Posts Tagged With: SCM

Supply Chain in Humanitarian Relief

In humanitarian organizations, the terms supply chain is basically used to describe the process of getting relief items from the source to the beneficiaries in a timely manner. The source could be suppliers as well as donors. And in some organizations, they used the terms supply chain and logistics both together to describe above mentioned process. Usually logistics also used to describe the function or division who is responsible for managing the process.

Basically, the nature of supply chain and logistics in business or commercial are essentially the same with humanitarian supply chain and logistics, the following are the significant differences:

  • Unpredictable demand in terms of timing, geographic location, type of commodity, quantity of commodity.
  • Short lead time and suddenness of demand for large amounts of a wide variety of products and services.
  • High humanitarian stakes regarding timelines in the face of sophisticated global media and the high anticipatory attention of the donors.
  • Lack of initial resources in terms of supply, human resource, technology, capacity and funding. (Source: Balcik and Beamon, 2008)


SCM2The main components of the humanitarian supply chain are:

  • Procurement
  • Transport
  • Warehousing and inventory



Procurement is a key activity in the supply chain. The procurement involves the sourcing, purchasing and covers all activities from identifying potential suppliers of relief items and services that are needed to meet the needs of the beneficiaries. There are three important principles of humanitarian procurement:

  • Transparency: all phases in the procurement process are fair and accurately documented.
  • Accountability: accountability to donors who may require certain rules to be followed when using the fund/money that they have provided.
  • Efficiency and cost effectiveness: meeting the six rights of supply: right price, right time, right quantity, right quality, delivery to the required places and from the most cost effective source.

The procurement function must guard and mitigate against risk, understand the market, build a trust relationship with suppliers, meet the needs in a timely manner, and constantly monitor performance to improve service provision.


In the humanitarian context, transport can be defined as the physical movement of relief items/goods from suppliers or point of origin to internal customers (in this case mainly is warehouse of humanitarian organization)  or directly to the beneficiaries. The transport component in the supply chain therefore is critical in connecting supply to demand. The aim of transport in humanitarian context is to physically move the relief items/goods in a reliable and safe manner, on time, cost effectively and efficiently to its destination.

Transport mode will depend on several factors including:

  • The type and volume of items/goods to be transported.
  • The urgency that items/goods are required.
  • The availability of different transport routes as well as different types of transport.
  • The destination to which the items/goods to be transported.
  • The cost of transportation.
  • The terrain through which the items/goods need to be transported.

Warehousing and Inventory

The third main component is warehousing and inventory. Recently, some of the experts said that in the perfect supply chain we do not need warehouses in order to reduce costs. In the humanitarian context, clearly there are reasons why items/goods have to be stored and why we need warehouses. In the humanitarian supply chain, there are types of responsibility to manage warehouses, e.g. supplier warehouses, donor warehouses, humanitarian organizations warehouses.

Types of warehouse space:

  • Commercial
  • Government
  • Transit warehouse
  • Bonded warehouses
  • Open storage
  • Pre-fabricated warehouses – non permanent structure

The role of inventory management in humanitarian context is to ensure that stock is available to meet the needs of beneficiaries when required.


In addition to those three main components, there are several subsidiary activities in the humanitarian supply chain, e.g. assessment and planning, fleet management, customs etc.

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Ideas for Improving the Performance of the Supply Chain

Previously, we have seen that there are two types of flows that exist in the supply chain, i.e. the “physical flow” and the “information flow”. Here’s an outline about the functions of the two flows:

  1. Physical flow or goods/material flow is to ensure the right types of goods/materials, in the right quantities, and to the right quality are meet the requirement of customers. Activities in this flow are buying, making and moving.
  2. Information flow is to find what are the goods/materials needed by customer, what quantities are required, when and where are they required.

All the activities involved in the supply chain are to respond to this information.

Supply demand

We also have seen that there are five basic components of the supply chain management, i.e. plan, source, make, deliver, and reverse. From these five basic components, in general we can see there are three important things involves in the supply chain:

  1. Procurement and Order Management.  Source of goods/materials is key information for companies to meet the needs. From this information then we can make a further planning for delivery of goods to the customers/buyers.
  2. Transport. Transport is an important component that ensures goods/materials are moved efficiently in the right speed to meet the needs of customers/buyers.
  3. Warehousing and Inventory. These components are also a key component of the supply chain process. By warehousing, any inventory is being stored in the supply chain process.

Improving supply chain is about ensuring the flow of goods/materials and the flow of information is as effective and efficient as possible and removing any barriers there may be affected to those flows.

Below some ideas for improving the performance of the supply chain:

  1. Improve and increase communication between all units in the companies (internal) and all agencies/companies involved in the supply chain process (external). Lack of communication either internal or external may raise some problems in providing the needs to the customers/buyers. Sharing information also includes in this point. By sharing related information to other colleagues will help companies to meet the needs. Sometimes people kept latest information only for them or their unit to get applause from the management. But applause will be given only if the work is done well. If it is failed then we will blame each other. We also need to give correct information in order to avoid any problem. It is always better to double check the information before pass it to other.
  2. Improve coordination and manage all links in the supply chain in properly manner. This includes improving the knowledge of people involved on the supply chain process.
  3. Reporting. Good and clear reports as well as correct data are needed. For example, by creating a new database related to the movement of goods/materials from the sources until the customers/buyers. All related information such as procurement, storage, warehousing, and transport to be updated on daily basis.
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Supply Chain >> Planning

Supply chain planning is the “heart” of SCM and occurs at the start. In general, supply chain planning is the determination of a policies and procedures that govern the entire operation of a supply chain. Planning also predicts future requirements to be able to balance supply and demand. Poor planning can result in a loss of profits.

SCplanSome of important factors in the planning stage:

1. Know the customers:

  • What do they want
  • Where do they want it
  • How do they want to receive it
  • When do they want it
  • What price are they willing to pay for the products/services

2. Integrate business processes in making a good strategy to increase profits. Companies must be able to make an accurate estimate of the demand in the near future. For example, the company forecast “x” amount of sales and order enough materials to cover “x” sales. But in fact fewer sales than “x” amount therefore the company end up with an excessive inventory. This case will create decrease in profit. Likewise, too many sales could cause the company has to order additional materials in the last minutes in order to fulfill demand, company also need to pay overtime to their workers. Then there will be additional production costs which will be usually passed on to the buyers and this can reduce in profits as well.
3. Makes a good information system/infrastructure. To achieve a competitive advantage, an effective information system/infrastructure is needed for both internal and between all stakeholders in the supply chain. Today, the internet makes much easier for stakeholders to share timely demand such as market demand, stocks, logistics, market trends etc.

I expect your comments / input for this writing and please also follow this blog if you like it 🙂

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Supply Chain >> Perencanaan

Perencanaan berfungsi sebagai “jantung” dari SCM dan terjadi di awal proses. Secara garis besar perencanaan dapat diartikan sebagai penetuan kebijakan dan prosedur yang mengatur keseluruhan operasi dalam rantai pasokan. Perencanaan juga memprediksi kebutuhan di masa yang akan datang untuk dapat menyeimbangkan antara penawaran dan permintaan. Perencanaan yang buruk bisa mengakibatkan kerugian bagi perusahaan.

SCplanBeberapa faktor penting pada tahap perencanaan ini antara lain:

1. Mengetahui siapa itu pembeli:

  • Apa yang diingikan oleh pembeli
  • Di mana mereka ingin membeli
  • Kapan mereka ingin membeli
  • Bagaimana mereka  ingin membeli
  • Berapa harga yang mau mereka bayar untuk produk / jasa yang diinginkan

2. Integrasi proses bisnis dalam membuat suatu strategi yang baik untuk meningkatkan keuntungan. Perusahaan harus mampu membuat perkiraan yang akurat mengenai permintaan dalam waktu dekat. Sebagai contoh,  perusahaan meramalkan sejumlah “x” penjualan dan telah memesan material untuk produksi sejumlah “x” penjualan tersebut. Namun pada kenyataannya penjualan lebih sedikit dari jumlah “x” tersebut sehingga mengakibatkan kelebihan persediaan yang nantinya bisa mengakibatkan penurunan pendapatan. Demikian pula sebaliknya, jika perusahaan memproduksi kurang dari angka penjualan, maka peruhaan harus memesan material tambahan untuk produksi, para pekerja akan lembur untuk memenuhi permintaan tersebut, sehingga akan ada tambahan biaya produksi yang biasanya akan ditambahkan ke harga produk jadi. Hal ini juga bisa mengakibatkan penurunan pendapatan

3. Membuat suatu sistem informasi yang baik. Untuk mendapatkan keuntungan yang kompetitif maka sistem informasi yang efektif sangat dibutuhkan baik untuk internal maupun antar semua pemangku kepentingan dalam supply chain. Saat ini, internet sangat memudahkan bagi para pemangku kepentingan untuk saling berbagi informasi baik itu informasi mengenai permintaan, stok, logistik, trend pasar dan sebagainya.

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What is Supply Chain Management (SCM) ?

Nowadays we often hear Supply Chain Management (SCM), but still many people do not understand about SCM.

I think we can make a rough conclusion about SCM. There is the word “chain” and the word “supply”. We know that chain shaped like a circle that is not broken, and the supply is a stock of goods required and can be obtained. So the supply chain is an interconnected circle in order to obtain the required goods from supplier. Of course there are many factors in the loop of supply chain itself.

The picture below gives us an idea about the supply chain.


In order for the chain goes well of course we need to set good management. From this we know what is called Supply Chain Management (SCM).

In general, SCM is a process that integrates, coordinates, and controls the movement of raw materials to make a product and deliver it to customers. Information flow includes in this process. Conscious effort is usually done to make the process can be carried out effectively and efficiently in order to maximize customers value and achieve a sustainable advantage.

I expect your comments / input for this writing and please also follow this blog if you like it 🙂

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More about SCM

From the picture of the SCM in the previous, in general we can see that SCM has five basic components as follows:

  1. Plan – companies need a planning or strategy to manage all available resources efficiently with costs less and able to meet the needs of consumers.
  2. Source – companies/factories must choose who will be the supplier of their products.
  3. Production – this is the manufacturing step. Companies / factories should be able to measure the level of quality, production output and worker productivity. Product testing, packaging and preparation for delivery of checks need to be considered and can be improved.
  4. Deliver – this part known as logistics. Companies coordinate orders received from customers, storage of products, choose how to send and who will deliver it and set up the payment/invoicing system.
  5. Return – this is a problematic part for many companies. In the above plan (point 1), companies must create a responsive and flexible systems to be able to take back a defective product, and providing service to customers who have have problems with delivery.

From above five points, we can see that the companies that make up the supply chain are linked together through physical flows and information flows. Physical flows involve the processing & transformation, movement, and storage of goods and materials. They are the most visible part of the supply chain. Information flows allow the various actors in the supply chain to coordinate their long-term plans, and to control the day-to-day flow of goods and material up and down in the supply chain.

I expect your comments / input for this writing and please also follow this blog if you like it 🙂

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