Product Code Database
A supply chain is a complex logistics system that consists of facilities that convert raw materials into and distribute themGaneshan, R. and Harrison, T. P., An Introduction to Supply Chain Management, updated 22 May 2005, accessed 29 June 2023 to end consumers or end , while supply chain management deals with the flow of goods in distribution channels within the supply chain in the most efficient manner.
In sophisticated supply chain , used products may re-enter the supply chain at any point where residual value is recyclable. Supply chains link . Suppliers in a supply chain are often ranked by "tier", with first-tier suppliers supplying directly to the client, second-tier suppliers supplying to the first tier, and so on.SCM Portal, Supplier Tiering , Procurement Glossary supplied by CIPS, accessed 11 July 2021
The phrase "supply chain" may have been first published in a 1905 article in The Independent which briefly mentions the difficulty of "keeping a supply chain with India unbroken" during the British expedition to Tibet.
At the end of the supply chain, materials and finished products only flow there because of the customer behaviour at the end of the chain;Gattorna, J. L., ed. (1998), Strategic Supply Chain Alignment, Gower, Aldershot academics Alan Harrison and Janet Godsell argue that "supply chain processes should be coordinated in order to focus on end customer buying behaviour", and look for "customer responsiveness" as an indicator confirming that materials are able to flow "through a sequence of supply chain processes in order to meet end customer buying behaviour".Harrison, A. and Godsell, J. (2003), Responsive Supply Chains: An Exploratory Study of Performance Management, Cranfield School of Management, accessed 12 May 2021
Many of the exchanges encountered in the supply chain take place between varied companies that seek to maximize their revenue within their sphere of interest but may have little or no knowledge or interest in the remaining players in the supply chain. More recently, the loosely coupled, self-organizing network of businesses who cooperate in providing product and service offerings has been called the extended enterprise, (2025). 9781591398394, Harvard Business School Press. ISBN 9781591398394 and the use of the term "chain" and the linear structure it appears to represent have been criticized as "harder to relate to the way really operate.Keith, R., " So Why Do We Call it a 'Supply Chain' Anyway?", IndustryWeek, emphasis added, published 3 December 2012, accessed 6 January 2021. A chain is actually a complex and dynamic supply and demand network.
As part of their efforts to demonstrate business ethics, many large companies and global are integrating codes of conduct and guidelines into their corporate cultures and management systems. Through these, are making demands on their suppliers (facilities, farms, subcontracted services such as cleaning, canteen, security etc.) and verifying, through social , that they are complying with the Requirement. A lack of transparency in the supply chain can bar consumers from knowledge of where their purchases originated and facilitate socially irresponsible practices. In 2018, the Loyola University Chicago's Supply and Value Chain Center found in a survey that 53% of supply chain professionals considered ethics to be "extremely" important to their organization.
In some cases, the operation of multiple tiers within a supply chain may give rise to additional costs, due the "profit layering", where each tier's operators add a profit margin to their costs. For example, in 2015 the UK's Ministry of Justice recognised that its elevator and refurbishment contracts were let to a main contractor who then sub-contracted the work to a specialist lift contractor. The ministry avoided the cost impact of this arrangement by contracting for lift work directly with the specialist contractors.
Mentzer et al. distinguish between "direct supply chains", "extended supply chains", and "ultimate supply chains"; in their usage:
Brown et al. refer to supply chains as either "loosely coupled" or "tightly coupled": These ideas refer to two polar models of collaboration: tightly coupled, or "hard-wired", also known as "linked", collaboration represents a close relationship between a buyer and supplier within the chain, whereas a loosely-coupled link relates to low interdependency between buyer and seller and therefore greater flexibility.CIPS, Loosely-Coupled vs Tightly-Coupled Supply Chain, no date, accessed 13 May 2021 The Chartered Institute of Procurement & Supply's professional guidance suggests that the aim of a tightly coupled relationship is to reduce inventory and avoid stockout.
A supply chain can often be split into different segments: the earlier stages of a supply chain, such as raw material processing and manufacturing, determine their break-even point by considering production costs relative to market price. The later stages of a supply chain, such as wholesale and retail determine their break-even point by considering transaction costs, relative to market price. Additionally, there are financing costs associated with all the stages of a supply chain model.
The Global Supply Chain Forum has introduced an alternative supply chain model. This framework is built on eight key that are both cross-functional and cross-firm in nature. Each process is managed by a cross-functional team including representatives from logistics, production, purchasing, finance, marketing, and research and development. While each process interfaces with key customers and suppliers, the processes of customer relationship management and supplier relationship management form the critical linkages in the supply chain.
The American Productivity and Quality Center (APQC) Process Classification Framework (PCF) SM is a high-level, industry-neutral enterprise process model that allows organizations to see their business processes from a cross-industry viewpoint. The PCF was developed by APQC and its member organizations as an open standard to facilitate improvement through process management and benchmarking, regardless of industry, size, or geography. The PCF organizes operating and management processes into 12 enterprise-level categories, including process groups, and over 1,000 processes and associated activities.
In the developing country public health setting, John Snow, Inc. has developed the JSI Framework for Integrated Supply Chain Management in Public Health, which draws from commercial sector best practices to solve problems in public health supply chains.
Similarly, supply chain mapping involves documenting information regarding all participants in an organization's supply chain and assembling the information as a global map of the organization's supply network.American Express, What is Supply Chain Mapping and Why is it Important?, published 4 February 2022, accessed 11 June 2022
If all relevant information is accessible to any relevant company, every company in the supply chain has the ability to help optimize the entire supply chain rather than to sub-optimize based on local optimization. This will lead to better-planned overall production and distribution, which can cut costs and give a more attractive final product, leading to better sales and better overall results for the companies involved. This is one form of vertical integration. Yet, it has been shown that the motives for and performance efficacy of vertical integration differ by global region.
Incorporating SCM successfully leads to a new kind of competition on the global market, where competition is no longer of the company-versus-company form but rather takes on a supply-chain-versus-supply-chain form.
The primary objective of SCM is to fulfill customer demands through the most efficient use of resources, including distribution capacity, inventory, and labor. In theory, a supply chain seeks to match demand with supply and do so with Drop shipping. Various aspects of optimizing the supply chain include liaising with suppliers to eliminate bottlenecks; sourcing strategically to strike a balance between lowest material cost and transportation, implementing just-in-time techniques to optimize manufacturing flow; maintaining the right mix and location of factories and warehouses to serve customer markets; and using location allocation, vehicle routing analysis, dynamic programming, and traditional logistics optimization to maximize the efficiency of distribution.
The term "logistics" applies to activities within one company or organization involving product distribution, whereas "supply chain" additionally encompasses manufacturing and procurement, and therefore has a much broader focus as it involves multiple enterprises (including suppliers, manufacturers, and retailers) working together to meet a customer need for a product or service. However, John Mills et al. note that "early research" on supply chains focused on internal supply relationships within a company.
Starting in the 1990s, several companies chose to outsource the logistics aspect of supply-chain management by partnering with a third-party logistics provider (3PL). Companies also outsource production to contract manufacturers. Selecting a Third Party Logistics (3PL) Provider Martin Murray, about.com Technology companies have risen to meet the demand to help manage these complex systems. Cloud-based SCM technologies are at the forefront of next-generation supply chains due to their impact on optimization of time, resources, and inventory visibility. Cloud technologies facilitate work being processed offline from a mobile app which solves the common issue of inventory residing in areas with no online coverage or connectivity.
A Cranfield University boardroom survey in 2010 found evidence that many organizations recognized the importance of the supply chain contribution to their business success, with a focus on cost, customer lead time and customer quality being the primary performance indicators.Wilding, R. et al., Supply Chain Strategy in the Board Room, Cranfield School of Management with Solving Efeso, published 11 June 2010, accessed 28 June 2023
Supply chain resilience has been identified as an important business issue. The United Kingdom's Confederation of British Industry reported in 2014 that a significant number of businesses had reshoring parts of their supply chain to European locations, with many identifying supply chain resilience as "a key factor in their decision to do so".CBI EU Reshoring survey, March 2014, quoted in Confederation of British Industry, Pulling Together: Strengthening the UK's Supply Chains, published October 2014, accessed 10 May 2023
In October 2009, the European Commission issued a Communication concerning "a better functioning food supply chain in Europe", addressing the three sectors of the European economy which comprise the food supply chain: agriculture, food processing industries, and the distribution sectors.European Commission, " Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: A better functioning food supply chain in Europe", provisional version published 28 October 2019, accessed 26 April 2022. An earlier interim report on food prices (published in December 2008) had already raised concerns about the food supply chain. Arising out of the two reports, the Commission established a "European Food Prices Monitoring Tool", an initiative developed by Eurostat and intended to "increase transparency in the food supply chain".European Commission, " European Food Prices Monitoring Tool", accessed 16 June 2022.
In March 2022 the Commission noted "the need for EU agriculture and food supply chains to become more resilient and sustainable".European Commission, " Commission acts for global food security and for supporting EU farmers and consumers", published 23 March 2022, accessed 26 April 2022.
According to an industrial engineering study which looked at a process for Design for Supply Chain (DFSC), since the product design imposes multiple requirements on the supply chain, then once a product design is completed, it drives the structure of the supply chain, limiting the flexibility of engineers to generate and evaluate different (and potentially more cost-effective) supply-chain alternatives. Design for Supply Chain is described as
Supply chain consultant Anthony Tarantino has identified a number of best practices affecting the resilience and operation of supply chains, including the formation of multi-disciplinary centres of excellence, hybrid supply chain organizations which optimize the balance between centralization and de-centralization, and more extensive use of both structured data and unstructured data.Bowman, R. J., " Seven Best Practices for Supply Chains in 2025", SupplyChainBrain, published 4 August 2014, accessed 21 February 2023.
Big data is increasingly being utilized in supply chain management, especially in the strategic purchasing and supply management sector.
Moore et al. note a trend towards strategic supply-base reduction as a mechanism for leading businesses to reduce costs and improve supplier-related performance, Moore, N. Y. et al. (2002), Implementing Best Purchasing and Supply Management Practices: Lessons from Innovative Commercial Firms, prepared for the US Air Force, Rand, page 83, accessed on 14 July 2024 and similarly Ogden identifies a company's decision-making on the number of suppliers it will engage with for each product or service as an important aspect of the design of a supply chain. Determining the number of suppliers logically precedes an RFP process for determining which suppliers will form part of the supply chain.Ogden, J., Supply Base Reduction Within Supply Base Reduction, CAPS Research, volume 6, January 2003, accessed on 14 September 2024 Morgan refers to an "n + 1 rule" example in the business practice of IT component supplier Intel, whereby the maximum number of suppliers required to maintain production levels for each component is determined, and no more than one additional supplier is engaged with for each component.Morgan, James P. (ed.) (1995), "Inside Intel", Purchasing's Book of Winners, p. 101, quoted in Moore, N. Y. et al. (2002), Implementing Best Purchasing and Supply Management Practices: Lessons from Innovative Commercial Firms, prepared for the US Air Force, Rand, pages 155-156, accessed on 14 September 2024
With the increased complexity and b2b activity associated with economic growth, actors often seek to view supply chain collaboration as a part of the value added activities in a value chain.
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