Supply chain networks
Supply chain networks are a complex system of interrelated organizations and activities that are involved in the procurement, production, and distribution of goods and services. It is an integrated system that connects different parts of a business and its supply chain partners, such as suppliers, manufacturers, wholesalers, distributors, retailers, and customers. It involves the coordination of multiple processes and activities, including purchasing, inventory management, transportation, and warehousing, to ensure the efficient flow of goods and services from supplier to customer. Effective supply chain networks rely on efficient communication, collaboration, and integration between all participants across the entire value chain.
Example of supply chain networks
- Automotive: The automotive supply chain network involves a complex network of suppliers, manufacturers, logistics companies, distributors, and retailers all involved in the production, distribution and sales of automobiles. This system includes the procurement of raw materials, production of components and finished vehicles, distribution of vehicles to dealers and retailers, and sales and service of vehicles.
- Food and Beverage: The food and beverage supply chain network involves a complex system of farmers, suppliers, processors, distributors, retailers, and consumers. This system includes the procurement of raw materials, production of ingredients, processing of foods, distribution of food to retailers, and sales and service of food products.
- Healthcare: The healthcare supply chain network involves a complex system of pharmaceutical companies, suppliers, distributors, pharmacies, hospitals, and consumers. This system includes the procurement of pharmaceuticals and medical supplies, distribution of drugs and medical supplies to healthcare providers, and sales and service of drugs and medical products.
- Technology: The technology supply chain network involves a complex system of technology companies, suppliers, distributors, retailers, and consumers. This system includes the procurement of components and materials, production of technology products, distribution of technology products to retailers, and sales and service of technology products.
When to use supply chain networks
Supply chain networks can be used in a variety of situations where efficient flow of goods and services is essential. These applications include:
- Manufacturing: Supply chain networks are essential for manufacturers to coordinate and manage the production of goods from sourcing raw materials to delivering finished products.
- Distribution: Supply chain networks are used to manage the transportation and distribution of goods from the manufacturer to retailers and customers.
- Logistics: Supply chain networks are used to optimize logistics management and ensure the efficient flow of goods and services from source to destination.
- Warehousing: Supply chain networks are used to manage the storage and inventory of goods and ensure the timely delivery of products to customers.
- Retail: Supply chain networks are used to manage the retail supply chain, from sourcing and stocking products to delivering them to customers.
- eCommerce: Supply chain networks are used to manage the online purchase, delivery, and returns of goods and services.
Types of supply chain networks
- Linear supply chain networks: Linear supply chain networks involve a single supply chain partner with a few steps between them. These networks are relatively simple, with limited coordination and communication between parties.
- Hub-and-spoke networks: Hub-and-spoke networks involve a central hub with multiple supply chain partners connected to it. These networks are typically more complex, but also provide greater flexibility and control over the flow of goods and services.
- Collaborative networks: Collaborative networks are networks in which multiple supply chain partners work together to achieve a common goal. These networks involve greater coordination and communication between partners and typically result in improved efficiency and performance.
- Third-party logistics networks: Third-party logistics networks involve a third-party logistics provider or service that provides a range of services, such as transportation, warehousing, and inventory management. These networks allow supply chain partners to outsource certain tasks to a third-party provider, allowing for greater efficiency and cost savings.
- Global networks: Global networks involve the coordination and collaboration of multiple supply chain partners across multiple countries. These networks require sophisticated communication and coordination between all partners, as well as the consideration of different laws, regulations, and cultures.
Steps of managing supply chain networks
- Step 1: Establishing Goals and Objectives: This is the first step in creating a successful supply chain network. It involves setting up the goals and objectives that the supply chain network should strive to achieve. This includes determining the desired level of performance and outlining the strategies to achieve the goals.
- Step 2: Designing the Network: This step involves designing the network to ensure that all participants have the resources, information, and technology to complete the tasks and activities efficiently. This includes selecting the appropriate partners, determining the most efficient routes, and creating the necessary infrastructure.
- Step 3: Implementing the Network: This step involves implementing the supply chain network. This includes establishing the necessary protocols, processes, and systems to ensure that the network runs smoothly. This includes developing the necessary software and hardware, and setting up the communication systems.
- Step 4: Managing the Network: This step involves managing the supply chain network. This includes monitoring the performance of the network, identifying and addressing any issues, and ensuring that the network continues to be efficient and effective.
- Step 5: Evaluating the Network: This step involves evaluating the performance of the supply chain network. This includes analyzing the data collected through the monitoring process and making necessary improvements to the network.
Advantages of supply chain networks
A supply chain network provides many advantages to businesses, including increased efficiency, improved communication, and increased competitiveness. Here are some of the main benefits of a supply chain network:
- Increased Efficiency: A supply chain network allows businesses to more easily coordinate the various processes and activities involved in the supply chain, leading to more efficient operations and a faster flow of goods and services.
- Improved Communication: A supply chain network facilitates better communication between different stakeholders in the supply chain, such as suppliers, manufacturers, wholesalers, distributors, and retailers. This improved communication allows for more accurate and timely decisions, as well as better collaboration between the participants.
- Increased Competitiveness: By improving efficiency and communication, a supply chain network helps businesses to remain competitive in the market. The improved coordination and collaboration between different stakeholders provides businesses with a greater ability to identify new opportunities and respond quickly to changing customer demands.
- Reduced Costs: A supply chain network allows businesses to reduce their costs by streamlining their operations and reducing the need for manual processes. This leads to improved profitability and greater efficiency.
Limitations of supply chain networks
Despite the many benefits of supply chain networks, there are some limitations that can hinder their effectiveness. These include:
- Complexity: Supply chain networks can be complex and difficult to manage, as they involve multiple processes and activities that need to be coordinated across many different organizations and stakeholders.
- Cost: The cost of implementing and maintaining supply chain networks can be high, as they require significant investments in technology and resources.
- Visibility: It can be difficult to obtain visibility into the different parts of the supply chain, as data may be siloed and difficult to access.
- Risk: Supply chain networks can be vulnerable to disruptions, such as natural disasters, political unrest, and other external factors.
- Adaptability: Supply chain networks may not be able to quickly adapt to changes in customer demand or supply conditions, leading to inefficiencies.
One approach related to supply chain networks is the use of a supply chain management system. This system is used to monitor and coordinate the activities of all participants in the supply chain, from suppliers and manufacturers to distributors and retailers. It can help to improve customer service, reduce costs, and improve efficiency. Other approaches include:
- Just-in-Time (JIT) Inventory Management: JIT inventory management is a system of stocking and managing inventory in order to respond to customer demand in the most efficient and cost-effective manner.
- Vendor Managed Inventory (VMI): VMI is a system in which suppliers collaborate with customers to manage and replenish inventory at optimal levels.
- Collaborative Planning, Forecasting, and Replenishment (CPFR): CPFR is a system of collaborating with suppliers and customers to ensure the accurate forecasting and replenishment of inventory.
- Transportation Management Systems (TMS): TMS is a system of managing the flow of goods from suppliers to customers, including routing, scheduling, and tracking of shipments.
In summary, there are various approaches related to supply chain networks, including supply chain management systems, just-in-time inventory management, vendor managed inventory, collaborative planning, forecasting, and replenishment, and transportation management systems. All of these approaches aim to improve customer service, reduce costs, and improve efficiency.
|Supply chain networks — recommended articles|
|Supply chain integration — Global supply chains — Logistics and transportation — SCM system — Global value chains — Role of transportation — Integrated supply chain — Procurement logistics — Enterprise information system|
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- Surana, A., Kumara*, S., Greaves, M., & Raghavan, U. N. (2005). Supply-chain networks: a complex adaptive systems perspective. International Journal of Production Research, 43(20), 4235-4265.
- Klibi, W., Martel, A., & Guitouni, A. (2010). The design of robust value-creating supply chain networks: a critical review. European Journal of Operational Research, 203(2), 283-293.