WHAT IS A SUPPLY CHAIN? AN OVERVIEW OF SUPPLY CHAINS

The concept of a supply chain often leads to confusion with the term logistics. In reality, supply chains and logistics are entirely different. So, how does a supply chain differ from logistics? Let’s explore “what is a supply chain?” in the article below.

What is a Supply Chain?

First, let’s examine the general concept of a supply chain. A supply chain, also known as a supply network, is a system that includes organizations, activities, information, people, and resources involved, both directly and indirectly, in moving goods from suppliers to end consumers. A supply chain doesn’t just include manufacturers; it also involves transporters, warehouses, retailers, and customers.

Essentially, a supply chain is a system, while logistics is merely a process within that system. Therefore, the concept of a supply chain is broader and inherently includes logistics. Within a company, the supply chain encompasses all departments related to business and sales operations, such as Marketing, Sales, Logistics, and Customer Service. These departments are closely linked within the supply chain to meet customer needs.

The Concept of Supply Chain Management

After understanding what a supply chain is, let’s delve into the concept of supply chain management. Supply Chain Management (SCM) refers to managing the supply-demand relationship across the entire enterprise system. This management involves activities such as planning, sourcing, production, and logistics. Effective supply chain management requires close coordination among partners within the supply chain to ensure customer satisfaction.

According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management includes all logistics management activities, from planning to managing activities related to sourcing and procurement, including logistics operations. More importantly, it involves coordinating and collaborating with partners in a comprehensive supply chain, from suppliers and third-party service providers to customers. Essentially, supply chain management integrates demand and supply management within and across different companies.

What Does a Supply Chain Include?

As mentioned, a supply chain within a business includes all departments related to business and sales activities. However, a complete supply chain includes the following five components:

Raw Material Suppliers: The source providing materials for the company’s production activities.
Manufacturers: Convert raw materials into finished products for sale to end consumers.
Distributors: Receive products from manufacturers, break them down, and distribute them to retail agents.
Retailers: Purchase products from distributors and sell them directly to consumers.
Customers: The final and most important component of the supply chain, as they generate revenue for the business.

Key Characteristics of an Effective Supply Chain

To have an efficiently functioning supply chain, you need to optimize the supply chain according to the following characteristics:

The supply chain must align with the business objectives and strategy of the company.
Products must be of high quality and fit the market segment targeted by the company, and they should be delivered to customers on time.
The supply chain must evaluate and integrate with the company’s position, including brand, scale, and reputation.
The supply chain must be flexible and adaptable to changes, exchanging information back and forth regarding market and customer conditions to make timely decisions.

Understanding the concepts and management of a supply chain not only helps businesses operate more efficiently but also ensures customer satisfaction, leading to profitability and sustainable growth. We hope this information is useful for individuals and businesses involved in import-export trade. We offer services and solutions to help goods reach global markets, with a commitment to dedication and partnership with our customers, backed by over 13 years of experience in the transportation industry.

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