Application Of Supply Chain Systems Using The Theory Of Constraint (TOC) Approach At The University Of North Sumatra

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Application of Supply Chain Systems using the Theory of Constraints (TOC) approach at the University of North Sumatra

Introduction

In today's fast-paced business world, companies are constantly seeking ways to improve their supply chain management systems to stay competitive. The concept of supply chain management has evolved from traditional logistics management practices to a more coordinated and partnership-based system between various parties involved in managing product flow and information. This approach has become essential for companies to create efficient products in terms of cost, high quality, and fast delivery. In this article, we will discuss the application of supply chain systems using the Theory of Constraints (TOC) approach at the University of North Sumatra.

The Importance of Supply Chain Management

Supply chain management is a critical component of any business, as it involves the coordination of various activities, including procurement, production, distribution, and sales. A well-managed supply chain can help companies to reduce costs, improve product quality, and increase customer satisfaction. However, many companies struggle to implement effective supply chain management systems, often due to a lack of understanding of the complexities involved.

The Theory of Constraints (TOC) Approach

The Theory of Constraints (TOC) is a management philosophy developed by Eliyahu Goldratt that focuses on identifying and addressing the constraints that limit a company's ability to achieve its goals. The TOC approach is based on the idea that every system has constraints that limit its performance, and that by identifying and addressing these constraints, companies can improve their overall performance. In the context of supply chain management, the TOC approach can help companies to identify and address the constraints that limit their ability to deliver products to customers on time and at the right quality.

Case Study: PT. Indofood Sukses Makmur Tbk.

One example of the real implementation of the Supply Chain system is PT. Indofood Sukses Makmur Tbk., a large company known as an instant noodle food producer, including Indomie, Supermi, and Sarimi. Despite implementing a supply chain system, the implementation of activities at PT. Indofood Success Makmur often runs separately and does not support each other. In dealing with various problems that arise in the supply chain system, companies are more likely to make partial improvement, with a focus on increasing productivity in each section without considering the overall integration of the system.

Methodology

This study aims to identify the main factors causing the problem that occurs in the Supply Chain System of PT. Indofood Success Makmur Tbk. Medan Branch, using the Theory of Constraints (TOC) approach. Through the process of thinking TOC, it is hoped that the initial solution can be developed to overcome the existing core problems. The results of the analysis showed the main conflict in the supply chain system in the marketing department, namely the unclear in determining the level of product availability (level of product availability) between companies and distributors operating in the North Sumatra region. This obscurity contributes to high inventory costs both in companies and distributors.

Solution

To optimize the level of product availability in each distributor, repairs are carried out in forecasting demand data using the Simple Exponential Smoothing method. In addition, also determined the number of optimal ordering products (Economic Order Quantity / EOQ) and Safety Stock for each distributor. The supply chain performance is then analyzed with a cycle service level (CSL) measuring device. Based on the calculation, the optimal average probability value of CSL in the condition of the stock lack of stock (lost sales) is 0.9902 or 99%. This means, there is a possibility of 99% that the existing inventory can meet demand, while only 0.98% the possibility of inventory deficiency.

Conclusion

The application of an efficient supply chain system with the TOC approach at PT. Indofood Success Makmur Tbk. The Medan branch is not only beneficial for the company, but also has a positive impact on all elements in the supply chain. Through better collaboration between parties, such as suppliers, distributors, and retailers, it is hoped that the final destination to provide quality products at optimal costs and fast delivery time can be achieved. This concept shows the importance of connectedness and coordination among all actors involved in the supply chain system, so that each component can contribute to creating added value to consumers and companies.

Recommendations

Based on the findings of this study, the following recommendations are made:

  1. Improve forecasting demand data: Companies should improve their forecasting demand data to ensure that they have an accurate understanding of customer demand.
  2. Optimize inventory levels: Companies should optimize their inventory levels to ensure that they have the right amount of stock to meet customer demand.
  3. Improve collaboration between parties: Companies should improve collaboration between parties, such as suppliers, distributors, and retailers, to ensure that they are working together effectively to deliver products to customers.
  4. Implement a supply chain management system: Companies should implement a supply chain management system to ensure that they have a clear understanding of their supply chain and can make informed decisions to improve its performance.

Limitations

This study has several limitations, including:

  1. Limited scope: This study only focused on the supply chain system of PT. Indofood Success Makmur Tbk. Medan Branch, and did not consider other companies or industries.
  2. Limited data: This study only used data from PT. Indofood Success Makmur Tbk. Medan Branch, and did not consider other data sources.
  3. Limited analysis: This study only analyzed the supply chain system of PT. Indofood Success Makmur Tbk. Medan Branch, and did not consider other aspects of the company's operations.

Future Research Directions

Future research should consider the following directions:

  1. Expand the scope: Future research should expand the scope of the study to consider other companies or industries.
  2. Use more data: Future research should use more data sources to improve the accuracy of the analysis.
  3. Consider other aspects: Future research should consider other aspects of the company's operations, such as its financial performance and customer satisfaction.

Conclusion

In conclusion, this study has shown that the application of supply chain systems using the Theory of Constraints (TOC) approach at the University of North Sumatra can help companies to improve their supply chain performance and reduce costs. The study has also highlighted the importance of connectedness and coordination among all actors involved in the supply chain system, so that each component can contribute to creating added value to consumers and companies.
Q&A: Application of Supply Chain Systems using the Theory of Constraints (TOC) approach at the University of North Sumatra

Introduction

In our previous article, we discussed the application of supply chain systems using the Theory of Constraints (TOC) approach at the University of North Sumatra. In this article, we will answer some of the frequently asked questions (FAQs) related to this topic.

Q: What is the Theory of Constraints (TOC) approach?

A: The Theory of Constraints (TOC) is a management philosophy developed by Eliyahu Goldratt that focuses on identifying and addressing the constraints that limit a company's ability to achieve its goals. The TOC approach is based on the idea that every system has constraints that limit its performance, and that by identifying and addressing these constraints, companies can improve their overall performance.

Q: How does the TOC approach apply to supply chain management?

A: The TOC approach can be applied to supply chain management by identifying and addressing the constraints that limit a company's ability to deliver products to customers on time and at the right quality. This can include constraints such as inventory levels, production capacity, and transportation times.

Q: What are the benefits of using the TOC approach in supply chain management?

A: The benefits of using the TOC approach in supply chain management include:

  • Improved supply chain performance
  • Reduced costs
  • Increased customer satisfaction
  • Improved collaboration between parties
  • Better forecasting and planning

Q: How can companies implement the TOC approach in their supply chain management?

A: Companies can implement the TOC approach in their supply chain management by:

  • Identifying and addressing constraints
  • Improving forecasting and planning
  • Optimizing inventory levels
  • Improving collaboration between parties
  • Implementing a supply chain management system

Q: What are some common challenges that companies face when implementing the TOC approach in their supply chain management?

A: Some common challenges that companies face when implementing the TOC approach in their supply chain management include:

  • Resistance to change
  • Limited resources
  • Complexity of the supply chain
  • Difficulty in identifying and addressing constraints
  • Limited data and analytics

Q: How can companies overcome these challenges?

A: Companies can overcome these challenges by:

  • Providing training and education to employees
  • Allocating sufficient resources
  • Simplifying the supply chain
  • Using data and analytics to identify and address constraints
  • Implementing a supply chain management system

Q: What are some best practices for implementing the TOC approach in supply chain management?

A: Some best practices for implementing the TOC approach in supply chain management include:

  • Conducting a thorough analysis of the supply chain
  • Identifying and addressing constraints
  • Improving forecasting and planning
  • Optimizing inventory levels
  • Improving collaboration between parties
  • Implementing a supply chain management system

Q: How can companies measure the success of their supply chain management efforts?

A: Companies can measure the success of their supply chain management efforts by:

  • Tracking key performance indicators (KPIs) such as inventory turnover, lead time, and customer satisfaction
  • Conducting regular audits and assessments
  • Gathering feedback from customers and suppliers
  • Analyzing data and analytics to identify areas for improvement

Conclusion

In conclusion, the application of supply chain systems using the Theory of Constraints (TOC) approach at the University of North Sumatra can help companies to improve their supply chain performance and reduce costs. By understanding the benefits, challenges, and best practices of implementing the TOC approach, companies can make informed decisions to improve their supply chain management.