Definition of the Supply Chain, Key Components, Types, and More The collection of procedures, resources, and modes of delivery needed to market a product as a whole is known as a supply chain. That is, starting with the procurement of raw materials, transforming them thereafter, and then manufacturing, shipping, and delivering the finished product to the customer.
To put it another way, the source chain is a logistical and strategic function that includes all of the necessary item processes to ensure that the ultimate client receives their order in optimal condition.
Supply Chain Goal
Meeting the demands of the final consumer as best as possible is the stream chain’s primary goal. The aforementioned serves the following objectives:
- Deliver goods and services on time.
- Avoid unnecessary losses or shrinkage.
- Optimize distribution times.
- Proper management of inventories and warehouses.
- Establish adequate communication and coordination channels.
- Dealing with unforeseen changes in demand, supply, or other conditions.
Core items
The source chain contains three essential elements:
- Supply: Refers to the activities necessary to obtain and deliver the raw materials for production.
- Manufacturing the process in which raw materials are transformed to obtain a different product or service.
- Distribution: It gets the products or amenities to the final consumers through a transport system, commercial premises, and warehouses.
Supply Chain Types
We can find six types of source chains:
- Traditional: In this type of supply chain, each party acts autonomously and without excessive communication. The main problem is that failures occur more frequently without an internal announcement.
- Direct: It is a simple supply chain since only three parties are involved: the supplier, the company that sells the product, and the customer. In this way, being a light chain, the number of failures is reduced, and the efficiency and speed of supply increase.
- Strategic: It consists of planning and distributing logistics optimally based on the location of each receiver of merchandise. This will save costs even though it may take longer.
- Shared: This type of supply chain is used when the different parties involved in manufacturing a product agree to supply it.
- Synchronized: Synchronized production chains are used when working with large demand volumes, requiring constant information flow between the different parties.
- Complex: These types of chains can be found in large companies. Companies with different product lines and providers require a complex source chain to carry out their activity.
Supply Chain Example
In this example, we explain what the stream chain of a car is:
- First, extracting the raw materials required to build the materials it includes is necessary. These raw materials would be oil for plastic, steel, iron, aluminum, etc.
- Secondly, the raw materials are transported to where the pieces will be created. The oil will be turned into plastic, and the dashes, seat adjustment levers, gearbox manufacturing, and other vehicle machinery will be shaped.
- Once all the necessary parts for the car’s construction have been manufactured, it is time to assemble it. First, the details will be transported to the car’s manufacturing plant, where each will be made so the vehicle is ready for sale.
- The car will be transported to the dealership and marketed in the fourth position. There it will be put on a show for potential customers to get.
- Finally, when a customer has decided to buy it, all the necessary procedures will be carried out to put it into circulation and delivered to the customer.
Elements of a supply chain
For the supply chain to function properly, many factors must come into play. First, there are the suppliers who provide all the raw materials needed to manufacture the commodities that the market requires. Next in the chain is transportation, which is essential since it delivers inputs and raw materials to their destinations. The business is also responsible for manufacturing the products or delivering them to the next link in the supply chain. Eventually, some clients get the supplies they require for their tasks.
Supply Chain Example
The production and distribution of detergent is an illustration of a supply chain. Choosing the basic materials is essential for this. They are then bought and transported to the facility, where each component is processed in compliance with the law. After the product is finished, it moves on to the packaging phase, which a supplier can handle. After that, it is delivered by air, land, or sea to wholesale businesses, who subsequently deliver it to the retail locations.