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What is a supply chain? What is supply chain management?

What is a supply chain? What is supply chain management?

Posted: Mon 4th Sep 2023

In today's economy, where products can travel thousands of miles before reaching the end consumer, understanding the intricacies of the supply chain is essential.

In this blog, we explore the fundamental concepts of the supply chain, the various steps involved in getting a product from the manufacturer to the customer, and how supply chain management works. We'll also look at why having a diverse supply chain can be crucial.

What is a supply chain?

The supply chain is the process that makes sure goods and services can flow smoothly from the point of production to the point of consumption. It involves a series of interconnected activities, including:

  • sourcing raw materials

  • manufacturing

  • transportation

  • warehousing

  • distribution

The supply chain is vital in that it determines whether products or services are available on the market, and how they are priced.

How does a supply chain work?

In a supply chain, a number of different entities – including suppliers, manufacturers, distributors, retailers and logistics providers – work together to make sure materials, information and processes move between each other efficiently and effectively.

Each party plays an important role in making sure goods or services are produced and delivered to meet customers' demands.

The supply chain starts with raw materials being procured, then manufactured and assembled. The finished products are stored, before they're distributed through a network of distribution centres, ultimately reaching the end consumer. (We cover this process in the What are the steps in a supply chain? section below.)

Supply chains must be managed effectively so:

To ensure a smooth and continuous flow of goods from start to finish, supply chain managers use various techniques, such as:

  • accurate forecasting

  • demand planning

  • production scheduling

In today's markets, supply chain resilience is also vital. Modern supply chains are going digital, incorporating technology like artificial intelligence and enterprise resource planning, to improve efficiency and limit risk.

Why does my business need to understand its supply chain?

Understanding the supply chain helps you effectively define your market and make strategic decisions for the future.

Once you know how the entire supply chain works, from the sourcing of raw materials to the delivery of the finished product, you gain valuable insight into the dynamics of your industry and what customers are looking for.

Understand competitors and markets

Mapping out the supply chain allows you to identify the key players in your industry, their roles, and their relationships within the supply chain.

Having this information lets you assess your position in the market, determine areas of strength and weakness, and make informed decisions to improve your competitive advantage.

Get value for money

By analysing various parts of the supply chain (such as sourcing, manufacturing and distribution), you can find ways to reduce costs, streamline operations, and improve overall efficiency. As a result, you can make valuable savings and begin to offer customers more competitive prices.

Gain a competitive advantage

With a well-managed supply chain, you're more able to offer faster delivery times, superior customer service, and consistent product quality. All of this helps to satisfy customers, build brand loyalty, and set your business apart from its competitors.

Manage risk

Understanding the supply chain lets you manage risks effectively. Once you've identified potential bottlenecks, vulnerabilities and dependencies within the supply chain, you can develop contingency plans and avoid any possible disruption.

Benefit from procurement opportunities

By knowing the suppliers and their capabilities, you can explore partnerships, diversify your supplier base, and capitalise on new market trends. This opens avenues for innovation, enhances the quality of your product, and boosts customer satisfaction.

 

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What are the steps in a supply chain?

In a supply chain, there are several key steps that contribute to the overall process of delivering goods or services to customers.

Supply chain management is all about co-ordinating these steps and making sure the entire supply chain process runs to its absolute best.

Step 1: Sourcing raw materials

Identifying and procuring the necessary materials or components needed to make the final product. Supply chain managers work closely with suppliers to make sure there is a reliable and efficient supply of raw materials.

Step 2: Manufacturing or sourcing other materials

Transforming the raw materials into components or finished goods through various manufacturing or assembly processes. Supply chain managers oversee the production process, monitor quality, and ensure timely completion to meet customer demands.

Step 3: Assembling parts

Putting together the different components to create the final product. Supply chain managers make sure all the parts are available and co-ordinate the assembly process to meet production schedules.

Step 4: Packaging the product

Properly packaging the finished goods to protect them during transportation and storage. Supply chain managers work with packaging suppliers to make sure the right packaging materials are used and that the products are packaged efficiently.

Step 5: Transporting and delivering the products

Co-ordinating logistics and transport so the goods can be delivered, on time, to distribution centres or directly to customers. Supply chain managers work with logistics providers to select the best possible transportation routes and make sure goods are delivered cost-effectively and efficiently.

Step 6: Customer support and return services

Addressing customers' enquiries, providing after-sales support, and managing product returns or exchanges. Supply chain managers collaborate with customer service teams to make sure customers have excellent experiences and are left satisfied.

 

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What is supply chain management?

Managing a supply chain effectively involves several key considerations and strategies.

Communication

Effective communication is crucial in co-ordinating all activities in the supply chain. Clear and timely communication between suppliers, manufacturers, distributors and customers means the supply chain can operate smoothly, with less chance of any delays or errors occurring.

Regular communication allows you to address issues promptly and maintain strong relationships with your supply chain partners.

Up-to-date knowledge

Staying updated with industry trends and technology is essential in managing a supply chain. Understanding market demands, new product developments, and emerging technologies and tools lets you adapt your supply chain strategies accordingly.

Armed with this knowledge, you're better able to anticipate changes, identify opportunities, and stay ahead of competitors.

Planning

Real-time planning and visibility benefit supply chain management enormously. By using advanced supply chain management systems, you can monitor your inventory levels, production schedules, and delivery statuses in real time.

This proactive approach helps you make accurate forecasts, allocate resources efficiently, and respond quickly to customers' demands.

Artificial intelligence (AI) and automation

These technologies are beginning to play a transformative role in supply chain management. AI algorithms can analyse large volumes of data, helping you to forecast demand and manage inventory more accurately and efficiently.

And by automating repetitive tasks, such as order processing or inventory tracking, you can cut down on human error and free up valuable resources for more strategic activities.

Flexibility

This is a crucial element of modern supply chain management. As customer demands and market conditions shift rapidly, supply chain managers must adapt and respond quickly to meet these ever-changing needs.

This includes being able to:

  • adjust production schedules

  • optimise transportation routes

  • manage inventory levels efficiently

  • collaborate effectively with supply chain partners

A flexible supply chain can help companies respond to unexpected events, mitigate supply chain disruptions, and maintain a competitive edge in the market.

What does it mean to diversify a supply chain?

Diversifying a supply chain means sourcing and procuring materials and other items from a number of different suppliers rather than relying solely on one.

As a result, you reduce the risk of your supply chain being disrupted, as well as avoid any uncertainties that may arise from your dependence on one supplier or location.

By diversifying the supply chain, you can become a more resilient business and improve how well you respond to unforeseen events such as natural disasters, geopolitical issues, or failures with suppliers.

 

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