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What is a Supply Chain? How help businesses to increase productivity.

Updated: May 6


What is Supply Chain? Meaning & Defination.

Supply Chain is the network of individuals, organizations, resources, activities, and technology. Supply chain concepts helps from manufacturing to the sale of a product. The delivery of source materials from the supplier to the manufacturer and finally to the consumer. The supply chain is used to manage the flow of goods, data, and finances to maximize value. It helps to reduce costs, enhancing customer satisfaction.

Models in Supply Chain Management

Basic Supply Chain Models guide the flow of goods, services, and information. Key models include:

  1. The Lean Model: Focuses on minimizing waste within the supply chain. Waste is any activity that consumes resources without creating value.

  2. The Agile Model: Designed to be highly flexible and adaptable. It's ideal for industries where customer demand is volatile and unpredictable.

  3. The Hybrid Model: Combines elements of both lean and agile models. It's suitable for companies that need to balance cost-efficiency with responsiveness.

Steps in a Supply Chain

  1. Sourcing raw materials

  2. Manufacturing and assembly

  3. Testing and quality control

  4. Packaging

  5. Logistics and distribution

  6. After-sales support and service


Flow of Manufacturing Costs

The flow of manufacturing costs includes three main types of expenses:

  1. Direct Materials: Raw materials that are converted into finished products.

  2. Direct Labor: Wages of employees who are directly involved in the production.

  3. Manufacturing Overhead: Indirect costs related to production, like maintenance, utilities, and equipment depreciation.

Reliable Suppliers Are Key

The reliability of suppliers is crucial in a supply chain. Reliable suppliers deliver quality goods on time. This helps maintain the efficiency of the entire chain and ensures customer satisfaction.


Example of a Supply Chain

Consider a smartphone manufacturer:

  1. Sourcing components from multiple suppliers (e.g., processors, displays, batteries).

  2. Assembling the smartphone.

  3. Quality testing.

  4. Packaging for distribution.

  5. Shipping to various markets.

  6. Providing after-sales support.

Supply Chain Challenges

Challenges include managing costs, ensuring timely delivery, and maintaining product quality. This means adapting to external changes like market fluctuations or supply disruptions.


Supply Chain Management (SCM)

Supply Chain Management is the active management of supply chain activities. The aim is to maximize customer value and achieve a sustainable competitive advantage. This involves the strategic coordination of businesses and business processes. Facilitate the flow of information, goods, and services across the supply chain.


Supply Chain Management vs. Business Logistics Management

While both are crucial, SCM encompasses a broader range than Business Logistics Management. SCM covers the entire process from procurement to delivery. Logistics specifically focuses on the transportation and storage of goods.


Best Practices in Supply Chain Management

  1. Adopt technology: Use ERP and SCM software.

  2. Build good relationships with suppliers.

  3. Focus on sustainability to ensure long-term viability.

  4. Implement flexible strategies that can easily adapt to changes.

Evolution and Future of Supply Chains

The future of supply chains lies in digitization and sustainability. Digital technologies like AI, IoT, and blockchain will help supply chains. How supply chains operate, making them more efficient, transparent, and resilient.


Difference Between Value Chains and Supply Chains

A value chain analyzes specific activities within a company. They add value to the business and the products. The supply chain looks at how various entities work together to create a product available to the end consumer.


Supply Chain Disruption

Disruptions can be caused by natural disasters, geopolitical events, or technological failures. Effective risk management strategies are essential to mitigate these risks.


How Inflation Affects Supply Chains

Inflation can increase the cost of raw materials and transportation. This compresses profit margins and forces companies to rethink pricing.


Supply Chain Resilience

Resilience in supply chains is the ability to anticipate, prepare for, respond to, and recover from disruptive events. Resilience helps through diversification of suppliers, investments in technology, and flexible response strategies.


Digital Supply Chains

Digital supply chains utilize digital tools. They enhance visibility, efficiency, and collaboration across the supply chain.


How Supply Chains Affect Sustainability

Sustainable supply chain practices can reduce the environmental impact of business operations. Methods like reducing waste, using sustainable materials, and optimizing logistics will help.


Operations Management and Supply Chain Management

While operations management focuses on optimizing efficiency and effectiveness in production processes. Supply chain management covers a broader scope, including the management of connections. It connects between different entities that collaborate to deliver products and services.


FAQs

  1. What does a supply chain do?

  • Manages the flow of goods, services, and information from suppliers to consumers.

  1. What is meant by supply chain?

  • It refers to the integrated process of producing and delivering a product to the end user.

  1. Why is supply chain management important?

  • It helps companies reduce costs, improve efficiency, and enhance customer satisfaction.

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