Understanding a Supply Chain

A supply chain is a network between an organization/company and its suppliers to manufacture and distribute a product. The supply chain represents the steps it takes to get the product or service to the customer. Supply chain management has thus helped organizations to drastically reduce the time required to process and deliver products to customers.

Need for Supply Chain Management:

It is a well-known fact that supply chain management is an integral part of most businesses and is essential to company’s success and for customer’s satisfaction. The changing and ever growing business environment has made organization/companies sit up and realize that if they had to survive, they needed to reduce the costs, improve the quality and ensure smooth deliveries on time. This balance can be achieved with an effective supply chain management system.

Supply Chain Process Flow:

A supply chain may or may not always involve the following stages:

• Suppliers
• Manufacturers
• Wholesalers or distributors
• Retailers; and
• Customers.

In a supply chain with suppliers, manufacturers, wholesalers, customers in a line, the flow of products and service, information and finances takes place in both the directions.

At the beginning, the external suppliers of the chain supply and transport raw materials and components to the manufacturers. Manufacturers then transform these materials into finished products. These products are then shipped either to manufacturer’s own distribution center or then to wholesaler’s. Next, the production is shipped to the retailers who then sell the product to the customers. Even though the customer is at the end of the chain, it is the customer who drives the entire process flow.

How a Supply Chain Functions:

Consider a customer walking into an Electronics store to buy a gadget. The process that initiates the supply chain starts with the need of the customer to buy an electronic gadget. The customer picks his gadget from a varied collection from the inventory supplied from its finished goods warehouse or by a distributor. 

The items ‘pulled’ out of the warehouse or distribution center trigger the manufacturer to produce more and fill the warehouse with more items. In order to produce more items, the manufacturer has to request more raw materials from their suppliers. These suppliers are called as the first-tier suppliers who also have their own suppliers, called lower-tier suppliers. As the manufacturer requests more raw materials from their suppliers, these first-tier suppliers request more material from the lower-tier suppliers.

Conclusion:

To conclude, management of a supply chain is a crucial process, as an optimized and efficient supply chain will result in lower costs and a faster production cycle.

About Author:

Disha Udani is a consultant in Systems Plus Pvt. Ltd. Within Systems Plus, she actively contributes to the areas of Technology and Information Security. She can be contacted at:  disha.udani@spluspl.com