Supply Chain: Overview

Project Management in the purest form involves contracts and supply chain as resources and the business are tightly tied to contractual agreements. This is a series on supply chain basics looking at the discipline from the Society of Operations Management perspective.

Supply Chain: Overview

A supply supply chain is a global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.  The supply chain does not have to be global but many are global. The base supply chain model involves the flow of goods, information, and money between elemental actors from the supplier to the consumer. Logistical and information networks service the flows; Figure 1, which applies mostly to corporations rather than governmental or military supply chains. The US Navy's supply chain system is modeled after Caterpillar's supply system.

Figure 1:  Basic Supply Chain Model

The supply chain concept applies to both goods and services.  The 'upstream' flow travels from the Consumer towards the Supplier and the 'downstream' flow is from the Supplier towards the Consumer.  

Suppliers are a provider of goods and services or a seller with whom a buyer does business.  A vendor is an all inclusive generic term referring to all sellers in the marketplace.  The supplier provides goods such as sub-components and raw materials as well as services such as transportation, professional services, etc...

Producers receive goods and services from the supplier then creates finished goods and services for consumption by the Consumer. Service supply chains tend to be more abstract then the supply chain for goods.  

Consumers are those who receive the shipments of finished goods or purchase the services. 

Flows connect the supply chain entities together.

Primary Product Flows travel from the supplier to the consumer. Logistical networks move the goods through the producer.  In manufacturing, Just In Time (JIT) the goods are in constant motion with supply buffers that absorb variability.   

Primary Cash Flows travel from the consumer upstream to the supplier.

Information Flows both upstream and downstream as well as internally and externally.      

Reverse Product Flows travel upstream towards the supplier as the reverse supply chain.  This occurs for several reasons such as warranty, repairs, recycling, buybacks, disposals, etc...  Logistical services transport the goods through the reverse supply chain. 

The importance of supply in business is growing as economies regionalize and globalization increases. For example, the North American Free Trade Agreement (NAFTA) is increasing the freedom of movement throughout the region as the NAFTA superhighway completes construction. Logistical pipelines are lengthening in most cases. Although, Ford Motor Company's Bahi, Brazil enterprise has convergent production lines feeding the main production line.  Supply partnerships operate these convergent lines and synchronize the supply chains in the flexible manufacturing environment. 

Reference:

(2011). APICS Certified Supply Chain Professional Learning System. (2011 ed.). Version 2.2.