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Introduction to SCM
Setijadi
setijadi@SupplyChainIndonesia.com

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Logistics System

FLOW OF GOODS

SUPPLIER PROCUREMENT MANUFACTURING PHYSICAL CUSTOMER

DISTRIBUTION

FLOW OF INFORMATIONS

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Definition

Logistics management is that part of

the supply chain process that plans, implements,
and controls the efficient, effective
flow and storage of
goods, services, and related information
from the point-of-origin to the point-of-consumption
in order to meet customers' requirements.
(Council of Logistics Management (CLM), 1986).

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 Flow of Logistics

SUPPLIER CARRIER MANUFACTURER CARRIER DISTRIBUTOR CARRIER CUSTOMER

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Fungsi-fungsi Utama Sistem Logistik

PERSEDIAAN

SISTEM
INFORMASI

TRANSPORTASI

PERGUDANGAN

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 Supply Chain

INBOUND OUTBOUND / PHYSICAL DISTRIBUTION

Modified from Russell & Taylor (2006)

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 Illustration of Supply Chain

PABRIK PABRIK
CPO MINYAK
GORENG

OUTBOUND / DISTRIBUSI FISIK

CPO
OUTBOUND / DISTRIBUSI FISIK MINYAK
INBOUND CPO
GORENG

INBOUND MINYAK GORENG

Modified from Russell & Taylor (2006)

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Supply Chain Management

Supply Chain Management is the

integration of key business processes from end
user through original suppliers that provides products,
services, and information that add value for customers
and other stakeholders
(The Global Supply Chain Forum).

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 SUPPLY CHAIN MANAGEMENT:
INTEGRATING AND MANAGING BUSINESS PROCESSES ACROSS THE SUPPLY CHAIN

INFORMATION FLOW

TIER 2 TIER 1 CONSUMER/

SUPPLIER SUPPLIER MANUFACTURER END-CUSTOMER
CUSTOMER
Logistics
Purchasing Marketing & Sales
Production
PRODUCTION FLOW Finance
R&D
SUPPLY CHAIN BUSINESS PROCESSES

CUSTOMER RELATIONSHIP MANAGEMENT

CUSTOMER SERVICE MANAGEMENT

DEMAND MANAGEMENT

ORDER FULFILLMENT

MANUFACTURING FLOW MANAGEMENT

SUPPLIER RELATIONSHIP MANAGEMENT

PRODUCT DEVELOPMENT AND COMERCIALIZATION

RETURNS MANAGEMENT

Source: Lambert et al. (1998)

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 Customer Relationship Management

The customer relationship management process provides

the structure for how the relationship with the customer is
developed and maintenanced.
Performance evaluations are undertaken to analyze the
levels of service provided to customers as well as customer
profitability.

Source: Lambert et al. (1998)

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 Customer Service Management

The customer service management is the firms face to the

customer. It becomes the key point of contact for
administering the product/service agreement.
Customer service provides the single source of customer
information, such as product availability, shipping dates and
order status.

Source: Lambert et al. (1998)

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 Demand Management

The demand management process needs to balance the

customers requirements with the firms supply capabilities.
Part of managing demand involves attempting to determine
what and when customers will purchase.
A good demand management system uses point-of-sale and
key customer data to reduce uncertainty and provide
efficient flows throughout the supply chain.

Source: Lambert et al. (1998)

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 Order Fulfillment

The key to effective SCM is meeting customer need dates.

Effective order fulfillment requires integration of the firms
manufacturing, logistics and marketing plan.
The design and operation of the network has a significant
influence on the cost and performance of the system.

Source: Lambert et al. (1998)

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 Manufacturing Flow Management [1]

In traditional make-to-stock firms:

The manufacturing process produced and supplied products to
the distribution channel based on historical forecasts.
Products were pushed through the plant to meet a schedule.
Often the wrong mix of products was produced.
With SCM:
Product is pulled through the plant based on customer needs.
Manufacturing processes must be flexible to respond to market
changes.
Changes in the manufacturing flow process lead to shorter
cycle times meaning improved responsiveness to customers.

Source: Lambert et al. (1998)

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 Manufacturing Flow Management [2]

The manufacturing flow process deals with making the

products and establishing the manufacturing flexibility
needed to serve the target markets.
Manufacturing flow at the operational level looks like
operations management internal to the firm.
However, certain characteristics of the process are designed
to integrate internal operations management with activities
in the supply chain.

Source: Lambert et al. (1998)

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 Supplier Relationship Management

Supplier relationship management is the process that

defines how a company interacts with its suppliers.
Long-term partnerships are developed with a small
core group of suppliers.
The purchasing function develops rapid
communication mechanisms such as EDI and internet
linkages to quickly transfer requirements.
It is important for the supplier relationships to be win-
win. If both parties do not gain from the relationship,
the incentive to be in the relationship is diminished
and it will likely dissolve.

Source: Lambert et al. (1998)

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 Product Development and Comercialization

Supply chain management includes integrating customers

and suppliers into the product development process in order
to reduce time to market.
It is critical to have the right people from the internal
functional silos along with key customers and suppliers
involved in the product development and commercialization
process.

Source: Lambert et al. (1998)

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 Returns Management

While many firms neglect the returns process because

management does not believe it is important, this process
can assist the firm in achieving a sustainable competitive
advantage.
As part of this sub process, the team develops procedures
for analyzing return rates and tracing the returns back to the
root causes.

Source: Lambert et al. (1998)

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 Implementing Integrated SCM

The implementation of SCM involves:

identifying the supply chain members with whom it is critical to link,
the processes to be linked with each of these key members,
and the type/level of integration that applies to each process link.
If the proper coordination mechanisms are not in place
across the various functions, the supply chain processes will
be neither effective nor efficient.

Source: Lambert et al. (1998)

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 Supply Chain Management Framework:
Elements and Key Decisions

What processes
should be linked with
each of these key
supply chain SUPPLY CHAIN
Who are the key
members? BUSINESS
PROCESSSES
supply chain
members with whom
to link processes?

SUPPLY CHAIN SUPPLY CHAIN

MANAGEMENT NETWORK
COMPONENTS STRUCTURE

What level of integration and

management should be
applied for each process link?

Source: Lambert et al. (1998)

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 Supply Chain Management:
Implementation
TYPICAL
FUNCTIONAL SILOS MARKETING R&D LOGISTICS PRODUCTION PURCHASING FINANCE
BUSINESS
PROCESSES
CUSTOMER
Account Requirement Requirements Manufacturing Sourcing Customer
RELATIONSHIP
MANAGEMENT Management Definition Definition Strategy Strategy Profitability

CUSTOMER
SERVICE Account Technical Performance Coordinated Priority Cost to
MANAGEMENT Administration Service Specifications Execution Assessment Serve

DEMAND Demand Process Capability Sourcing Tradeoff

CUSTOMERS
MANAGEMENT Forecasting
SUPPLIERS

Planning Requirements Planning Analysis

ORDER Special Environmental Network Plant Selected Distribution

FULFILLMENT Orders Requirements Planning Direct Supplier(s) Cost

MANUFACTURING
FLOW Packaging Process Prioritization Production Integrated Manufacturing
MANAGEMENT Specifications Stability Criteria Planning Supply Cost

SUPPLIER
Order Material Inbound Integrated Supplier Materials
RELATIONSHIP
MANAGEMENT Booking Specifications Flow Planning Management Cost

PRODUCT
Source: Lambert et al. (1998)

DEVELOPMENT AND Business Product Movement Process Material R&D

COMERCIALIZATION Plan Design Requirements Specifications Specification Cost

RETURNS Product Product Reverse Re- Material Revenue

MANAGEMENT Life Cycle Design Logistics Manufacturing Specification & Costs

INFORMATION ARCHITECTURE, DATA BASE STRATEGY, INFORMATION VISIBILITY 21

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