or centralization, direct shipment, third- person logistics , cross-anchored or attraction strategies.

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

Seeing from the understanding of supply chain management alone, this field is classified as the most complicated and busy. How not, they must ensure that the flow of information runs fast and is integrated evenly so that the stock of goods is not inadequate or excessive.

Sometimes what makes it difficult is to make sure the goods arrive in the hands of consumers 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 of the company’s survival.

Now, by understanding this supply chain management is expected to be applied in your business. Although it is still in the developing stage, it doesn’t matter if you start to have a neat distribution system.

Also read: Human Resource Management

Thus a brief explanation of Supply Chain Management or supply chain management, components, objectives, and processes in general. Hopefully this article is useful and broadens your horizons.


by Abdullah Sam
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