Supply chains are the backbone of our modern world. Without well-oiled supply chains, there would be no food on your table, no clothes in your wardrobe, and no phone in your pocket. Inchainge has long recognized the immeasurable value of not only understanding but experiencing supply chains and their intricate processes. We have decades of combined expertise that we want to share with you. What is a supply chain and how does it work? We will explain everything you need to know including its importance and how to set up the process.
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What is a supply chain?
A supply chain is the entire process of creating and delivering products and services including every stage starting at the supply of source materials, manufacturing of the goods through to their distribution and sale. It involves the entire network of all individuals, organizations, resources, activities, and technology involved in the creation and sale of a product.
How does a supply chain work?
Supply chains consist of several supply chain steps. In many supply chains, the first step is that companies unearth raw materials. These materials are then moved and/or transformed by:
- producers
- vendors
- warehouses
- transportation companies
- distribution centers
In the final step, the end customer gets a delivery of a product or service.
The words “supply chain” may suggest something linear, since that is what most people depict a chain to be. However, this is a bit of a traditional view. The reality is different: supply chains can be considered complex networks. In many industries, they have evolved into so-called global supply chains.
A supply chain example
As a supply chain example, the smartphones that most of us cherish, contain rare-earth metals that can have been excavated in South America. Production and final assembly of smartphones can have taken place in Asia, and sales of smartphones happen in hundreds of countries, via multiple sales channels. Just imagine what supply chains need to be capable of to make this all come true.
Why is a supply chain important?
In current literature, you may have come across terms as lean supply chain, agile supply chain and resilient supply chain. These words signal that supply chains need to be cost- and time-effective, flexible, and quickly adaptable in response to disruptions.
Furthermore, for a company to be successful it needs a well-defined company strategy. That implies that for a supply chain to contribute there is a need for a derived supply chain strategy as well. If, for example, a company aims to be the lowest-cost provider in the market, it needs a supply chain that is focused on efficiency. As opposed to a company that tries to compete by being the most responsive to customer needs and wants. Then the supply chain strategy needs to be putting responsiveness first as a quality to be superior .
How to set up a supply chain process?
Once the supply chain strategy is defined, supply chain processes need to be set up. It can be decided for instance to implement a process called Sales and Operations Planning (S&OP) that balances supply and demand at a tactical level. S&OP is considered to be the bridge between strategy and execution. Or at a more operational level, supply chain planning needs to be implemented to manage weekly production and supply schedules.
Finally, supply chains have become global and complex in recent decades. Therefore, there are vast amounts of market and operational data that need to be sifted through and analyzed. Nowadays companies cannot do without some form of supply chain analytics. Furthermore, companies need one or more supply chain analysts in their workforce to extract valuable information. This can help them in supply chain decision-making and supply chain planning.
In summary, supply chains are very important. Without them, products and services would simply not be available, and the world would come to a sudden halt.
Now you know
Now you knowNow you know the main idea of how the supply chain operates. You learned that the supply chain represents the entire chain of steps and processes that the product must take to be delivered to the end consumer. You also found out that a well-defined strategy for a supply chain plays a crucial role in business life. It must be cost- and time-effective, flexible, and quickly adaptable in response to disruptions. Finally, you learned about the initiation of the supply chain process through Sales and Operations Planning (S&OP) and data analysis through supply chain analytics.
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