What is a supply chain?
A supply chain refers to the interconnected network of processes, resources, and organisations involved in producing goods or services and delivering them to the end consumer. It covers multiple stages, including sourcing raw materials, manufacturing, warehousing, and the final distribution of the finished product to the market.
Check your business loan eligibility to explore financing options that support supply chain investments and upgrades.
Key objectives of a supply chain in a business
Every supply chain is designed to achieve specific goals that support business efficiency and customer satisfaction. Below are the key objectives it aims to fulfil:Customer satisfaction: A primary goal of the supply chain is to ensure that the right product reaches the customer at the right time and in the right condition.Cost efficiency: Another key objective is to minimise overall costs while maintaining service quality. This is achieved through efficient planning and optimal use of resources.Inventory optimisation: The supply chain aims to maintain the right balance between product availability and cost control. This involves tracking demand patterns and refining restocking processes regularly.Lead time reduction: Reducing the time taken to deliver products is crucial. A streamlined supply chain helps improve delivery speed, which in turn enhances customer experience and lowers the risk of product expiry.Flexibility and responsiveness: A good supply chain must be adaptable. In times of market shifts or disruptions, it should quickly respond to changes and continue to meet customer needs effectively.
If you are planning to scale your supply chain operations or invest in improving efficiency, you may want to check your business loan eligibility to explore funding options.
How does supply chain work?
A supply chain is a network that involves a series of steps involved to provide a product or service to the customer. These steps include procuring and transforming raw materials into finished goods and distributing them to end-users.
The basic elements of the supply chain process consist of product development, marketing, operation, distribution and customer service. The stakeholders involved in this process include producers, vendors, warehouses, transportation companies, distribution centres and retailers.
If the supply chain management is efficient, it helps in reducing the cost of production and increases profits. If one of the links in this process fails, a company may have to bear an increased cost. To avoid such setbacks and invest in process improvements, you can apply for our business loan and strengthen your operational framework.
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.
Process of supply chain
The supply chain process involves a series of interconnected steps that help ensure smooth movement from raw materials to final product delivery. Below are the key stages:
- Demand forecasting and planning: This step involves predicting customer demand in advance to avoid overproduction or stock shortage. This step ensures accurate inventory planning.
- Sourcing raw materials: Businesses procure raw materials or components needed for production, either locally or internationally, based on cost, quality, and availability.
- Refining materials into basic parts: The acquired raw materials are processed into usable parts or components at manufacturing units or processing facilities.
- Combining parts to create a product: The basic parts are assembled or fabricated into finished goods using production processes suited to the product type.
- Order fulfilment and sales: Finished products are sold through retail outlets, online channels, or distributors. Orders are received and processed for delivery.
- Product delivery: Once the order is ready, products are packaged and shipped to customers through efficient logistics channels to ensure timely delivery.
- Customer support and return services: After delivery, businesses provide assistance for returns, exchanges, or warranty claims to maintain customer satisfaction and trust.
What are the different types of supply chains?
Beyond the supply chain process, businesses adopt different supply chain models based on their industry, product type, and market demand. Here are the most common supply chain models:
- Agile model: This model prioritises adaptability and rapid response to unpredictable demand. It is ideal for businesses where customer preferences change frequently or where products are customised on order.
- Fast chain model: Suitable for industries with short product life cycles such as fashion or electronics, this model emphasises speed in production and delivery to quickly capture market demand.
- Flexible model: Best for businesses facing fluctuating or seasonal demand, this model allows companies to scale operations up or down as needed, ensuring efficient use of resources.
- Continuous flow model: Designed for stable industries with consistent demand, this model supports steady production with minimal disruptions. It works well for established products with little variation.
- Custom-configured model: This model is suited for industries that rely on tailored production, such as automotive or aerospace. It combines standardised components with custom features to meet specific customer needs.
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 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.
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
Effective supply chain management requires a number of best practices to boost efficiency, ensure the successful delivery of goods and services, and drive business growth. Some of these best practices include:
- Collaboration and communication across the supply chain partners.
- Implementing technology-driven solutions such as automation and data analytics.
- High transparency and visibility within the supply chain process.
- Forecasting and planning using demand and sales forecasting.
- Developing contingency plans for supply chain disruptions.
- Efficient logistics and transportation management.
- Lean inventory management and just-in-time deliveries.
- Effective supplier management and selection.
- Continuous improvement and optimisation based on supplier feedback.
- Promoting sustainability practices, including ethical environmental practices, circular design, and social responsibility.
For businesses just starting out or expanding, startup business loans can provide the necessary capital to invest in these supply chain best practices, helping streamline operations and support long-term growth. By implementing these best practices, businesses can streamline their supply chain process, optimise resource utilisation, ensure customer satisfaction, and boost profitability and growth in the long term.
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.
Supply chain risks
Disruptions to supply chains and value chains have become more frequent in recent years, influenced by a range of global events, environmental changes, and economic shifts. Various incidents across regions have highlighted the vulnerability of interconnected supply systems. Geopolitical tensions, natural disasters, and public health emergencies have all contributed to interruptions in sectors such as manufacturing, agriculture, energy, and logistics, often resulting in material shortages and delays. Supply chain disruptions can be broadly categorised based on how predictable they are and the scale of their impact:
- Unanticipated catastrophes: These are rare and unpredictable events that cause widespread damage and losses. Examples include global cyberattacks or severe terrorist incidents that impact international infrastructure.
- Foreseeable catastrophes: These events are equally large in scale but can be anticipated to some degree through trends or early warnings. Financial crises and global military conflicts are typical examples.
- Unanticipated disruptions: These are significant but smaller in scale than catastrophes. Events like industrial accidents, major product recalls, or data breaches fall under this category.
- Foreseeable disruptions: These are issues that can be identified in advance, such as prolonged trade disputes or policy changes like a country’s exit from a trade bloc.
Most businesses focus on the types of disruptions they face regularly. However, recent events have shown that even rare or unexpected shocks must be factored into strategic planning. To stay resilient, companies are now expanding their focus beyond cost and efficiency to include resilience, agility, and long-term sustainability in supply chain operations.
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.
