Supply Chain Basics: What You Need To Know

If you’re not a supply chain manager or a purchasing specialist, there’s a good chance you don’t think about supply chains too often.

Like most people, you buy a new pair of shoes from your favorite online retailer without really considering the process involved. The process that ensures you get your order on time, in the correct color and in the right size.

But what might surprise you is the basics of a supply chain are likely happening all around you, whether you think about it on a daily basis or not.

 With that in mind, we’ve decided to cover the basics of supply chains, how they function and how it impacts you. Here’s your refreshers course on everything you need to know.

What is a supply chain?

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A supply chain is the sequence of processes involved in the production and distribution of a commodity. Basically, a supply chain represents the steps it takes to get a specific product or service to the customer. It’s how a company gets your shoes made, packaged and placed at your favorite retail store.

It may sound simple, but it’s actually incredibly complex, with a lot of moving parts. An entire network of interconnected businesses works together so that the end customer gets the product they want. The network is comprised of suppliers, who supply the raw material to the manufacturers, who turn raw materials into products. Then distributors transfer the products to the retailers.

What is supply chain management?

Supply chain professionals are consistently working to ensure the supply chain is functioning efficiently.  This is known as optimizing your supply chain. Supply chain management duties include analyzing costs, developing purchasing strategies, optimizing production schedules, and strategic planning.

• Order fulfillment

Some would say that order fulfillment is one of the most important aspects of optimizing a supply chain. Obvious, right? If a customer doesn’t receive the correct order, then you are not only leaving a customer unsatisfied, but you’re also wasting money. A lot goes into order fulfillment, there’s the actual process of taking orders – which is the easy part. Then there is accounting, inventory management, returns, packaging, and logistics.

• Production Planning

Production planning directly impacts the manufacturer. It involves the planning of the production of goods.  In production planning, there is a lot to consider, including managing the inventory of raw materials, forecasting, and staffing. Meanwhile, ensuring you are creating the finished product according to the specified schedule.

• Inventory

Inventory management is essential when it comes to the supply chain. Without the correct amount of raw materials from the suppliers, you aren’t able to move onto production. Within inventory management it is also necessary to check the quality of the product and that the correct handling/storage is in place.

• Production of Goods

While adhering to the production plan, a specified amount of raw materials from the supplier are moved from inventory to the manufacturer. This is where raw materials are turned into the finished product. Once the items have been inspected, tested and approved for quality assurance, they are moved to a warehouse before being delivered to the customer.

• Logistics/Transportation

Logistics can be defined in a few different ways. There is inbound logistics, which is the management of the flow of goods from suppliers to the company. While outbound logistics relates to the movement of your finished products from your warehouse to the customer. Shipping companies are relied on to pick up the finished product from the warehouse and determine the most efficient way to get it to the customer.

How does it relate to what I do?

The supply chain philosophy is to ensure that every customer receives the correct products at the right time, for a reasonable price and at the desired location. But by definition, doesn’t that apply to every business? Whether it be a restaurant, a clothing store – or the not so obvious, web design agency, the basic principles of a supply chain applies.

More directly, if you’re in marketing and the product that you’ve been promoting gets an influx of customer orders. What do you do? Without a good supply chain process in place, you can get yourself into a bad situation. What about sales? Without predictable delivery schedules, you might not meet your sales quota for the month. As you can see, although we often take it for granted, a supply chain does directly impact your job and success of your company.

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