A supply chain is a network of retailers, distributors, transporters, storage facilities, and suppliers that participate in the production, delivery, and sale of a product to the consumer. It is typically made up of multiple companies who coordinate activities to set themselves apart from the competition.
There are three key parts to a supply chain:
- Supply focuses on the raw materials supplied to manufacturing, including how, when, and from what location.
- Manufacturing focuses on converting these raw materials into finished products.
- Distribution focuses on ensuring these products reach the consumers through an organized network of distributors, warehouses, and retailers.
While often applied to manufacturing and consumer products, a supply chain can also be used to show how several processes supply one another. The definition in this sense can apply to Internet technology, finance, and many other industries. A supply chain strategy defines how the network should operate in order to compete in the market, evaluating the benefits and costs relating to the operation. While a business strategy focuses on the overall direction a company wishes to pursue, supply chain strategy focuses on the actual operations of the organization and the path that will be used to meet a specific goal.
Another related term is supply chain management (SCM), which is the oversight of materials, information, and finances as they are distributed from supplier to consumer. The supply chain also includes all the necessary stops between the supplier and the consumer, so its management involves coordinating this flow of materials within a company and to the end consumer.
Supply chain management can be divided into three main flows:
- The Product flow includes moving goods from supplier to consumer, as well as dealing with customer service needs.
- The Information flow includes order information and delivery status.
- The Financial flow includes payment schedules, credit terms, and additional arrangements.