Logistic System

Talking about Supply Chain in 21st century is very interesting. Why? Because there has been major

changes occurred in the past few decades that has tremendously shape the landscape and the way

businesses think about supply chain.

For example, in 1990 the average time required for a company to process and deliver a product as

simple as merchandise to customer from warehouse inventory ranged from 15 to 30 days (Bowersox,

2013) now the same feat can be achieved in a significantly much faster rate, even within a day or hours.

How did it happened? One is structure, Two is better technology, Third is shift in mindset. Let me

elaborate one by one.

Supply chain is basically a system that enable customers to get a product they want. Well, it is not

limited to only physical products, it can be in form of service, but I will only discuss physical goods.

Supply chain covers activities done by supplier to manufacturer, to distributor, to end-customers. In

supply chain, the object we discuss started from raw material extracted from earth all the way until it is

transformed into a product customer enjoys.

A simpler form of it is called logistical system.

In a logistical system, it excludes the discussion on raw material. So we’re only be talking about material

used in manufacturing process, half-done product, and also final product.

Now let’s talk why supply chain has changed so much lately

One is structure

In the good old days, the supply chain usually mimics the full version of the business process necessary

in producing particular goods. Suppose I want to order a car from Ford. Following things will happen. A.

procurements, B. logistics.

A. Procurements

Procurement happen because material from supplier is being delivered to manufacture plant. Once the

production occurs, it will start producing products. These products will be stored in inventory.

B. Logistic

This order will trigger logistic cycle. Once customer place an order, the information on this order will be

transmitted to inventory to process order. Then company will select order so that it will fit the

customer’s demand before transporting the order until its delivery to customer’s hand.

Traditionally, the supply chain do not communicate between one another (not integrated, no synergy

nor coordination), so the system can only go in one direction making the performance not too efficient.

Ford producers rely to produce cars in massive batch to achieve economy of scale.

But Toyota introduces that supply chain can actually have synergy by communicating with one another.

So naturally this changes the supply chain structure to be more slender and making it more effective and

efficient.