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Supply ChainDefinition
Supply ChainDefinition
Supply ChainDefinition
SUPPLY CHAIN
Supply Chain
By
ADAM HAYES
Updated July 30, 2022
Reviewed by
SOMER ANDERSON
Fact checked by
YARILET PEREZ
KEY TAKEAWAYS
A supply chain is a network of companies and people that are involved
in the production and delivery of a product or service.
The components of a supply chain include producers, vendors,
warehouses, transportation companies, distribution centers, and
retailers.
The functions of a supply chain include product development,
marketing, operations, distribution, finance, and customer service.
Today, many supply chains are global in scale.
Effective supply chain management results in lower costs and a faster
production cycle.
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The supply chain begins operating when a business receives an order from a
customer. Thus, its essential functions include product development,
marketing, operations, distribution networks, finance, and customer service.
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When supply chain management is effective, it can lower a company's overall
costs and boost its profitability. If one link breaks, it can affect the rest of the
chain and can be costly.
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Continuous Flow Model: This traditional supply chain model works well for
companies that produce the same products with little variation. The
products should be in high demand and require little to no redesign. This
lack of fluctuation means managers can streamline production times and
keep tight control over inventory. In a continuous flow model, managers will
need to regularly replenish raw materials in order to prevent production
bottlenecks.
Fast Chain Model: This model works best for companies that sell products
based on the latest trends. Businesses that use this model need to get their
products to market quickly to take advantage of the prevailing trend. They
need to rapidly move from idea to prototype to production to consumer. Fast
fashion is an example of an industry that uses this supply chain model.
Flexible Model: Companies that manufacture seasonal or holiday
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merchandise often use the flexible model. These companies experience
surges in demand for their products followed by long periods of little to no
demand. The flexible model ensures they are able to gear up quickly to
begin production and shut down efficiently as soon as demand tapers off. In
order to be profitable, they must be accurate in forecasting their need for
raw materials, inventory, and labor.
Logistics deals with the planning and control of the movement and storage of
goods and services from their point of origin to their final destination.
Assume, for example, that XYZ Furniture manufactures high-end furniture, and
that a supplier provides metal handles and other attachments. The metal
components need to be durable so that they last for many years. They must
meet the design and quality specified by the manufacturer, and they must work
as intended.
A reliable supplier will fill the manufacturer’s order and ship the parts on time.
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industry leaders.
At the same time, demand for products changed abruptly. Shortages developed
as consumers hoarded essentials like toilet paper and baby formula. Masks,
cleaning wipes, and hand sanitizers were suddenly in demand. Shortages of
computer chips delayed the delivery of a wide range of products from
electronics to toys and cars. [2]
Shifting Priorities
A survey in late 2020 by Ernst & Young of 200 senior-level supply chain
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executives pointed to three essential findings:
The pandemic had a deep negative effect, cited by 72% of supply chain
executives. Automotive and industrial supplies companies were worse-hit.
"Visibility" is the top priority, and the word is meant literally. The executives
want to focus on adding technology such as sensors that give them a better
view of their orders throughout the process.
That is the first step in the process. From there, the raw materials are hauled to
a wholesaler, who sells them in batches to manufacturers. Once delivered, the
manufacturer uses the materials to create a product, which is then delivered to
a retailer. Finally, it is sold to a consumer.
That's the big picture, but note that each step in the process is complicated by
the need to prepare, package, ship, and unpack the product at each of its
successive destinations.
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What Is Supply Chain Management (SCM)? products and asset classes but is a good fit
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Supply chain management (SCM) is the management of the flow of goods and services as
well as overseeing the processes of converting original materials into final products.
more
LEARN MORE LEARN MORE
Understanding End-to-End in Business
End-to-end refers to a process that takes a method or service from its beginning to its
end, delivering a complete functional solution.
more
Procurement Definition
Procurement is commonly associated with businesses' or governments' need to solicit
services or purchase goods, usually on a relatively large scale.
more
What Is Throughput?
Throughput is the rate at which a company can produce and sell its goods to customers.
more
Backward Integration
Backward integration is a type of vertical integration that includes the purchase of, or
merger with, suppliers. more
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