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Pertemuan 1 COURSE OUTLINES

SUPPLY CHAIN MANAGEMENT
Introduction & Course Outline
• OBJECTIVES : To give general
under standing on basic SCM concepts,
methods, and tools.
• Teaching Methodology : lecture, case study, home
work.
Rahmi Yuniarti, ST.MT
Department Industrial Engineering
UNIVERSITAS BRAWIJAYA MALANG

Text Books
The following text books are recommended, but not required :
• Chopra, S., and Meindl, P. (2007). Supply chain management: Strategy, Lecture 1
planning, and operations. 3rd Ed. New Jersey - Prentice-Hall.
• Handfield, R., and Nichols, Jr., E. L. (2002). Supply chain redesign :
Transforming supply chains into integrated value systems. New jersey :
Financial Times – Prentice Hall. Introduction to Supply Chain
• Pujawan,I Nyoman .(2005). Supply Chain Management. Surabaya: Guna
Widya
Management
• Wisner, J. D., Leong, G. K., and Tan, K-C. (2005).Principles of supply
chain management : A balanced approach. Thomson South-Western.
• Simchi-Levi, D., Kaminski, P., and Simchi-Levi, E. (2000). Designing and
managing the supply chain : Concept, strategies, and case studies. Irwin
McGraw-Hill

Top Performers in SCM SEVERAL CRITICAL QUESTIONS

• Where do you source your materials?
• Where do you process or convert them?
• What channels of distribution do you use?
• How do you build a strong relationship with your
suppliers and customers?
• How do you get direct information from your
end-consumers?
• What logistics structure should you impose?
• How do you coordinate your information flows
and systems globally?
• And how do you set up incentive systems for all
of your partners in the supply chain to optimize
overall performance?

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THOSE QUESTIONS SPAN DIFFERENT

DECISION HIERARCHY Evolution of Challenges Facing
Strategic Level Manufacturing Companies
• Network design (for example : number, FORD: any colour
1970 Manufacturing, Mass production as long as it is black
location, capacity of plants and warehouses)
1980 Quality  SQC, TQM
• Developing partnerships with supplier, 3PL, 1990 SCM dan e-SCM
and distributors. SLOAN: a car for
every purse and
Tactical Level purpose
Now, the new frontier is the
• Setting policies for sourcing, production, opportunity through coordination,
cooperation and collaboration.
delivery, after sales services, and inventory.
•Competition
Operational Level
•More demanding customers
• Executing day to day operations on the •Globalization
above activities.

A product flows through a very long process before

consumed by customers
What is SC?
• A series (or network) of companies who
work collectively to make and deliver
products and services to the end
customers. This span from the raw
materials extractors (at the upstream end)
to the retailers / shops (at the downstream
end)
• In a SC there are three flows : materials,
information, and cash / funds

SIMPLE SC STRUCTURE IN REALITY WE ARE DEALING

WITH A NETWORK, NOT A CHAIN
UPSTREAM DOWNSTREAM (Copra & Meindl, 2001)
Customer wants
P&G Wal-Mart DC Wal-Mart-Store
detergent
MANUFACT DISTRIBU WHOLESAL END
SUPPLIER RETAILER
URER TOR ER CUSTOMER

Physical flow
Materials / products, returns
Plastic Packaging Chemical
Payments flow Producer company manufacturer
Cash, invoice, pricing, credit terms flow

Information flow

Capacity, delivery schedule, orders, point of sale Chemical Paper

Timber Industry
manufacturer manufacturer

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What is Supply Chain Management SUPPLY CHAIN MANAGEMENT DEFINITION

• A process orientation, integrated approach to procuring, producing, and
delivering product and services to costomers (MIT)
• A collaborative-based strategy to link cross enterprise business operations
to achieve a shared vision of market opportunity ( D.J. Bowersox,
Michigan State)
• The delivery of enhanced customer and economic value through
synchronized management of the flow of physical goods and associated
information from sourcing to consumption ( Lalonde, Ohio State)
• The process of strategically managing the procurement, movement and
storage of materials, parts, and finished inventory (and the related
information flows) through the organization and its marketing channels
in such a way that current and future profitability are maximized through
the cost-effective fulfillment of orders (Martin Cristopher, Cranfield
University)
• "Supply chain management (SCM)" seeks to integrate into one synergistic
effort all the relevant operations of a corporation, including marketing,
design, customer service, production, purchasing, logistics, and supplier
The logistics network and inventory management. (Arthur Anderson)

Observations from the Definition Conflicting Objectives in the Supply Chain

1. Purchasing
• Supply chain management takes into consideration every • Stable volume requirements
facility that has an impact on cost and plays a role in making
• Flexible delivery time
the product conform to customer requirements. 3. Warehousing
• Little variation in mix
• The objective of supply chain management is to be efficient • Low inventory
• Large quantities
and cost-effective across the entire system. Thus, the emphasis • Reduced transportation costs
2. Manufacturing
is not on simply minimizing transportation cost or reducing • Quick replenishment
inventories but, rather, on taking a systems approach to • Long run production capability
supply chain management. • High quality
4. Customers
• Because supply chain management revolves around efficient • High productivity
• Short order lead time
integration of suppliers, manufacturers, warehouses, and • Low production cost
• High in stock
stores, it encompasses the firm’s activities at many levels, • Enormous variety of products
from the strategic level through the tactical to the operational • Low prices
level.

SUPPLY CHAIN MANAGEMENT ACTIVITIES THROUGHOUT THE

FUNCTIONS SUPPLY CHAIN
Two basic functions :
• Physically converting raw materials and PHYSICAL MARKET MEDIATION
components into products and delivering them to
the end customers. Sourcing Marketing Research

Production Product Design

Related to physical costs
Distribution After Sales Services

• Make sure that products/services delivered satisfy Warehousing Demand Management

customer’s aspiration Inventory Control

Related to market mediation costs

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SCM Related Functions in a Case Li & Fung

Manufacturing Company
Division Example of Activities / Processes Front end (Li Fung) Back end (Li & Fung)
Product Development market research, product development, Perancangan produk Pengendalian kualitas
involving supplier in product development Engineering Pengiriman
Perencanaan produksi Banking
Purchasing selecting supplier, evaluating supplier
performance, purchasing raw material,
monitoring supply risk, designing and
managing relationships with supplier
Planning and control demand planning, demand forecasting, Kegiatan tengah
capacity planning, material planning, (Suppliers/Subcontractors)
production planning and inventory control, Pengadaan bahan baku dan
distribution management Komponen
Operations/Productions production execution, quality control Proses produksi
Distribution designing distribution network, delivery
schedulling, selecting logistics service
providers, monitoring service levels in each
distribution centre

SCM REQUIRES SOLID INTERNAL INTEGRATION

Purchasing Material Ctrl Production Sales Distribution

Materials
Mgm
Mfg. Mgmt Distribution
EXAMPLES

Suppliers Internal SC Customers

Nabisco, Inc. Wal-Mart

• This type of cooperation with other companies requires advanced

information systems and entails a variety of risks.
• What systems are necessary for this approach to be a success?
• When should a company undertake this type of complicated • If the cross-docking strategy works so well for Wal-Mart, shouldn’t all
partnership? companies use the same strategy? Indeed, many successful retailers
employ other distribution strategies: some keep inventory at their
warehouses while others ship directly to stores.

SCM SCM

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Key Issues, Questions, and Trade-offs Then and Now

• Distribution Network Configuration: several plants producing Just a few years ago, most analysts would
products to serve a set of geographically dispersed retailers
• Inventory Control: maintain an inventory of a particular have said that these two objectives,
product
improved service and inventory levels,
• Supply Contracts: impact from volume discount and revenue
sharing, pricing strategies, incentivizing buyers to order more? could not be achieved at the same time.
• Distribution Strategies: e.g., questions related to cross-docking
• Supply Chain Integration and Strategic Partnering:
Recent developments in information and
information sharing and operational planning are the keys communications technologies, together
• Outsourcing and Procurement Strategies: core competencies
• Product Design: mass customization
with a better understanding of supply
• Information Technology and Decision-Support Systems chain strategies, have led to innovative
• Customer Value: the measure of a company’s contribution to approaches that allow the firm to
its customer
improve both objectives simultaneously.