Supply chain

Page written by AI. Reviewed internally on July 11, 2024.

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A supply chain is a network of organisations, individuals, activities, resources, and information involved in the creation, production, distribution, and delivery of goods and services to end consumers.

What is a supply chain?

A supply chain encompasses all the stages and processes from raw material extraction to the final delivery of a product or service. 

Supply chain participants:

  1. Suppliers: These are the entities that provide raw materials, components, or services needed for the production of goods or services. Suppliers can range from local vendors to global partners.
  2. Manufacturers/producers: These are the companies or entities responsible for transforming raw materials into finished products.
  3. Distributors/wholesalers: Distributors buy products from manufacturers in bulk and then sell them in smaller quantities to retailers. They play a crucial role in moving products closer to the end consumer.
  4. Retailers: These are the businesses that sell products directly to consumers. They can be physical stores, e-commerce platforms, or any other channels.
  5. Transportation and logistics companies: They handle the movement of goods within the supply chain. This includes transportation, warehousing, and inventory management.
  6. Customers/consumers: These are the ultimate end users of the products or services. 

Recognising and preparing for potential disruptions, such as natural disasters, geopolitical events, or supplier issues, to ensure continuity in the supply chain is a crucial part of supply chain management.

Supply chain management

Supply chain management (SCM) is the coordination and oversight of all activities involved in producing and delivering goods and services to customers. It includes the entire process from sourcing raw materials to manufacturing, transportation, warehousing, and final distribution. SCM aims to optimise efficiency, reduce costs, and improve customer satisfaction by making sure that each component of the supply chain operates smoothly and effectively.

Key functions of SCM include demand forecasting, inventory management, procurement, production planning, logistics, and quality control. Effective supply chain management requires collaboration among suppliers, manufacturers, distributors, and retailers to align their activities and share information. Technological tools play an important role in improving visibility and coordination across the supply chain.

Example of a supply chain

Let’s consider a company, XYZ Electronics, that manufactures and sells smartphones:

  1. Raw materials suppliers: XYZ Electronics sources raw materials from various suppliers around the world. These suppliers provide the necessary materials for manufacturing smartphones.
  2. Manufacturing facilities: Once the raw materials are acquired, XYZ Electronics manufactures the smartphones at its production facilities.
  3. Distribution centres: After production, the smartphones are transported to distribution centres located strategically in different regions.
  4. Retailers: XYZ Electronics sells its smartphones through retail partners. These retailers purchase the smartphones from the distribution centres and sell them to end customers.
  5. End customers: Finally, the smartphones are purchased by end customers, who use them for communication, entertainment, and productivity.

In this example, the supply chain of XYZ Electronics consists of multiple stages. Each stage of the supply chain plays a key role in delivering smartphones to the market efficiently and effectively.

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