What is the Supply Chain, Really?

what is the supply chain really

Understanding the supply chain is crucial for strategizing business objectives and organizing practices to achieve them. A successful organization should have full visibility into its supply chain, as well as its processes and suppliers.

This will enable business owners to make informed decisions that will maximize their profitability and ensure customer satisfaction.

What is the Supply Chain?

A business's supply chain is a system of suppliers and processes that are involved in the production and delivery of a product or service. Goods will generally move down the supply chain, beginning with the manufacturers who will source all the raw materials necessary to produce the item and ending with distributors who will transport the finished goods to consumers.

Effective supply chain planning can make a great impact on businesses because it encompasses and defines all the activities and processes that a product must go through before it is marketed to end-users. It also clarifies how information is exchanged between retailers and suppliers, and how labor can be productively managed.

Organizations that proactively conduct supply chain management will be able to identify and minimize any delays in receiving goods. For example, a well-defined strategy will enable supply chain managers to compare a supplier's average lead times, which they can then use this information to put in purchase orders for inventory at the right time. This will help retailers keep optimal stock levels to satisfy customer demand and ensure overall satisfaction.

Importance of Supply Chains

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Supply chain logistics are crucial to the success of a company because it ensures that goods are being made and sent to customers. Businesses must map out their supply chain so that they can identify their market and create sales goals.

Having full visibility into the movement of products will also enable business owners to examine each stage of the supply chain network and make informed decisions on what processes need to be improved and which suppliers they need to prioritize. This gives companies the opportunity to refine their products or services, as well as gain insight into their competitive edge.

Businesses can streamline their supply chain management with inventory administration software. These tools provide integrated invoices and real time alerts about business conditions, allowing supply chain managers to be connected to their network. It also has advanced artificial intelligence (AI) features that automate ordering. This simplifies the replenishment process and helps companies make optimal purchase orders to their suppliers.

Supply Chain Examples

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There are various types of supply chains that a company will use, depending on its business model. The 2 main types of supply chains are-

  • Generic Supply Chain
A generic supply chain begins with an organization that sources and extracts raw materials. Then, the raw materials are transported to a distributor or wholesaler who will eventually sell and deliver them to a manufacturer.

At this stage, the manufacturer will produce an item from the supplies or assemble different raw materials to create a finished product. The completed goods are then delivered to a distributor who will sell them in bulk to retailers. Retailers will market these products in their stores to the general public. The supply chain cycle is completed once a consumer purchases the finished good.

If there is a demand for the product by consumers, then the cycle will continue and begin again with the extraction of raw materials.

  • E-Commerce Supply Chain
E-commerce refers to a company that uses a website to sell goods. This form of a supply chain begins when a customer places an online order on the retail website. Companies will generally use advanced technology that will process an order with a digital check out cart or order system. These systems will have built-in payment processing to authorize and complete transactions made by a credit card.

Some businesses will utilize a third-party payment processor to ensure safe transactions, such as PayPal. Once the order has been placed, the retailer's warehouse will receive the order details. Businesses will commonly employ a third-party warehouse facility or have in house logistics.

Warehouse staff will then compile the customer's purchases, package them, and send them out for delivery through a shipping company. Finally, the package will arrive and be received by the customer.

Key Takeaways

  • The supply chain encompasses all the processes, sequences, and networks that are involved with producing and distributing a finished product to consumers.
  • An effective supply chain is key to a productive and functioning business.
  • There are two types of supply chains that a company can use based on their business plan- generic and e-commerce.
  • To streamline and efficiently oversee supply chain activities in real time, businesses can use inventory management software.