9 Chapter II Literature Review II.1 Introduction This section will focus on describing the general concept of supply chain management, the evolution, and the current status of Indonesia's pharmaceutical industry, particularly regarding raw materials medicine. This review seeks to elucidate industry advancements and challenges linked to the production and supply of pharmaceutical raw materials. It will trace the growth and current state of Indonesia's pharmaceutical industry, emphasizing raw materials production's critical role in supply chain sustainability. These developments will enhance understanding of Indonesia's approach to meeting its pharmaceutical raw materials requirements. Furthermore, the review will investigate supply chain risks, particularly in the upstream phase, which involves raw materials sourcing and procurement, essential for supply chain stability. By reviewing these risks, it aims to identify potential vulnerabilities in securing a consistent raw materials supply. At the culmination of this chapter, the review will synthesize advanced knowledge and recent research on pharmaceutical supply chain risk, elucidating the State-Of- The-Art (SOTA) in this domain. A conceptual framework will be developed to visualize the risk factors affecting the pharmaceutical industry, providing insights into their influence on reliability and self-sufficiency. II.2 Supply Chain Management To comprehend supply chain management (SCM), one must first understand the concept of a supply chain. A supply chain encompasses the extraction of raw materials, which suppliers then process into usable forms. Manufacturers utilize these processed materials to create components, which are subsequently assembled into final products. The completed products are then marketed to wholesalers, who distribute them to retailers, culminating in consumer purchases (Wisner et al., 2023). Koleksi digital milik UPT Perpustakaan ITB untuk keperluan pendidikan dan penelitian 10 According to Lambert, Stock, and Ellram (1998, as cited in Wisner et al., 2023), the supply chain is a cooperative alignment of firms delivering products or services. Chopra and Meindl (2003, as cited in Wisner et al., 2023) expanded this definition to include all stages from suppliers to end consumers. This view underscores that each component, from sourcing to retail, aims to fulfill customer demands, framing the supply chain as an end-to-end process. Ganeshan and Harrison (1995, as cited in Wisner et al., 2023) added this by characterizing the supply chain as a network managing material procurement, transformation, and distribution. This perspective emphasizes the functional roles within the supply chain, highlighting its multi-stage process from raw material acquisition to product delivery. Through their book, Rushton et al. (2014) try to visualize the differences between the concept of logistics and supply chain management (see Figure II.1). In short, logistics is a subset of SCM, focused on the internal handling, movement, and storage of goods.