A supply chain is a series of links between companies and suppliers for the purpose of producing and distributing a product to a final buyer. This network of links includes various entities such as manufacturers, producers, warehouses, logistics services, distribution centers and retailers. When it comes to supply chain management, a healthy supply chain helps get a product successfully and profitably from the planning phases to the end user in a reasonable amount of time. Healthy supply chains help reduce costs for companies as well as help them stay competitive in the marketplace.
These five stages of a supply chain outline the basics of what it takes to transform raw materials into finished products successfully and profitably.
This is the phase of the supply chain when being strategic is important. To begin a supply chain, planning for what will be produced is the goal. The other stages of the chain will be broken without proper planning in place. Planning includes budgets, product design, prototype testing, time requirements, and quality requirements. Logistics should also be included in the plan, as raw materials as well as final products will need to be moved. Logistics touches upon most stages in the supply chain. Once planning is completed, execution of the plan begins.
Sourcing Raw Materials
To produce a product, raw materials must be sourced. These materials must be the proper type for the product to be produced. The materials should be available to be purchased in bulk so that they align to budgets established during the planning process. The material source should also have work scheduled in place that align with any time constraints required in the schedule for production of the product. Logistics happens at this phase of the supply chain, as arrangements are made for the movement of raw materials to manufacturers.
Once raw materials are sourced and acquired, the next phase is the manufacturing phase. In this phase of the chain, raw materials will be turned into a product based on the previously planned design. More testing will occur to be sure the product meets quality standards. Products will also be assembled and packaged as needed.
Although manufacturing is a critical step in the supply chain, without planning and proper sourcing of materials, the manufacturing stage cannot successfully occur.
Supply chain distribution includes overseeing the movement of products from supplier or manufacturer to retailer. Once products have been manufactured, the next step is to get them out into the world. More logistics occur as goods are moved from the manufacturer to the distributor. In addition, products will then be moved from the distributor to the retailer phase of the chain. Logistics is a very important part of any supply chain. Products will arrive at a distribution point. A distributor houses product for the sole purpose of distributing to a retailer. Distribution of goods is a key step in the supply chain.
Retailer-Point of Purchase
As its name implies, retailers accept product from distribution and make product available to customers. There is a price mark up from distribution to retailer level and retailers pass that price mark up to end users at the point of purchase.
It’s important to note that the supply chain doesn’t always run in a straight line. Sometimes things are happening concurrently and sometimes consecutively. If a manufacturer wants to continue to make products in a cost effective and efficient way, it is critical that a sustaining strategy is implemented. There should be no second guessing when it comes to maintaining the efficiency of a healthy supply chain, in any phase of the process.
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