What Is A Supply Chain? (With Supply Chain Types And Steps)
Updated 8 September 2023
All businesses that produce, distribute and sell goods rely on supply chain networks for their operations. Alongside ensuring the efficient delivery of products to consumers, a supply chain network employs people in various job positions. By understanding how a supply chain operates, you can realise its relevance in business infrastructure and use it for the company's benefit. In this article, we discover the answer to the question, "What is a supply chain?", find out about the steps in a supply chain and learn why supply chain management is so important.
What is a supply chain?
The common answer to the question "What is a supply chain?" is that it is a system of networks between an organisation and its vendors. A supply chain covers all the activities essential for producing, distributing and selling commercial goods to consumers. Goods and services can be tangible or digital.
The supply chain infrastructure comprises workers, data, technology and other resources. It involves various steps to transform materials into products. A supply chain enables the movement of materials and goods from warehouses, manufacturing plants, assembly centres, shipping ports and transportation companies to retailers and consumers. A well set-up supply chain is responsive to business and consumer requirements and can reduce production costs, speed up manufacturing cycles and improve the overall operational efficiency of an organisation.
What are some types of supply chain models?
Organisations can review many different supply chain models and select the ones that suit their specific business structure and needs. Some of the models to consider for improving the workflow efficiency are:
If an organisation manufactures specialised items on order, they may want to consider the agile supply chain model. It is a management method suitable for making, distributing and selling goods for which there is inconsistent or infrequent market demand. With the agile model, a company can manipulate the supply chain to match the demand. For instance, if there is an increased demand for the products, they can increase the supply chain activities and reduce these when there are few or no product orders.
Continuous flow model
The continuous flow model is a traditional type of supply chain model. It is suitable for businesses that produce items that are not likely to vary too much in their features and have a high market demand. Having an ongoing supply chain for these types of high-demand and unvarying commodities can help stabilise the organisation's business operations. Businesses can continue to manufacture and ship the goods without causing the supply chain to fluctuate and that can make the business more efficient and profitable.
Custom configured model
A custom configured model combines the agile and continuous flow supply chain models. With the custom-configured model, companies can customise the supply chain configuration to meet the specific requirements of the business. It is particularly useful if they can manufacture products that have multiple configurations. In addition, they can use the continuous flow model for processes before the product configuration and the agile model after the product configuration.
Efficient chain model
Businesses operating in highly competitive markets can benefit from the end-to-end efficiency that is possible with the efficient chain model. With this type of model, the organisation can maximise the use of human, physical, technological and financial resources. Businesses can reduce expenses arising from wastage of resources and time and improve operational efficiency. It is a flexible supply chain model that they can scale up or down to suit high and low market demands.
Fast chain model
Fast chain models are suitable for businesses that make products to meet short-term market trends. Since most trends tend to be short-lived, the products correspondingly have short life cycles. If the organisation produces trendy goods, it is necessary to expedite while the trend lasts and be prepared to switch to newer products once the trend ends. The fast chain model enables the swift movement from product ideation to prototype creation to product manufacturing. Companies can ensure the finished goods reach the consumers on time. They can take advantage of prevailing trends and make a profit while they last.
With the flexible supply chain model, businesses can determine which supply chain models work well for them and pick those. They can change their choices if the business requirements change. This type of flexibility allows them to take advantage of high-demand periods to produce more goods and slow down production when the market demand is low.
What are the steps in a supply chain?
The steps in a supply chain can differ according to the supply chain model. Some of the general ones that are common to all supply chains are:
Planning: The business plans the goods it wants to produce, selects the appropriate manufacturing processes and determines the number of goods necessary to meet the market demand. For instance, the business might decide to manufacture cars and determine the number of vehicles it can produce.
Sourcing: In this step, the business is concerned with finding and acquiring the necessary raw materials to produce commercial goods. In the case of the car manufacturing company, it can source steel for its vehicle production.
Manufacturing: The business uses the sourced raw materials and processes them using the selected manufacturing methods to turn them into finished goods or product parts. The car manufacturer, for example, can convert the sourced steel into car parts.
Assembling: This step involves putting together the manufactured product parts to assemble the final product. For example, a car manufacturer might use steel car parts to build a car.
Packaging: The finished products get packed in protective and recognisable brand packaging. They are stored in the warehouse inventory or made ready for immediate or later shipment.
Sales: The business markets the products to a selected target group in selected locations through advertisements and promotions and takes orders from retailers and consumers. The car manufacturer can send the finished vehicles to a car dealership where consumers can view and purchase them.
Delivery: In the delivery step, the business arranges for transportation and delivery of the finished goods to the distributors, retailers and consumers who have ordered them. In the case of a car manufacturer, the business makes the shipping and logistics arrangements to get the vehicles to the customers.
Customer service: The business sets up a customer service division to provide product and service-related support to consumers and handle complaints and returned goods. For instance, the car manufacturer may arrange for free or paid car servicing and offer part replacements.
What is supply chain management?
Supply chain management entails overseeing and controlling its various steps. It provides centralised control of all the phases, from product planning to customer service that an organisation can undertake. That can lead to improved operational coordination and efficiency. In turn, that can enhance the quality of goods and services and lead to increased customer satisfaction. It can boost product sales and revenue and give the business an advantage over competitors.
Why is supply chain management important?
Supply chain management is important for the following reasons:
Enable better strategies
By focussing on their supply chain management, organisations can find ways to improve and synchronise new and existing human resources, business processes and technology. They can make plans and investments to venture into new areas and remain aligned with market demands. Being continually prepared can enable an organisation to stay ahead of its business competitors.
Emphasises network design
Supply chain management places great emphasis on improving supply chain networks to enhance the efficiency of business operations. A supply chain manager may use strategic modelling to determine how to best design the network infrastructure. They may also use platform technology to facilitate the centralisation of business processes.
Promotes better customer service
The main goal of supply chain management is to improve the processes that get finished products from the manufacturer to the consumer. By improving operational efficiency, the organisation can improve the quality and delivery of its products. That can lead to better customer service, more satisfied customers and more product sales.
Reduces operational expenses
By enhancing operational efficiency, supply chain management ensures better use of all available resources. That can reduce wastage and help the organisation to also reduce costs. In turn, that can increase its profit margin.
Fosters better business relationships
Supply chain management plays a role in building strong business relationships with vendors, suppliers and other third parties. That can help with placing timely orders, resolving disputes amicably and receiving raw materials and shipping finished goods on schedule. It can improve the overall efficacy of the supply chain.
Encourages corporate responsibility
Increasingly, consumers prefer businesses that can take corporate responsibility in environmental spheres. It can make a difference to product sales and business profits if an organisation focuses on ethically sourced product materials and parts. It can also win consumer approval by making sure that its manufacturing processes are safe and that it disposes of all hazardous waste properly.
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