Supply chain, what it is and how it works

A supply or supply chain is a set of elements that allow companies to have the necessary organization to carry out the development of a product or service and that this fulfills the main objective that is to satisfy the needs of the end customer.

This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.

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A large company has its own characteristics that bring together all the agents that take place in it and that are responsible for complying with the appropriate processes so that end consumers can enjoy a good quality product.

Among these characteristics we find supply chains also known as supply chains, which is a set of activities or operations involved to carry out the entire process of selling a product. Here we talk about the supervision from the process in which the raw materials are obtained, the manufacture of the products, production, distribution, transport and delivery of these.

As we have seen, everything is directed towards a general objective that a factory or company seeks to fulfill, which is to satisfy in the best possible way the needs of a user or end customer. Thus, the main objective of a supply chain is to provide articles and materials in quantity, quality and time necessary at the lowest possible cost. Within this we can find others such as:

  • Establish good communication channels.
  • Have proper coordination.
  • Avoid unnecessary losses.
  • Improve distribution times.
  • Adapt inventory management.
  • Respect delivery times.
  • Respond effectively to changes in demand and supply.

The main thing is to keep it dynamic, that is, there is a continuous flow of information about the entire production and manufacturing process. In addition, in the different stages it is necessary to keep all relationships with suppliers, wholesalers, and customers, controlled to obtain an effective technique.

Who makes up a supply chain?

For the process to be carried out with the normality and necessary efficiency, it must have the fundamental components, such as:

  1. Suppliers: those people or organizations that are responsible for distributing, offering, granting or leasing the use of goods and services.
  2. Transportation: responsible for the transfer of raw materials, finished products and supplies between companies and clients.
  3. Manufacturers: corresponds to those who transform the raw material into an article.
  4. Customers: an important part of the supply chain, those whose needs must be covered.
  5. Communication: it is a basic characteristic so that the operations between each element of the chain flow and develop correctly.
  6. Technology: allows the elements of the supply chain to optimize their tasks and perform them in less time.

An example of a supply chain is as follows:

The supply chain is a strategy and logistics that involves three parts or that consists of three basic elements, which are: supply, manufacturing and distribution.

  • The supply: this part refers to the raw materials with which the company works. In it it is important to answer certain questions such as where the material comes from, how it is obtained and the time it takes to reach the sites where it is required. If this step is not taken good care of, it is very likely that the entire chain will be affected, so it is essential that it works perfectly.
  • Manufacturing: the phase of assembling or making the product from raw materials, to finally have a finished product.
  • Distribution: in this section, as its name indicates, the process of distributing articles is given through a transport network, warehouses, stores, merchants, with the aim of reaching final consumers.

Supply chains can vary depending on the type of company we are talking about, these can be industrial, services and marketers.

  • Industrial companies: they have a supply chain with great logistics which will have different characteristics according to the size of the company, production lines and the audience to which they direct their product. In it we find marketing, the development of new products, among other functions.
  • Service companies: they have hierarchical chains, this is a management, production, commercial manager and distribution manager. They depend on human resources.
  • Trading companies: they obtain and sell products, receive customer requests and are in charge of complying with them.

There are some activities so that the final result of a supply chain is adequate, within them we find planning, both of supply and storage and distribution, inventory management, this refers to raw materials and final products, purchase order processing, transfer and dispatch, contingency monitoring and control, customer service, guarantee administration, payment processing, as indicated by Economipedia.

Since we know what a supply chain is, we can evaluate if your company’s supply chain is working well or if it needs a better organization and if you own a small company you will have the necessary knowledge to fulfill your wishes to expand.

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