What is a supply chain?
A supply chain is a network of people and companies involved in creating a product and delivering it to the consumer. The links in the chain start with the raw material producers and end when the van delivers the finished product to the end user.
Supply chain managementit is a crucial process because an optimized supply chain results in lower costs and a more efficient production cycle. Companies seek to improve their supply chains in order to reduce their costs and remain competitive.
- A supply chain is a network of companies and people involved in the production and delivery of a product or service.
- The components of a supply chain include producers, suppliers, warehouses, carriers, distribution centers, and retailers.
- Supply chain functions include product development, marketing, operations, distribution, finance, and customer service.
- Today many supply chains are global in scale.
- Effective supply chain management results in lower costs and a faster production cycle.
Understand a supply chain
A supply chain includes all the steps necessary to bring a finished product or service to the customer. The steps may include sourcing raw materials, moving them into production, and then transporting the finished goods to a distribution center or retail store where they can be delivered to the consumer.
Entities involved in the supply chain include producers, suppliers, warehouses, carriers, distribution centers, and retailers.
The supply chain begins to operate when a company receives an order from a customer. Therefore, its primary functions include product development, marketing, operations,distribution networks, finance and customer service.
When supply chain management is effective, it can reduce a company's overall costs and increase its profitability. If one link breaks, it can affect the rest of the chain and can be expensive.
What are the main supply chain models?
There are many types of supply chain models available. The model a business selects will depend on how the business is structured and what its specific needs are. Here are some examples:
- Continuous flow model:This traditional supply chain model works well for companies that produce the same products with little variation. Products must be in high demand and require little to no redesign. This lack of fluctuation means managers can optimize production times and keep tight control on inventory. In a continuous flow model, managers will need to regularly replenish raw materials to prevent production from slowing down.bottleneck.
- Quick chain model:This model works best for companies that sell products based on the latest trends. Companies using this model need to get their products to market quickly to take advantage of the prevailing trend. They need to move quickly from idea to prototype, from production to consumer.fast fashionis an example of an industry using this supply chain model.
- flexible model:Companies that make seasonal or holiday products often use the flexible model. These companies experience sudden increases in demand for their products, followed by long periods of little or no demand. The flexible model ensures that they can quickly prepare to start production and shut down efficiently once demand subsides. To be profitable, they must be accurate in forecasting their needs for raw materials, inventory, and labor.
What are the best supply chain management practices?
Here are some of the best practices seen in successful supply chain management systems:
- They support continuous improvement.
- They are meant to increase speed.
- They encourage collaboration between individual companies in the supply chain.
- They look for new technologies that improve their processes.
- They have metrics that allow employees to measure the success or failure of each step in the supply chain.
What is supply chain management vs. business logistics management?
The termsSupply chain management(SCM) and business logistics management, or simply,logistics- are often used interchangeably. However, logistics is really a link in the supply chain.
Logistics deals with the planning and control of the movement and storage of goods and services from their point of origin to their final destination.
Successful logistics management ensures that there are no delivery delays at any point in the chain and that products and services are delivered in good condition. This, in turn, helps keep costs down for the business.
What is the manufacturing cost stream?
Efficient supply chain systems put each piece of product where it is needed, when it is needed. This means controlling the flow of manufacturing costs.
The manufacturing cost stream is most relevant to companies that make products that require many different parts from many suppliers. For example, a clothing manufacturer might need deliveries of fabric, zippers, trims, and thread to arrive at the same time. If any supply arrives too early, it must be stored at the company's expense. If anyone is late, the machines are idle while they wait.
Reliable suppliers are key
An efficient supply chain management process requires reliable suppliers. This means that they produce a product that meets the manufacturer's specifications and deliver it on time.
Suppose, for example, that XYZ Furniture makes high-end furniture and that a supplier supplies metal knobs and other accessories. Metal components must be durable to last for many years. They must meet the design and quality specified by the manufacturer and must function as expected.
A reliable supplier will fulfill the manufacturer's order and ship the parts on time.
Does the supply chain cause deflation?
Increasing supply chain efficiencies has played a significant role in reducinginflation🇧🇷 As the efficiency of moving products from point A to point B increases, the costs of doing so decrease, which reduces the final cost to the consumer. WeatherdeflationOften viewed as a negative, supply chain efficiency is one of the few examples where it is a good thing.
As globalization increases, the efficiency of the supply chain is further optimized, which keeps pressure on input prices.
How has COVID-19 affected the supply chain?
One of the most serious economic problems caused by the COVID-19 pandemic has been the damage to the supply chain. Its effects affected almost all sectors of the economy.
Product deliveries of all kinds have been delayed due to ever-changing restrictions at national borders and long delays at ports.
At the same time, the demand for products has changed dramatically. The shortage developed as consumers hoarded essential items like toilet paper and baby formula. Suddenly there was a demand for masks, cleaning wipes, and hand sanitizers. The shortage of computer chips has delayed the delivery of a wide range of products, from electronics to toys and cars.
change of priorities
A late 2020 survey by Ernst & Young of 200 senior supply chain executives found three key findings:
The pandemic has had a profound negative effect, cited by 72% of supply chain executives. Automotive and industrial supply companies were hardest hit.
"Visibility" is the top priority, and the word is taken literally. Executives want to focus on adding technology like sensors that give them better insight into their orders as they move through the process.
The pandemic has accelerated the transition to digitalization, with the majority of respondents saying that digital transformation combined with increased automation will accelerate in the coming years.
What is supply chain management?
Supply Chain Management (SCM) is the oversight and control of all the activities necessary for a company to turn raw materials into finished products that are sold to end users.
SCM provides centralized control for the planning, design, manufacturing, inventory, and distribution phases necessary to produce and sell a company's products.
One of the goals of supply chain management is to improve efficiency by coordinating the efforts of the various entities in the supply chain. This can result in a company gaining a competitive advantage over its rivals and improving the quality of the products it produces, which can lead to an increase insales and income.
What are the steps in a supply chain?
The key steps in a supply chain include:
- Plan inventory and manufacturing processes to ensureoffer and demandThey are properly balanced.
- Manufacture or supply the materials necessary to create the final product.
- Assembly of parts and product testing.
- Pack the product for shipment or keep it in stock until a later date.
- Transport and deliver the finished product to the distributor, retailer or consumer.
- Provide customer service support for returned items.
What is a supply chain example?
A supply chain begins with the sourcing of raw materials, whether it be diamond mining, leather curing, or sheet metal manufacturing.
This is the first step in the process. From there, the raw materials are transported to a wholesaler, who sells them in batches to manufacturers. Once delivered, the materials are used by the manufacturer to create a product, which is then delivered to a retailer. Finally, it is sold to a consumer.
That's the big picture, but keep in mind that each step of the process is complicated by the need to prepare, pack, ship, and unpack the product at each of its successive destinations.
What is order fulfillment in supply chain management? ›
What is order fulfillment in supply chain management? It is the process of receiving goods, then processing and delivering orders to customers. The process starts with a customer placing an order and ends once they receive it.What are the 5 stages of the supply chain? ›
Supply chain management has five key elements—planning, sourcing raw materials, manufacturing, delivery, and returns.What are the four 4 stages of supply chains? ›
- INTEGRATION. Integration starts at your strategic planning phase and is critical throughout your communications and information sharing and data analysis and storage. ...
- OPERATIONS. ...
- PURCHASING. ...
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Order fulfillment is the process of receiving, packing, and shipping orders. When someone purchases an item from your ecommerce store, the order fulfillment process picks the order off the shelf, packages it, and ships it to their home.What is order fulfilment strategy? ›
Order fulfillment is the process of receiving, packing, and shipping orders. The process begins when a customer purchases a product and ends when they receive the product.