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Overview of Supply Chain
Definition of
Supply Chain
What is a Supply Chain? A Supply Chain is the entire network of organizations, people, activities, information, and resources involved in moving a product or service from its raw material suppliers to the end customer. This complex system includes everything from the extraction of raw materials, to the transformation of these materials into components and finished products, through to distribution channels, and finally, delivery to the consumer. Effective supply chain management aims to optimize these flows for efficiency and cost-effectiveness.
Activities Related to
Supply Chain
Here is a list of Supply Chain related activities:Â
Sourcing raw materials and components (procurement), Manufacturing and production planning, Inventory management and warehousing, Order fulfillment, Logistics and transportation (shipping and freight), Distribution channel management, Demand forecasting and planning, Supplier relationship management, and Customer service related to product delivery.
These activities are coordinated through Supply Chain Management (SCM).
The Importance of
the Supply Chain
An efficient Supply Chain is important for businesses because it directly impacts costs, product availability, customer satisfaction, and overall profitability. Effective supply chain management can lead to lower operating costs (e.g., reduced inventory holding costs, optimized transportation), faster delivery times, improved product quality, and greater responsiveness to changes in customer demand or market conditions. A well-managed supply chain is a significant competitive advantage, ensuring that the right products are in the right place at the right time and at the right cost.
Key Aspects of
Supply Chain
Network of Entities
Includes all parties involved, from initial suppliers to the final customer.
Flow of Goods, Information, and Finances
Involves the movement of physical products, related data, and financial transactions throughout the chain.
Interconnected Processes
Comprises various integrated processes like procurement, production, inventory management, and logistics.
Goal of Efficiency and Customer Satisfaction
Aims to deliver products and services effectively and efficiently to meet customer needs while minimizing costs.
Concepts Related to
Supply Chain
The Supply Chain encompasses processes like Inventory Management, logistics, and procurement. Its efficiency directly impacts the Cost of Goods Sold (COGS) and overall Operating Costs. Concepts like Just-in-Time (JIT) inventory are strategies within supply chain management. The entire supply chain ultimately affects a company's ability to generate Revenue and Profit.
Supply Chain
in Action:
The Adventures of Coco and Cami
Coco needs fresh bread from the bakery, special meats from the deli, and crisp lettuce from the farmer to make her sandwiches. Cami needs coffee beans from a roaster and milk from a dairy for her lattes.
Professor A explains that this whole network – from their suppliers, to their shops, and finally to their customers – is their Supply Chain, and managing it well is key to their success!