Supply Chain Management: Integrating information, reducing cost

Supply Chain Management: Integrating information, reducing cost

The Jakarta Post, Jonminofri Nazir, Contributor

A great success in running a simple foodstall does not
automatically guarantee a similar success in managing
supermarkets, let alone such hypermarkets as Carrefour, Makro,
Goro, Alfa and the like.

The reason is that the expertise required is much different
from the simplistic style of foodstall management, as these
businesses demand a more sophisticated handling of goods and
finance that involves numerous suppliers.

For businesses of this magnitude, a knowledge of supply chain
management is necessary, which includes a good management of
logistics and flow of information.

Companies that effectively apply supply chain management
obviously produce far better results. For example, Garuda
Indonesia has just given its on-line travel agencies access to
the ticketing data, so that they can easily find out the latest
status of unsold seats at any time.

Lipposhop, which sells products using on-line system, is
another example of a company that truly understands the
importance of supply chain management, as they have a well
established on-line system between their customer service and the
customers. However, they do not have a good on-line system with
their suppliers, so that the suppliers are not directly aware of
the customers' orders to Lipposhop, thus causing deliveries not
quite on time.

This is quite different from the type of business developed by
the computer company, Dell, both in its home country, in the
U.S., as well as in its branch office in Malaysia.

This company practically does not have a warehouse to store
its raw materials and products. The moment all components and
other raw materials enter the factory, they are immediately
assembled according to customers' orders. Soon afterwards, the
ready-to-use computers are delivered to the customers by courier
companies. Dell's manufacturing plant or shops do not resemble
ordinary shops or warehouses, much more the popular shops in
Glodok or Mangga Dua shopping areas in Jakarta.

It is common knowledge that to order for a Dell computer a
customer can place an on-line order according to the
specifications he or she wishes. The data sent by the customer
automatically goes to each of Dell's suppliers for any material
required. Without further command from the boss, each supplier
sends the necessary components to fill the customer's order.

The entire process is quite fast and everything seems to be
automatic. This can happen because Dell uses an integrated
information system that links everyone, from the shops,
manufacturing plant, suppliers, courier service companies up to
all other companies that are related to Dell's business.

Dell in Malaysia uses Ship n Track (www.shipntrack.com), which
is a company that provides e-fulfillment services, including
supply chain management. This system coordinates the flow of
information, goods and payments from customers, shops,
manufacturing plant, suppliers, banks, courier services and all
other related companies. Using GPS (Global Positioning System) it
even monitors the journey of the goods from the manufacturing
plant to the warehouse, the retail points and the customers.

In Indonesia, until now there is no company that applies such
a complete system of supply chain management, which includes flow
of information, goods and financing from customers, manufacturing
plant and shops.

Even in Malaysia, where Dell was established two years ago and
had financial success, companies with such a complete system are
less than twenty. This company, with an investment of 15 million
Malaysian ringgit in 1999, produced its fantastic first year
revenue of 12 million Malaysian ringgit.

The few number of companies applying this system indicates
that it is not easy to convince a company to change its system
with a new one. Furthermore, it is more difficult if the company
has been established for quite a long time and its old system is
still working well or is considered workable by the owners. To
them trying an entirely new system is considered like gambling.

Hasan Shahab, general marketing manager of PT Global Jaringan
Nusantara, the partner of Shipntrack for Indonesia, said that he
had seen some of the hampering factors that he would have to
overcome.

The hampering factor he was referring to was the country's
manufacturers and distributors knowledge of the concept, meaning
that without their good understanding it will be difficult for
them to embark on such a system. For business people who are
laymen to technology, it is indeed complicated to understand the
e-fulfillment product, because it is heavily loaded with
information technology and relies on the Internet network for
data communication. On top of that, to educate the market will
take a lot of time and involve huge costs.

Jefry Maulidani, product and development manager of Shipntrack
Indonesia, said that in Malaysia this company purchased a
warehouse and transware company to show examples how this concept
can be efficient in the logistics of supply chain management (see
tabel).

Apart from Dell, it is also interesting to study Malaysia's
Social Security company. This insurance company for manpower
operates jointly with various outlets and Shipntrack to enable
every employee to purchase electronic items using his or her
pension funds. The system is simple. After the employee selects
the item of purchase, the data of the item and its price are
entered into the company's data system for confirmation. All
information are received by companies involved in the transaction
at the same time, so that the purchase can be processed
simultaneously. Just imagine if the transaction was conducted in
the conventional method, how much time and paper work it would
consume.

A more complicated application is at the drugstores and
pharmaceutical companies in this neighboring country. Here
several drugstores jointly form a company to purchase medicines
from various pharmaceutical manufacturers. The drugstores can
then send their orders through the computer, cellular phone and
PDA. All these orders are treated as a collective order and these
large volume purchases naturally get reduced prices, which would
not be possible if each drugstore places an individual order.

The orders are automatically received by the manufacturers.
After being produced, the ordered items are sent to the
warehouse, where each drugstore's order is dispatched.

Every step of the process moves very fast and it does not
involve even a single piece of paper. The flow of information and
goods are virtually controlled, including the payment.

Can such a system be applied in Jakarta and other major cities
in Indonesia? One has to admit that currently it is still
difficult.