How Does the Supply Chain Work [Intro to Supply Chain Management, Detailed Overview]

Introduction

Supply chain management in today’s day and age is crucially relevant to understanding how the economy functions and how goods and services reach consumers daily. It’s a fascinating area that has garnered much attention, especially in light of the pandemic-related disruptions. But how exactly does a supply chain work? This article provides a detailed overview of supply chain operations.

Introduction

My name is Eric Kimberling, the CEO of Third Stage Consulting, an independent consulting firm that aids clients around the globe in their digital transformation journeys. Since the onset of the pandemic, the discipline of supply chain management has become increasingly important. Consumers and organizations alike have experienced the impacts of supply shortages, labor deficits, and supply chain disruptions that affect everything from retail products to large-scale construction. This makes understanding supply chains more relevant than ever.

The Basics of Supply Chain Management

To understand how a supply chain works, it helps to begin with where the supply chain starts: the customer. Not just what the customer buys, but a forecast of anticipated purchases. This customer demand forecast is crucial as it dictates the entire supply chain process.

Demand Forecast

Organizations typically forecast demand based on historical trends, macroeconomic indicators, and other external factors. This forecast influences how the entire supply chain operates since it helps determine what needs to be produced and the raw materials required.

Procurement of Raw Materials and Sub-Assemblies

The next step involves translating the demand forecast into specific procurement needs. For instance, manufacturing an iPhone requires hundreds of different components. Whether it’s raw materials or partially produced sub-assemblies, the goal is to procure what is needed in time for manufacturing runs. Retailers and distribution companies that don’t assemble anything purchase finished goods from producers.

Production and Manufacturing

Once raw materials or sub-assemblies are procured, they need to be transported to manufacturing facilities. This can involve various logistics like ground shipping or overseas shipping. Ensuring that the right inventory is available at the right time is vital for seamless production.

Warehousing and Distribution

After production, the finished goods need to be moved to warehouses or directly to customers if an order is urgent. This logistics process is key to managing the flow of goods. For some organizations, the next step involves further distribution via wholesalers or middlemen before it reaches the end customer.

Reaching the End Consumer

Finally, the product reaches the consumer, either through a retailer or directly. This step completes the supply chain cycle from customer demand all the way through to delivery.

The Importance of Technology

Supply chains involve complex data, multiple touchpoints, and numerous logistics and suppliers. Here is where technology comes into play. Supply chain management technologies and ERP systems can automate and streamline these processes, providing necessary data and visibility. They can bridge supply chain activities with other organizational aspects such as financials, sales, and human resources.

Why Supply Chains are Disrupted

Supply chain disruptions are common due to the complex nature of these operations. Factors like labor shortages, pandemic-related lockdowns, and logistical inefficiencies can disrupt the flow of goods. For instance, shortages in raw material suppliers or truck drivers can create a domino effect of delays throughout the supply chain.

Conclusion

Understanding the intricate workings of supply chains and the role of technology can help in mitigating some of the current challenges faced by businesses worldwide. Embracing advancements in supply chain technologies is crucial for improving efficiency and reducing disruptions.

Keywords

• Supply Chain Management
• Demand Forecast
• Procurement
• Raw Materials
• Sub-Assemblies
• Production
• Manufacturing
• Warehousing
• Distribution
• Logistics
• ERP Systems
• Supply Chain Disruptions

FAQ

Q1: What initiates the supply chain process? A1: The supply chain process starts with a customer demand forecast, which predicts what customers are likely to purchase based on various data points.

Q2: What is the role of procurement in supply chain management? A2: Procurement involves translating the demand forecast into specific raw material and sub-assembly needs to ensure appropriate resources for production.

Q3: How does manufacturing integrate into the supply chain? A3: Manufacturing involves the actual production of goods using procured raw materials and sub-assemblies, along with the logistical management of getting these materials to the manufacturing facility.

Q4: Why are supply chain technologies important? A4: Supply chain technologies and ERP systems are essential for automating processes, managing data efficiently, and connecting various supply chain activities back to broader organizational functions.

Q5: What are common reasons for supply chain disruptions? A5: Common reasons include labor shortages, logistical inefficiencies, and pandemic-related lockdowns, which can delay or halt the flow of materials and products through the supply chain.