What is a supply chain?
A supply chain is the complete network that connects every stage of a product’s journey—from sourcing raw materials to delivering the finished product to the customer. It involves producers, manufacturers, distributors, retailers, and consumers working in coordination. In India’s rapidly developing economy, efficient supply chain management (SCM) plays a crucial role in reducing costs, improving productivity, and ensuring timely delivery in an increasingly competitive market.
Key takeaways
- A supply chain represents all the businesses and individuals involved in producing, transporting, and delivering goods or services, starting from raw material procurement to final customer delivery.
- Strong supply chain management is vital for India’s economy, helping businesses lower operational costs, enhance efficiency, and maintain consistent movement of goods from source to sale.
- The COVID-19 pandemic exposed global supply chain vulnerabilities, causing labour shortages, shipment delays, and shortages of essential goods across multiple industries in India.
- While supply chain management oversees the entire process, logistics focuses specifically on transportation, warehousing, and inventory control, making it a crucial subset of SCM.
- Reliable suppliers form the backbone of a seamless supply chain. Their timely, quality-driven deliveries prevent disruptions, reduce downtime, and help sustain steady production cycles in India’s diverse markets.
Key objectives of a supply chain in a business
Key objectives of a business supply chain focus on driving efficiency, value creation, and competitiveness:
- Customer satisfaction: Deliver products accurately and on time to meet customer expectations.
- Cost reduction: Minimise spending in procurement, production, logistics, and storage.
- Operational efficiency: Streamline workflows to use resources effectively and reduce waste.
- Inventory optimisation: Maintain balanced stock levels to match demand without overstocking.
- Agility: Respond quickly to market shifts and unexpected challenges.
- Quality assurance: Uphold consistent product standards across all stages of the supply chain.
- Risk management: Identify and mitigate potential risks to ensure uninterrupted operations.
- Sustainability: Implement eco-friendly and ethical practices in sourcing and production.
- Financial growth: Boost profitability and maintain strong cash flow through efficient supply chain operations.
Components and functionality of a supply chain
A supply chain covers all the activities needed to move a product or service from its origin to the final customer. It typically includes stages such as sourcing raw materials, transporting them to manufacturing sites, producing finished goods, and delivering them to distribution centres or retailers for sale.
- A complete supply chain network consists of producers, raw material suppliers, warehouses, transporters, regional distributors, and end retailers or online platforms.
- The supply chain cycle usually begins when a customer places an order. It involves key functions such as product design, marketing, procurement, production, distribution, finance, and customer support.
An efficiently managed supply chain helps businesses cut costs, improve productivity, and boost profitability. On the other hand, any disruption, like a transport delay or material shortage, can affect the entire chain, leading to losses and operational setbacks.
How does supply chain work?
The supply chain is an interconnected system that turns raw materials into finished products ready for consumers. In India’s fast-paced market, it is carefully managed across multiple stages to ensure timely, efficient, and cost-effective product delivery.
Process of supply chain
The supply chain process typically unfolds in five essential stages:
- Planning and strategy: This stage defines the supply chain framework. It includes forecasting demand, setting performance goals, and designing a logistics network that ensures efficiency and cost control.
- Sourcing and procurement: Businesses identify and partner with reliable suppliers to obtain quality raw materials and components. It also involves negotiating contracts and maintaining consistent material availability.
- Manufacturing and production: Here, raw materials are transformed into finished goods. The process covers scheduling, production, quality checks, and preparing products for dispatch with proper packaging.
- Delivery and logistics: This step handles the movement and distribution of goods. It includes managing warehouses, selecting suitable transport modes, and ensuring timely order fulfilment and last-mile delivery.
- Returns and reverse logistics: This phase deals with returned products. It involves inspecting, repairing, or recycling goods and maintaining customer satisfaction through efficient after-sales service.
Importance of supply chain
A well-functioning supply chain is essential for business success, as it governs the movement of goods from raw materials to final delivery. Here are some key reasons why supply chains are so important:
- Reduced overheads: An efficient supply chain helps forecast demand accurately, reducing the cost of storing excess inventory and improving inventory turnover.
- Greater quality control: Routine audits and checks throughout the supply chain help maintain high product quality and increase customer satisfaction.
- Higher efficiency: Streamlined processes minimise delays and ensure products are available when needed, improving operational flow and service levels.
- Risk management: Supply chain data allows businesses to identify and manage risks early, helping avoid disruptions and maintain continuity.
- Optimised shipping: With better logistics planning, supply chains support faster and more cost-effective deliveries.
- Competitive advantage: A strong supply chain enables better pricing, quicker delivery, and consistent quality, giving businesses an edge over competitors.
What are the different types of supply chains?
The type of supply chain model a company adopts in India depends on its business structure, product type, and customer demand patterns.
- Continuous flow model: Ideal for businesses producing large quantities of standardised goods with steady demand, such as daily-use consumer items. It focuses on maintaining smooth production schedules, strict inventory control, and consistent raw material replenishment to prevent disruptions.
- Fast chain model: Suitable for industries driven by quick-changing market trends, like fashion or electronics. Companies following this model prioritise speed—rapidly moving from concept to finished product to capture short-lived demand opportunities.
- Flexible model: Designed for businesses with unpredictable or seasonal demand, such as festive goods. It enables swift scaling of production during high-demand periods and efficient downsizing later. Accurate forecasting of sales, materials, and workforce is crucial for success in this model.
Supply chain with a continuous flow
Manufacturers who use this supply chain technique usually manufacture a single line of products in bulk. This type of supply chain ensures the stability of supply during high demand.
- Fast supply chain: Businesses that manufacture or sell popular products with a short life cycle find a suitable supply chain with a faster manufacturing model.
- Efficient model of supply chain: The efficient model of a supply chain is implemented, where supply chains require end-to-end efficiency. Businesses operating in highly competitive markets opt for this SC type.
- Agile supply chain: The agile supply chain model best suits businesses producing or manufacturing items in a particular order, with speed and responsiveness to market conditions.
- Custom-configured supply chain: Businesses involved in assembling and production lines implement a custom configured supply chain, a hybrid of the continuous flow and the agile model.
- Flexible chain of supply: A flexible supply chain allows businesses to find a balance between periods of high demand and low-volume movement.
Check your pre-approved business loan offer before deciding on infrastructure or inventory enhancements to align with your preferred supply chain model.
Difference between value chains and supply chains?
To better understand how businesses deliver value and manage operations, here is a comparison between the supply chain and value chain:
Aspect |
Supply Chain |
Value Chain |
Meaning |
Covers the full network of people, processes, and logistics used to produce and deliver goods. |
Focuses on activities that increase product value and meet customer needs at each step. |
Objective |
Aims to ensure product availability and customer satisfaction through efficient flow. |
Seeks to gain a competitive advantage by maximising customer value. |
Management focus |
Primarily driven by operational and logistics management. |
Falls under strategic business and performance management. |
Main function |
Supports the movement, manufacturing, and delivery of the product. |
Adds value to the product through innovation, design, and service. |
Starting point |
Begins with the sourcing of materials and ends with final product delivery. |
Starts with market research or customer needs and ends with after-sales service. |
Activities |
Involves procurement, production, inventory, transportation, distribution, and customer service. |
Includes research, product development, testing, marketing, packaging, and support. |
Examples of supply chains
To better understand how goods move from origin to end-user, here are two common examples of supply chain models:
- Traditional supply chain
In a traditional supply chain, the process begins with the extraction of raw materials from suppliers. These materials are then transported to manufacturers who convert them into finished products. Once ready, the products are passed on to logistics providers for distribution to retailers. Retailers then place the goods on shelves for consumers to purchase. The entire process ends when the product reaches the hands of the customer through a physical point of sale. - E-commerce supply chain
The e-commerce supply chain starts when a customer places an order on a digital platform. Once the order is received, it is processed automatically using backend systems. Payment is made through secure gateways, after which the product is packed and dispatched from a warehouse. Delivery may be handled by in-house teams or third-party logistics providers, depending on the arrangement. The chain completes when the product is successfully delivered to the customer's doorstep.
Supply chain challenges
While effective supply chain management can bring numerous benefits, it also poses several challenges to businesses. Some of these challenges include:
- Fragmentation in the supply chain network involving multiple partners.
- Limited visibility and control over the supply chain process.
- Disruptions such as natural disasters, war, pandemic, strikes, and transportation.
- Globalisation and cross-border movement of goods, regulations and fees.
- Increasing customer expectations regarding product quality, speed of delivery, etc.
- Inventory management and meeting product demand.
- Optimisation of resource utilisation.
- The cost of logistics and delivery.
- Risks and uncertainties associated with long lead times.
- Meeting sustainability goals, including ethical environmental practices, circular design, and social responsibility.
These challenges require proactive measures and strategies to ensure the efficiency, productivity, and long-term success of businesses.
Supply chain best practices
Successful supply chain systems, particularly in India’s diverse and fast-moving market, follow a few essential practices for efficiency and growth:
- Continuous improvement: They promote a culture of ongoing optimisation, regularly assessing and refining processes to boost overall performance.
- Speed and responsiveness: They focus on faster movement and processing of goods to meet strict delivery timelines and rising consumer expectations.
- Collaboration: They build strong partnerships and transparent communication between suppliers, manufacturers, and delivery networks.
- Technology adoption: They embrace digital tools such as automation, real-time tracking, and data analytics to improve visibility and accuracy.
- Performance measurement: They track clear metrics and KPIs across each stage to evaluate efficiency, identify gaps, and ensure accountability.
Causes of deflation due to supply chain factors
Modern supply chains, driven by efficiency and cost optimisation, have helped curb inflationary pressures. As businesses streamline the journey of goods from origin to end consumer, operational costs fall, often reducing product prices. While deflation is usually viewed cautiously, efficiency-led cost savings in supply chain management are a positive example of controlled price reduction.
With increasing domestic and global integration, supply chains are becoming more streamlined and cost-efficient, collectively helping stabilise input costs across industries.
Impact of COVID-19 on global and Indian supply chains
The COVID-19 pandemic caused widespread disruptions in global supply chains, affecting almost every sector of India’s economy. Product deliveries and supplies were delayed due to shifting border restrictions, port congestion, and logistical backlogs.
- Consumer demand fluctuated sharply, panic buying caused shortages of essentials, while demand for medical supplies and protective gear surged.
- A global shortage of semiconductors and key components led to delays in the production and delivery of electronics, automobiles, and other goods.
Changing supply chain priorities post-pandemic
The pandemic reshaped global supply chain strategies, pushing businesses to prioritise resilience and digital transformation.
- Most supply chain leaders reported severe disruptions, particularly in automotive and core industrial sectors.
- Visibility became the top priority, with firms focusing on technologies like sensors and data analytics for real-time tracking of inventory and shipments.
- The crisis accelerated digital adoption, prompting companies to invest in automation and end-to-end digitisation to strengthen future operations.
Conclusion
In today’s fast-paced and competitive world, having a strong and well-managed supply chain is vital for any business. From sourcing raw materials to delivering finished products, each step must be planned and managed carefully. A good supply chain helps reduce costs, improve customer satisfaction, and support business growth. While challenges like disruptions and rising customer expectations do exist, following best practices and using the right tools can make a big difference. With financial support such as a business loan, especially those offering competitive business loan interest rates, businesses can strengthen their supply chains and build a strong foundation for long-term success.
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Frequently asked questions
Supply chain refers to the process of producing and delivering products and services to customers. It involves numerous steps, including procurement of raw materials, transportation, production, and distribution.
An example of a supply chain could be a coffee company, where the supply chain starts with the coffee bean farmers and goes through various stages, including roasting, packaging, and distribution to retailers or consumers.
SCM stands for supply chain management. It is a process of managing the flow of goods and services from the point of origin to the point of consumption. Effective SCM can improve productivity, efficiency, and profitability, making it crucial for the success of businesses.
In logistics, a supply chain refers to the entire process of making and selling goods, from raw materials to the final product. It includes steps like production, shipment, storage, and delivery.
Supply chain companies are businesses that manage and control the flow of goods. They handle aspects like production, storage, transportation, and distribution to ensure products move efficiently from the manufacturer to the consumer.
A supply chain diagram is a visual representation that shows the different stages of a product's life, from production to delivery. It helps in understanding the flow of goods and identifying any issues in the process.
