Chapter I

preliminary

1.1 Background

The development of industrial technology which has currently entered into

industry 5.0 makes entrepreneurs compete in making products, one of which is

perishable products, now there are many home industries open to perishable

products such as cakes and bakeries, the food and beverage industry is one of

them. mainstay manufacturing sector in contributing to economic growth. The

food and beverage industry plays a major role in the process of economic growth

and is the most superior industry today which has a lot of supply and demand.

Including bread consumption, during the Corona pandemic like today the bread

business has increased rapidly so that the demand for bread products has flooded

the market, this shows that the demand for bread products continues to increase.

Bread is one of the oldest staple foods and processed foods in the world

and in Indonesia itself, bread was introduced in 1930 or during the Dutch colonial

period, the culture of eating bread was introduced in Indonesia by trading and

until now the development of the bread business has increased rapidly and one

One way to maintain the bakery business in today's business competition is to

always maintain the quality of the products and services provided by the company

so that the products arrive in the hands of consumers and maintain product quality

standards. Product quality is one of the things that consumers pay the most

attention to. if the quality of the product produced by consumers is good, then
consumers will be satisfied, trusting and can recommend the product purchased to

their relatives(Anggrahini et al., 2015). This will have an impact on the business

benefits that the company will get.

Apart from that, the customer wants not only to expect quality product

quality but also to expect a reasonable price and quality service with a process of

service time and fast delivery.The company organization should manage and be

able to think of ways to get value for customers and reduce the impact of the risk

of product damage.

In the process of distributing products, it is important because the success

or failure of a company or the behavior of a product depends on the distribution

process, in this case the researcher wants to develop a method of distributing

bread products at PT. NIC Makassar by minimizing the impact and controlling

risk in the product distribution process, in this case the company must always

maintain product quality until it reaches the consumer.

such as trouble on the production machine to cause delays in the specified

OTD (on time delivery) time and from that the researcher must think of the right

method in the product distribution process, because the above problems can affect

product quality and business quality at PT. NIC Makassar.

1.2 Formulation of the problem

Based on the above background, the formulation of the problems raised in

this study:

a. What are the sources of risk for the overland route of PT. NIC
 b. How is the proper handling to reduce risks to the supply chain flow

(distribution channel) of PT. NIC

1.3 Research purposes

Based on the above problems, this research was carried out with the following

objectives:

a. Identify sources of risk in the product distribution route

b. Able to analyze sources of risk in the product distribution line

c. Able to design the right method to reduce risk in the supply chain flow of

product distribution PT. NIC.

1.4 Research Limits

a. This research was conducted at PT. NIC Makassar

b. This study examines the risk of the product distribution channel of PT.

NIC Route Makaassar - Manado.

c. The risk studied is the risk of any product distribution activity on the

Makassar - Manado route.

 CHAPTER II

LITERATURE REVIEW

According to SNI 1995, the definition of bread is a product obtained from

wheat flour dough which is distributed with yeast and baked, with or without the

addition of other food ingredients and permitted food additives.(BSN, 1995). The

ingredients and the processes they go through make the bread have a distinctive

texture. Judging from the final processing method, bread can be divided into three

types, namely steamed, baked, and fried bread. Bakpao and mantao are examples

of steamed buns. Donuts and panadas are deep fried breads. Meanwhile, various

plain breads, sweet breads, pita bread, and baquette are baked bread (Sufi, 1999).

Bread is a food product made from fermentation of wheat flour with yeast

or other developing ingredients, then baked. Various types of bread. The

classification is based on taste, color, name of region or country of origin, name of

constituent ingredients, and method of development (Mudjajanto and Yulianti,

2004).

2.1 Supply Chain Theory

According to Van der Vost (Van der Vorst et al., 2007)Defining a supply

chain is a series of activities (physical and decision-making) connected by goods

and information channels and linked to flows of money and property that are

across organizational boundaries. Therefore, supply chain management is

important to create the integration of planning, coordination and monitoring of all

business processes and activities in the supply chain to deliver the value that
consumers expect at the least possible cost to the entire supply chain while

simultaneously fulfilling various requirements from other actors in the supply

chain.

Supply Chain Management or supply chain management is a system that

describes a process from upstream to downstream. It can also be interpreted as a

chain of production flow from raw materials to finished materials that are received

by consumers. Another definition of supply chain management is a system or

network of materials, information and services that processes links with the

characteristics of supply, transformation and demand.(Chen & Paulraj, 2004).

The International Logistics Management Agency defines SC as strategic

and systematic coordination between companies - companies that are involved in

supplying raw materials, producing goods, and delivering them to the final

customer.(Lee & Whang, 2000) defines SC as a network system consisting of

several companies that have the same goal as a place for the organization to run

goods and services to customers.

There are several key supply chain management processes, namely

customer and supplier relationship management, customer service management,

demand management, order fulfillment, manufacturing flow management, product

development and commercialization, and return management. (Lambert & Enz,

2017). In addition, there are three flows in this supply chain, namely the flow of

goods, financial flows, and information flows(Pujawan & Geraldin, 2009).

According to (Christopher, 2003) in(Anggrahini et al., 2015) Supply chain risks

can be divided into three categories, namely:

1. Internal risk, namely the risk included in control processes and activities.
 2. External risk, namely the risk that is included in the sub-category of

demand and supply risk.

3. Other external risks, namely risks that are included in the environmental

sub-category which impact upstream and downstream.

Increased risk, mostly due to network complexity caused by the

circumstances in which the company is outsourcing, namely more activities to

third parties or parties outside the company(Pujawan & Geraldin, 2009). Supply

chain risk management is a risk approach system that is carried out in a supply

chain structure. Risks that arise in supply chain activities include such as;

scheduling, technology, and costs are uncertain. It can be managed separately

based on risk perception. Currently, the global business environment is affected

by financial instability, timely outsourcing, corporate mergers, new technologies,

e-business, shorter time to market, etc. This forces organizations to adopt a variety

of new ways of doing business. However, supply chains that are simpler and more

timely, are often more prone to risks resulting from operational and external

disruptions (natural and man-made).(Ghadge et al., 2012).

2.1.1 SCM area

Based on the various types of SCM that have been submitted, it can be

concluded that the general thing is all activities related to the process flow from

upstream to downstream, and SCM will include:

1. Activities to design new products (product development)

2. Activities to get raw materials (Procurement, Purchasing, or Supply)

3. Production and inventory planning activities (Planning & Control)

4. Production activities
 5. Activities of sending or distributing (Distribution)

6. Product or goods return management activities (Return)

This division is often called a function division because they are grouped

according to their function. Generally, a manufacturing company will have a

product development section, a purchasing section or a procurement section (in

English it can be called a purchasing, procurement or supply function), a

production section, a production planning section (often called a Production

Planning and Inventory Control, PPIC) section delivery or distribution of finished

goods.

2.1.2 Challenges in managing the Supply Chain

1. The Complexity of Supply Chain Structure

A supply chain is usually very complex and involves many parties,

both from the SCM team itself (internal SCM) and outside the

company (External SCM), and these parties have different interests,

and sometimes even conflicting with one another. other. Within the

company itself, these differences of interest often arise. For example,

the marketing department wants to satisfy the customer so often makes

deals with customers without properly checking the capabilities of the

production department. Changes in production schedules suddenly

have to occur because the marketing department agrees to change

orders (orders) from customers. On the other hand, the production

department is usually quite resistant to such sudden changes as it will

result in lower machine utility and frequent raw material procurement

has to be promoted or changed. This would make the production

 department look less than good. Conflicts of interest are also very clear

between companies in the supply chain. The supplier wants the buyer

to order the product well in advance of the delivery time and to the

extent possible the order has not changed. Suppliers will also be more

pleased if deliveries can be made immediately after production is

complete. On the other hand, 15 buying companies want high

flexibility. They will be easier in their operations if suppliers provide

flexibility to change quantities, specifications, as well as the schedule

for the delivery of the ordered raw materials. Buyers also want

suppliers to be able to deliver on time with small shipping quantities

(following the just in time model) so that buyers don't have to pile up

large amounts of inventory in their warehouse. Conflicts of interest

also arise in relation to payment terms. Suppliers want buyers to pay

quickly, while buyers want long payment terms. The complexity of a

supply chain is also influenced by differences in language, time zone,

and culture between one company and another.

2. Uncertainty

Uncertainty is a source of difficulty in managing a supply chain.

Uncertainty creates insecurities in the plans that have been made. As a

result, companies often create safeguards along the supply chain.

These safeguards can be in the form of inventory (safety stock), time

(safety time), or production capacity cannot be fulfilled. In other

words, the customer service level will be lower in situations where the

uncertainty is high. Based on the source, there are three main

classifications of uncertainty in the supply chain. The first is demand

uncertainty. A store or supermarket can never have definite

information on how many products x will sell on a particular week or

day. They can only predict and we are all aware that predictions are

almost always untrue. Orders from a supermarket to a distributor are

also uncertain due to a variety of factors, including errors in inventory

administration, the requirement for a minimum shipment quantity from

the factory, and the need for supermarkets to accommodate

uncertainties for their customers. Likewise with distributors for various

reasons earlier. Even upstream the demand uncertainty usually

increases. The increase in uncertainty or variation in demand from

downstream to upstream in a supply chain is called the bullwhip effect.

The second uncertainty comes from the direction of the supplier. This

can be in the form of uncertainty in delivery lead times, prices for raw

materials or components, uncertainty of quality, and quantity of

materials shipped. Meanwhile, the third source is internal uncertainty

that can be caused by engine failure, imperfect machine performance,

absence of labor, and uncertainty over time and quality of production.

The amount of uncertainty faced by each supply chain varies. In most

cases, customer demand is considered to dominate supply chain

uncertainty, but of course there are also many cases where the

uncertainty of raw material or component supply is a more dominant

issue.
2.2 Distribution

Distribution is one aspect of marketing. Distribution can also be

interpreted as a marketing activity that seeks to facilitate and facilitate the delivery

of goods and services from producers to consumers, so that their use is in

accordance with what is needed (type, quantity, price, place, and when needed).

According to Winardi (1989), distribution is a group of intermediaries that

are closely connected to one another in the activities of distributing products to

consumers (buyers).

According to Philip Kotler (1997), distribution is a group of organizations

that make a process of distributing goods or services for use or consumption by

consumers (buyers).

In general, there are 3 types of strategies in the distribution of goods from

factories to customers. The three distributions are as follows:

1. Direct shipment

Delivery is made directly from the factory to the customer without

going through the warehouse. This strategy is usually used for items

that are easily damaged and have a short life.

2. Warehousing

Deliveries are made from the factory to the intermediary warehouse but

the warehouse belongs to the company. This strategy is usually used for

items that have a long life.

3. Cross-docking

Deliveries made through cross-docking services owned by other parties.

 According to Tjiptono (Tjiptono, 2014) "A distribution channel is a series

of organizational participants who perform all the functions required to deliver a

product / service from the seller to the final buyer."

According to Etzel (2013: 172) "Distribution channels consist of a series

of institutions that carry out all activities used to distribute products and their

ownership status from producers to consumers or business users.

According to Daryanto (2011: 63) distribution is "an organizational device

that is interdependent in providing a single product for use or consumption by

consumers / users".

From the experts' point of view, we can conclude that the distribution

channel is closely related to the product marketing system, this is because the

distribution channel has the duty to deliver products or services produced by the

company or producer to consumers.

2.3 Perishable Products

Perishable products are products that have a relatively short life span and

are easily obsolete. Perishable products can be divided into triangles based on the

cause of obsolescence according to(Jia & Hu, 2011), namely the first because of

loss of value such as plane tickets, cinema tickets, hotel rooms, and newspapers;

secondly due to technological developments such as electronic goods: cell phones,

laptops, televisions and so on; third, due to physical changes resulting from a

decrease in product quality caused by natural processes (metabolism) as well as

the influence of the environment (temperature, humidity, and water content) such

as fruit, vegetables, meat, fish and other food products. Perishable products are

products with perishable characteristics that must be maintained for quality and
lifespan (self life) by cooling the product so that the temperature is maintained

and can minimize microbial degradation. Some of the attributes related to the

quality of the attributes are integrity, safety, and self life.(Zhang et al., 2013). One

thing that distinguishes perishable products from non-perishable products is the

product's self-life. Perishable products will experience loss during their life, so

that the value of the product will decrease(Trihardani & Candra Dewi, 2017).

There are two types of value changes in perishable products, namely physical

changes that are visual (visible) such as in the shape of the product and changes

that are non-visual (invisible), namely the content in the product.(Osvald & Stirn,

2008). Perishable food according to Shukla and Jharkharia (2013) in(Prakash et

al., 2017)have been described as perishable foods such as edible agricultural

products, which deteriorate or rot over time. Examples of perishable food are

meat, milk, eggs, fruits, flowers, vegetables and their processed products.

The risk of perishable product in general can be classified into two types

of risk according to (Goh et al., 2007) that is, risks arising from within the supply

chain network and risks arising outside of it. (Prakash et al., 2017)has classified

supply chain risk into four categories, namely environmental risk, supply risk,

demand risk and process risk. The following is an explanation of each risk:

1. Environmental Risk

Environmental risk is caused by the external environment affecting the

operational level of a supply chain. Various external environmental factors

can affect the entity or the entire supply chain. Some examples of

environmental risks are caused by natural disasters, terrorist attacks,

 economic decline, political instability, factory relocation or other

environmental factors.

2. Inventory risk or supply risk is usually caused by the supplier. Suppliers

are important entities in a supply chain. Failure from the supplier level,

can cause various disruptions to product quality, delays, product

reputation, lost demand, etc. Therefore, it is very important to minimize

the downstream risks of a supply chain. In the context of the perishable

product or perishable food supply chain, the upstream risks considered are

the reliability of the infrastructure supplier, the quality of the supply and

the ability of the suppliers.

3. Demand Risk

Demand risk usually arises due to fluctuations in product demand.

Demand risk does not only include uncertainty in the amount of

production volume, but also if there is a demand that changes according to

the existing product variations. Demand risk also arises due to customer

migration, the formation of new market segments, distortion of

information by retailers or point data errors or risks due to forecast errors.

4. Process Risk

Process risk usually occurs in the processing of raw materials into

products that exist within an organization or company. This risk includes

risks that occur due to internal company problems. Examples of problems

or process risks include technological changes in plant and product

quality, production problems, transportation problems and labor problems.

After we know about perishable products and the risks of perishable products or

products that have a short life span, then we will discuss risk management or

supply chain risk management.

2.4 Risk management

Risk management is a scientific approach in managing risk, by

anticipating losses that can arise, and designing procedures that will minimize

financial losses (Vaughan, 2008). (Anggrahini et al., 2015). The risk management

process is an ongoing management task and can be described as a control loop

that is repeated. Risk management itself consists of four sub-processes, namely:

risk identification, risk assessment, risk treatment and risk monitoring(Klöber-

Koch et al., 2017). Risk is a matter of uncertainty and is an inherent thing in every

business activity and if it is not anticipated earlier it will be fatal to the business

network. One way of handling risk is to identify, implement a risk management.

We know that not all risks can be eliminated or avoided, therefore it takes

precautions or actions to deal with the risks that have been identified. The

following are steps that can be taken in preventing risk management, namely

1. Risk Identification

It is the first step in preventing risk management, at this initial stage,

identification of the risks that can occur in an organization / company.

Identification can be done by looking at potential risks that have

occurred and those that will occur in the future by tracing potential

risks, and risks from all aspects will be classified according to their

respective categories to make the next process easier.

2. Risk Assessment
 After the risks have been identified and classified according to their

respective categories, the next step will be to assess the potential

severity and losses to be received by the organization / company, and

in this case individual expertise is needed in each field to be able to

determine the dominant risk and the lowest risk.

3. Risk Response

After we have carried out the risk assessment, the next step is to select

and find out the risk control steps. Each risk has a value which

indicates the frequency and impact of what would occur if it were not

controlled. And the big challenge for top management is determining

the right portfolio to create and form a strategy so that we can manage

risks properly. Risk responses generally fall into the following

categories:

a) Risk Avoidance, Taking action to stop activities that can

cause risks to occur

b) Risk Reduction, Taking actions to reduce the likelihood or

impact or both, usually through control within the

company / organization

c) Risk Sharing or Transfer, Taking action to transfer some

risk through insurance, outsourcing or hedging.

d) Risk Acceptance, does not take any action to address risks,

but rather accepts the risks that occur.

e) Create a Risk Management Plan

4. Implementation

Carry out all methods that have been planned to reduce the impact of

losses that will be experienced by the company

5. Evaluate and Review

The planning that we have planned will not fully work well, because

changes in circumstances or the environment that were not predicted

before will cause changes to the plans we have made, therefore we

need to change our plans so that we can overcome the risks that may

occur.
 CHAPTER III
RESEARCH METHODOLOGY
CHAPTER IV
CHAPTER V
CHAPTER VI
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