Unlocking the Hidden Power of Supply Chains: A Beginner’s Introduction
What is a Supply Chain? Let’s explore it together in my first Medium article
The question “What is a Supply Chain?” often arises from friends, colleagues, and curious minds. When faced with this question, I begin with a brief response:
It’s a complex concept, but where should we start? Well, it all begins with understanding a customer’s needs and goes through various business functions that fulfill those needs.
However, this initial explanation leaves “supply chain” as an enigmatic term, especially for beginners. Fortunately, like any field of knowledge, I delved into the intricacies of supply chains by immersing myself in books, articles, and courses. Among my readings, I highly recommend the following book for anyone seeking to enhance their understanding of supply chain management:
This comprehensive book introduces high-level strategies and concepts while equipping readers with practical tools to tackle supply chain challenges. By employing a strategic framework, readers explore key drivers of supply chain performance, including facilities, inventory management, transportation, information flow, sourcing, and pricing. Whether you’re a beginner or aiming to deepen your knowledge, this book serves as a solid foundation.
Here are two pieces of advice for your supply chain learning journey:
- Internalize the Knowledge: Like any undergraduate or MBA course, the insights from this book require time to sink in. Establish a daily or weekly routine to read, jot down key takeaways for memory retention, and practice solving supply chain problems presented in the book.
- Stay Updated: Subscribe to my page — I’ll regularly share articles on supply chain concepts. My goal is to keep these articles accessible and informative, focusing on essential definitions, processes, and tools.
Remember, supply chains are intricate ecosystems, and continuous learning is key to mastering this dynamic field. Happy exploring! 🌐📦🚚
To facilitate your reading here is a brief list of introductory insights about supply chain and a list of key concepts that would be addressed later on in my articles:
The term “supply chain” is misleading
A supply chain encompasses a dynamic network of participants, processes, and tools, all working in concert to meet a customer’s demands. It extends beyond manufacturers and suppliers, involving transporters, distributors, warehouses, and even the end customers themselves. Within this complex web, various functions converge to fulfill customer requests, including product development, production, quality control, and procurement.
Let’s illustrate this with an example: Imagine a customer purchasing a protein bar. Typically found in retail stores like Walmart or 7-Eleven, protein bars serve as a convenient snack. To satisfy the customer’s need, several players come into play:
- Retailer: The retailer must maintain inventory in their warehouses or establish agreements with distributors. These arrangements ensure a steady supply of protein bars to meet customer demand.
- Distributor: When the retailer requires protein bars, the distributor steps in. If their existing stock falls short, they initiate sales orders to purchase from manufacturers. Transporters facilitate the movement of goods from distributor A to retailer shop B.
- Manufacturer: The manufacturer, in turn, procures raw materials (including packaging) to produce the requested quantity of protein bars. Their role extends beyond mere production — it involves orchestrating the entire supply chain.
In this interconnected ecosystem, the term “supply chain” transcends a linear concept. Rather than envisioning it as a simple “chain,” consider it a collaborative network. At each stage, multiple manufacturers, retailers, and other stakeholders collaborate to fulfill the ultimate goal: meeting the customer’s needs.
Process views of supply chain
The previous paragraph outlines the structure of a supply chain, comprised of suppliers, manufacturers, distributors, retailers, and customers interacting globally. In this network, parties primarily exchange physical items like raw materials, semi-finished, and finished products.
Beyond the physical layer, a cloud of information and financial flows also exists. For example, a retailer must send replenishment orders to its distributor and make payment upon order fulfillment. The order represents information flow, while the payment constitutes financial flow. This dynamic cloud is driven by key business process cycles.
You might be asking, who decides when to initiate these processes? When does a manufacturer begin the procurement cycle with a supplier? The answer lies in the pull/push concept. All processes in the supply chain fall into one of these two categories:
- Pull: The process begins in response to a customer order. In other words, the customer is in control. When the customer says, “I want this product,” the process to fulfill this request is initiated.
- Push: The process begins in anticipation of customer orders based on a forecast. In other words, we predict future demand to anticipate the customer’s needs and ensure that the product is ready even before the customer requests it.
An example of a pull supply chain process could be a made-to-order furniture store. When a customer places an order for a custom piece of furniture, the process to source materials, manufacture, and deliver the product is initiated.
On the other hand, a push supply chain process can be seen in seasonal clothing manufacturing such as Zara, H&M and so on. Based on forecasts of customers demand, clothing items for the upcoming season are designed, materials are sourced, and production begins before customers have placed any orders.
The role of management, planning and operational decisions in supply chain
A successful supply chain is defined by the decisions made by its participants. Each decision aims to enhance the supply chain’s value surplus and improve other sustainability-related KPIs. These decisions fall into three main categories, distinguished by decision frequency and time frame:
- Strategy & Design: In this category, decisions about the supply chain’s design and management over the coming years are made. It involves decisions on the supply chain configuration such as the network of facilities, whether to outsource or perform processes internally, and capacity allocation. These decisions have a long-term impact and should align with the company’s growth strategy.
- Planning: This category covers a time frame ranging from one quarter to a year. When making planning decisions, the supply chain configuration determined in the Strategy & Design stage is fixed. Companies typically begin planning with a forecast for the upcoming year (in push processes) or customer orders for the next year (in pull processes). Planners must calculate the required inventory level for each product in each warehouse, send purchase orders to suppliers to maintain the necessary raw materials inventory, and more.
- Operations: This category focuses on weekly or daily decisions. Once the strategy, design, and planning decisions are made, operational teams manage individual customer orders. Transportations are scheduled, production is allocated to customer orders, and so on.
Feel free to explore the recommended book and dive deeper into the fascinating world of supply chains! 📚🌟
Embarking on My First Medium Journey
🎉 Hello, Medium community! 🎉
I’m thrilled to share my very first article with you. As I dip my toes into the vast ocean of words and ideas, I invite you to join me on this adventure. Expect insights, stories, and case studies inspired from my professional experience
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Thank you for being part of my writing journey! 📝✨
