A supply chain is an interconnected system of people, resources, activities, organizations, information and technologies that are involved in directing a product or service from supplier to customer. The term supply chain brings up pictures of different items being directed from suppliers to manufacturers, distributors, retailers and clients all along the chain. This term may also refer to the fact that a single player is involved at every stage. For example, a manufacturer may be supplied with material by a few providers and supply a few more distributors. Therefore, supply chains are basically networks, and the term supply network would describe the structure of most supply chains far more accurately.
Classical Supply Chain:
A classical supply chain consists of many stages, for example: customers, retailers, wholesalers/distributors, manufacturers, components/raw material providers. Each stage does not necessarily need to be mentioned in a supply chain. The look of supply chain should solely depend on customer needs and the roles of each stage involved.
Supply chain in organizations comprises all functions of accepting and meeting clients’ needs, such as product development, distribution, marketing, finance, operations, customer service and many others.
Supply chain is dynamic, it contains continuous flow of product, funds and information between various stages.
Purpose of Supply Chain:
The initial purpose of any supply chain is to meet customers’ needs and simultaneously gain profits for the business. These activities usually start with a customer order and finish with a paid purchase by a satisfied client.
However, any merchant that is a member of a supply chain, or network, should keep in mind a few important constants for their business, and that is, basically, asking themselves a number of questions and, of course working toward the right answers. One of the good questions to ask yourself would be – how efficient is your supply chain? In other words your business is supposed to work effectively, considering each of your customers’ needs, excluding over and under-service. Another useful thing to wonder about would be the actual cost of the supply chain, which would cover stock terms, cost per order and per delivery, showing the numbers in details, providing the information on every point to help see the whole picture and exclude extra expenditure, if required. One more crucial moment worth finding the answer to are ways to improve the supply chain. First of all you should look at it in terms of revenue. Can delivery be boosted? If the sales items are not available to the buyer when they want it, we generally lose a sale.
So, is there a way to get these items faster? Can our service become better? In terms of the cost side of the equation procurements and the stock management are expensive products. Lots of companies prefer to deal with cheaper unit costs, not the end-to-end total supply chain costs. So when the business doesn’t own the stock that is stored by the supplier, it must generate a purchase order and buy single items from the supplier in order to get them delivered to the end customer. That usually makes sense for those businesses that sell single products or in small amounts. This type of shipment is generally called drop shipping and it’s often used for online stores. However, there is another option in place, for when the business owns the actual stock but the supplier fulfills the order at a much more reasonable price, because the products are bought in multiples.
Whatever part of the supply chain you choose to work with, remember to visualize how it all works. It will help you improve your business at each stage and your customers will always come back to you.