Supply Chain

In recent years the term supply chain has been widely used. It became an essential knowledge for any new hire regardless of his main qualification. In this article, we are going to introduce in short the definition of the supply chain, its components, and a real life example.

In 80's of the last century, supply chain was introduced in financial times’ interview with Oscar Gomes. Since then several definitions of supply chain have been ascended. Supply chain can be described as a network of people, processes, resources, and technologies in a business that work collectively to produce products and services for an end user. It is a worldwide network used to carry final products and services from raw materials to final consumers through a planned flow of information, physical distribution, and cash.

Simplest form of  supply chain consists of three main parties, i.e. supplier, manufacturer, and customer. When supply chain becomes more complex, it can consist of many suppliers, many manufacturers and many customers. Even one element can be considered as a multi performer, i.e. customer can be either an end consumer or the manufacturer who make a process on a semi finished item purchased from other supplier. Each entity adds value to the chain, hence, supply chain can be considered a value chain for any business.

There is four main flows in the supply chain,

·         Primary product flow: the downstream flow of products from supplier to customer.

·         Cash flow: the upstream flow of funds from end consumer to supplier.

·         Information flow: the upstream and downstream flow of data between entities of supply chain, i.e. sales orders, purchase orders, and invoices.

·         Reverse product flow: the upstream flow of defect products that are not accepted by end customer due to several reasons, i.e. poor quality, product not matching with specifications, or recycling.

Supply chain management is the science of planning, organizing, leading, and controlling all functions related to the supply chain such as customer services, sourcing, production, warehousing, transportation, and after sales support. All those functions are participating in the flow of goods and services from its origin till reaching the final consumer. Being unsuccessful in one function will cause other functions to fail to perform its tasks.

Every industry has its own supply chain model which every company needs to consider for surviving the competition. Not any business can survive the market without considering the importance of its own supply chain. Businesses should apprehend its supply chain model before launching new product to avoid problems that might affect their market share and their own products, i.e. lead time, safety stock and forecast accuracy. Supply chain operations reference model is a management tool defines the mandatory business processes and how to improve them to satisfy a customer’s demands. We are going to discuss it in more details in another article.