What is a supply chain?

2 min read

A supply chain is a network of suppliers, individuals, technology, organisations, activities and resources of a business for delivering a product or service. All these entities could be a part of the sourcing, procuring raw materials or equipment, manufacturing, selling or logistics that ultimately help deliver finished goods to end-users.

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.

What are the different types of supply chains?

Typical of manufacturing companies, the supply chain now also extends to other business models. The type of supply chain and its complexity, however, depends on the nature of a business. For instance, a company operating on a made-to-order model does not store finished products. Its warehouse thus consists of raw material. Similarly, a company operating in the assembly model requires managing different types of stock.

Considering these requirements, the supply chain (SC) has evolved into several different models. Here is a brief synopsis of different types of SC models.

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.

Supply Chain Management (SCM)

Supply Chain Management (SCM) is the management of supply chains to increase operational excellence and improve customer value.

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Why is supply chain management important?

Supply chain management is the process of managing the flow of goods and services from the point of origin to the point of consumption. It involves the coordination and integration of various parties involved in the production, logistics, and distribution of goods and services. Supply chain management is a vital aspect of business operations, and its importance lies in the following points:

  • Increased efficiency and productivity
  • Cost reduction
  • Improved customer satisfaction
  • Better inventory management
  • Increased profitability
  • Better risk management
  • Enhanced collaboration
  • Efficient use of resources
  • Better responsiveness to market demands
  • Sustainable practices and reduced environmental impact.

Effective supply chain management ensures that businesses operate more smoothly, efficiently, and sustainably, making it crucial for long-term success and growth. It helps businesses to meet customer demands better, optimise resource utilisation, streamline processes, increase profitability, and improve overall business performance.

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.

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.

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Frequently asked questions

What is the meaning of supply chain in simple terms?

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.

What is an example of a supply chain?

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.

What is SCM and why is it important?

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.

What is supply chain in logistics?

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.

What are supply chain companies?

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.

What is a supply chain diagram?

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.

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