The supply chain is the cornerstone of a company’s logistics, regardless of its business profile and customers. In this article, we explain what a supply chain is and what it means.
What is a supply chain (supply chain)? It can be said that the supply chain is an extremely extensive process. The term supply chain is such a broad one that it cannot be described in just a few words. Supply chains are a whole sequence of events, it is also the process of moving goods. The main purpose of a supply chain is to meet the demand for a product. It can be said that the supply chain is a network of organizations involved in the process and is characterized by extensive connections with suppliers, as well as customers. The activities they carry out create value, it is the product and service delivered to consumers or end users.
One may wonder what a supply chain is. What is certain is that the process consists of a network of plants, companies and manufacturers, as well as contractors, who firstly supply raw materials and components, and secondly process them into sub-assemblies and semi-finished products. And further, from these intermediates and sub-assemblies a final product is produced, which reaches the consumer. It is also worth knowing that the basic elements of the supply chain are transportation and warehousing. They are the ones that make delivery possible and possible.
Logistics is also related to the concept of supply chain. It is important to know that logistics is a so-called subordinate concept to supply chain. This is because logistics covers only a small part of the supply chain.
We present three basic features related to the supply chain. They are:
- Entity structure – these are the entities that participate in the supply chain,
- The object of the flow – is all kinds of materials and products processed and then moved through the subsequent elements of the supply chain,
- Objectives – are the activities and areas of interaction of the entities that participate in the supply chain.
What does the supply chain consist of? three elements should be mentioned:
- company
- suppliers
- customers
It is worth knowing that there are extended supply chains. Thus, the extended supply chain includes:
- suppliers of suppliers,
- customers of customers,
- Companies that provide logistics, financial, marketing and IT services.
You should also be aware that the following processes are distinguished within the supply chain:
- Development,
- production,
- sales,
- service,
- supplies,
- resource management,
- distribution,
- all kinds of support activities.
What are the types of supply chains? The supply chain covers the entire life cycle of a product. It includes sales, after-sales service, and disposal. In other words, it is a value chain. The supply chain is made up of all the elements and values transferred by a given company to the market and society. There are two parts of the supply chain. The first is the upper part of the supply chain – from the manufacturer through first- and second-tier suppliers to the company. The second is the lower part of the supply chain. It runs from the company through distributors and sellers to the consumer.
There is also a sustainable supply chain. What is it? It’s all kinds of business activities that span the life cycle of a product. They are the ones that allow value creation for all parties to the contract and ensure commercial success. This, in turn, has an impact on social welfare and environmental health.
Another type of supply chain is the green supply chain (responsible supply chain). The characteristic of a sustainable supply chain is that the so-called ideas of green operations and green design, as well as green production, are included in its process. Reverse logistics and waste management are also characteristic in this model. In a green supply chain, it is important to seek to maximize profits, but in a different way than is done in traditional supply chains. In this case, all activities carried out are directed at reducing the consumption of natural resources or energy. Participants in a green supply chain also seek to reduce emissions.These are actions characteristic of responsible businesses.
What are the goals of the of the supply chain?
It can be said that the primary purpose of introducing supply chain management is financial benefit, or simply money. This is because every innovative solution is associated with savings for the company and its financial gain. Supply chain management improvements that are introduced give companies the highest return. This is because it is possible to reduce the cost of goods sold. Taken together, logistics, production, means of obtaining raw materials, transformation of raw materials, storage of goods or transportation, as well as all kinds of fees and manpower are costs of up to 80% of the cost of sales. So if even a small decrease in this percentage, such a state of affairs will have a huge impact on the company’s profitability, and this is already crucial for the company in question. This makes it possible to achieve better financial results.
What are the objectives of supply chain management? We can list 5 main objectives of supply chain management, they are:
- Creating effective cooperation to automatically coordinate logistics on the part of suppliers and buyers,
- To provide end customers with valuable and high-quality products,
- Attention to long-term stability and sustainability. In this process, an important role is played by planning and executing each activity in an optimal way, i.e. starting from the material acquisition cycle to the procurement cycle. These activities are carried out to be able to meet consumer needs,
- Anticipating and then exploiting potential opportunities and threats.
- enabling success and reducing financial risk by reducing or bringing about cost reductions – the costs of product storage, manpower and logistics are also important and need to be reduced. In this process it is also necessary to bring about an increase in sales, market availability and product differentiation play an important role.
What is supply chain management?
Let’s consider what effective supply chain management is all about. It can be said that at the first and basic level, effective supply chain management is based on managing the flow of goods, data and funds that are directly related to products or services. In this case, the time span covers the moment from the purchase of raw materials until the delivery of the product in question to its final destination (to the end customer).
Supply chain is often confused with logistics. And it is only one part of the supply chain. All operations that take place within the supply chain include:
- ordering,
- product lifecycle management,
- Supply chain planning along with inventory and maintenance of company resources,
- Logistics, which includes transportation and fleet management,
- order management.
In addition, directly related to the concept of supply chain management is also the management of global suppliers, as well as all kinds of international production processes.
The primary goal of supply chain management is to reduce company costs, as well as increase efficiency. Nowadays, it is the customer who determines management priorities by giving companies experience.
Nowadays, the customer attaches itself only to the company that is able to meet customer expectations quickly and efficiently. Therefore, all the supply of raw materials carried out, followed by the production, logistics and sales of products, as well as the management of acquired orders must work together and be well coordinated. Only then will the customer receive what he expects within a timeframe acceptable to him. Nowadays, companies need to analyze supply chains from the consumers’ point of view in some way. Only then will it be an efficient supply chain.
Like today’s world, supply chains are now highly complex and constantly evolving. The efficiency of supply chains depends on flexibility. This is because customers have a wide range of choices and different purchasing options. They can freely purchase products in stationary stores, but also online. Customers are now focused on personalization, and only a modern flexible supply chain can provide them with this.
The world is moving forward, and as a result, sourcing is also constantly evolving and is now extremely fluid. The ability to reconfigure supply chains flexibly, quickly and seamlessly is very important. As you can see, flexibility plays a key role in this process.
A fundamental issue of business management is supply chain management. Modern companies do everything to be able to cooperate with each other, because only such cooperation increases efficiency and makes it possible to reduce the costs associated with running a company. This approach to business also makes it possible to adapt to the needs of customers. Below are the elements necessary for supply chain management:
- Location of warehouses and production facilities,
- transportation,
- storage,
- Resource and inventory control,
- Information, especially its collection, processing and transmission (information flow),
- Emphasis on marketing and customer service,
- A well-thought-out packaging and residue management strategy.
In addition, the following methods are used in supply chain management:
- LM – slimming management,
- QR – quick response,
- AM – flexible management,
- TQM – total quality management,
- BPR – involving the redesign of the business process,
- TBM – or time management,
- Six Sigma,
- ECR – efficient service in consumer supply chains,
- JiT – that is, delivering goods exactly on time,
- SCOR – which is a supply chain reference model,
- VMI – vendor management of inventory.
Each time, supply chain management is tailored to the company. Today, it is impossible to imagine a company’s operations without an effective supply chain. This is because it is the essence of any company’s logistics regardless of the company’s profile, and regardless of the profile of its customers.
