What is a supply chain? (With definition and example)

By Indeed Editorial Team

Published 29 March 2022

A supply chain is a business process used to deliver products and services to customers in an efficient and timely manner. The design of the supply chain is important, as it can determine the quality of products and services and the resulting delivery to consumers. It's important to know what a supply chain is and how a company or organisation might manage one, so you can determine how best to design one as part of your role at a company. In this article, we explain what a supply chain is and outline the different types of supply chain that are commonly used.

What is a supply chain?

A supply chain is a system that you can use in business and distribution to determine how to move products and services from a supplier to a distributor and then on to a consumer. To learn what a supply chain is, we will first look at supply chain systems. Different stakeholders in the supply chain process work together to ensure they distribute these products and services efficiently. The management of supply chains is a critical part of this process, and you may take on a role as a supply chain manager.

The stages of the processes can be complex, and building up the skills and experience to undertake each stage is essential. Each company in the supply chain process may focus on their own business interests. As a supply chain manager, you can create workplace policies and systems that outline how to undertake each step of the process. This is essential for large companies with many lines of distribution. It also helps each company to meet the standards of distribution.

What is supply chain management?

Supply chain management is a process that helps to streamline the various elements involved in the management of moving goods from a supplier to a consumer. Various distribution stakeholders, like organisations and companies, can engage in supply chain management. You may take on a role as a supply chain manager, which can focus on creating and maintaining the processes that ensure companies can deliver products and services from the raw material stage, through to production, distribution and finally customer consumption.

Effective management of the supply chain can help avoid potential conflicts among stakeholders and ensure you meet the expectations of consumers. The working relationship of each stakeholder involved in distribution and the management of a supply chain can affect the likelihood of a company fulfilling its distribution goals. Symbiotic relationships between suppliers, warehouses, sales departments and you, as a supply chain manager, are invaluable to providing high-quality goods and services to customers. Each department can perform their tasks; for example, the warehouse can maintain inventory while the sales department maintains client relationships. Other benefits of supply chain management include:

  • maintaining flow of goods and services to consumers

  • ensuring the delivery processes meet customer expectations

  • improving the profitability of each stakeholder

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What are the types of supply chain models?

You could choose to implement various forms of supply chains. The supply chain you choose could work in collaboration with other team members or executives. Choosing the most suitable supply chain is an important task of a supply chain manager. It's a crucial part of planning, as it allows for the effective distribution of products and improved efficiency. The type of supply chain model you choose could also depend on the distribution needs of your employer and their overall sales goals. Examples of supply chain models you may decide to use include:

Continuous flow model

A continuous flow model is a traditional supply chain model. It can work well for companies which produce products that don't change in production. The products are typically in high demand, and a company can produce them on a large scale without variation. It's not necessary for each product that's manufactured to have ongoing design input. The continuous flow model means that suppliers and manufacturers can streamline production, keeping production times down and maintaining control over inventory. The continuous flow model also works on the basis that business maintains raw materials to a high standard.

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Fast chain model

The fast chain model is a type of supply chain model that works well for companies that sell products with a limited-time appeal. The function of this model is to get a product to the consumer quickly, allowing companies to take advantage of passing customer trends. Rapid management of the supply chain is necessary for this model to work, with companies creating product prototypes quickly and sending them to distribution channels without delay. This enables the consumer to receive the product while a trend is still popular. This type of model in prevalent in the fast fashion industry.

Flexible model

Companies who produce seasonal or holiday goods may benefit from using the flexible supply chain model. These types of companies may experience surges in demand and popularity at specific times of the year. Throughout the rest of the year, the demand for seasonal products is little to none. A flexible model enables companies to be ready for their time of high demand, beginning production at an opportune time and ending it when the demand for a product wanes. This model can require accurate forecasting of the need for raw materials and labour costs.

5 supply chain management stages

Various steps are involved in the process of supply chain management. As a supply chain manager, you can implement each step to achieve the goals of high-accuracy distribution and high-quality products or services. You can use the following five steps as a guide to effective supply chain management:

1. The planning stage

The first stage of supply chain management is usually the planning stage. This is when you'd develop plans that determine how to approach the manufacturing and distribution of your company's products. The ultimate goal is often to meet the demands and expectations of consumers. You can use this step to design a plan that achieves maximum profits and reduces costs for your employer. You can also use the planning stage to predict the performance of the supply chain process.

2. The development stage

Following planning, the next stage in the supply chain management process is development. When developing products, it's necessary to source raw materials that your employer or manufacturer may use to produce a product. You may find it useful to build a positive working relationship with suppliers and determine their dependability to provide raw source materials in times of high pressure. You may also wish to consider the costs of sourcing and delivering raw materials to the manufacturer.

3. The manufacturing stage

The next step in the supply chain management process involves manufacturing, or producing, the products your company sells. Consumer demand can guide your production process and help you determine how often it may be necessary to produce your products. During the manufacturing stage, you can design product packaging, verify the quality of products, pack products and organise delivery to consumers. During this stage, you could also measure the quality and efficiency levels of the factory employees producing the products.

4. The delivery stage

The delivery stage of supply chain management involves how consumer receive their product from the designated supplier. This stage can involve efficient logistics, with customers placing orders and expecting delivery by a certain date. You could work with a variety of delivery or courier services to ensure customers receive their products on time and in good condition. You could also set up a merchandise payment system, allowing you to keep up to date with consumer invoices.

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5. The return stage

The final stage of the supply chain management process is the return stage. This stage involves customers who want to return damaged or broken products to you, the supplier. The company may also deal with customer queries or complaints at this stage. It's important to devise an efficient company policy or plan to ensure you're well-equipped to solve customer complaints. It can also be helpful to devise a logistics plan, enabling customers to return faulty goods to you in exchange for a refund.

Example of a supply chain

You could describe the example of a standard supply chain as a 'generic' supply chain. The processes involved in the generic supply chain may be adjusted to suit the needs of your individual company. Any generic supply chain first starts with the acquisition or extraction of raw materials to make your products. You can then transport these raw materials to a wholesaler or distributor through logistical channels. Distributors then move the raw materials to manufacturers, who begin the production process using the raw materials.

Once the manufacturers utilise the raw materials to create a finished product, you arrange for the delivery of this product to a wholesaler or distributor who delivers it to shops and retailers. The retailer is then responsible for selling the product to consumers. The supply chain cycle continues, but consumer demand and company costs may dictate whether you manufacture the products again.