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What is Supply Chain
Supply chain is a chain or a system made of all the processes that are going on between businesses involved at any point between the raw material extraction and the moment when the product reaches the final customer.

Supply chain is a chain or a system made of all the processes that are going on between businesses involved at any point between the raw material extraction and the moment when the product reaches the final customer. These processes are usually ensured by a number of companies, including logistics companies who ensure the transport of materials, goods or products. The more companies are involved, the longer and more complex is the supply chain.

What counts as part of a supply chain?

Considering the above, the supply chain includes all processors of raw materials, manufacturers, distributors, carriers, warehouses, wholesalers, retailers, sales points or e-shops. The end-customers are also an inseparable part of the supply chain since they are the reason for its existence and it is them who will pay for the products in the end. Therefore, the value chain is essential because without this, the suppliers are not able to deliver to the customers what they want and what they need.

How does the supply chain work?

Surprisingly, it starts with the end-customer. When s/he decides to buy a product, s/he expresses it by placing the order. The merchant (or shop or e-shop) must then be able to accept this order, process it and deliver the product to the customer. Most consumer goods are available to customers immediately, so the customer just picks them up at the store. If the customer orders / purchases the goods remotely, for example in an e-shop, or the ordered / purchased item is not at the store, longer supply chain is activated in order to deliver the item to the end-customer.

Not all goods and products are in stock. They can also be manufactured at the customer’s request. For example, a number of passenger cars are manufactured in a configuration exactly according to the customer’s wishes. After the order is places, the next link of the supply chain is the car maker who puts into production the car in the required configuration. Thus, the chain goes towards the suppliers of the individual components, their suppliers and the suppliers of their suppliers… as deep as the supply chain leads in the given situation.

As customers place more and more emphasis on the speed of delivery, the responsiveness of the suppliers in the supply chain is challenged accordingly. At the same time, the current trend is to lower stock level. Therefore, companies use modern information systems and stock management methods like JIT (Just-in-Time) that allow fast functioning of the supply chain, while ensuring the economy of operation and low operating inventory.

For a number of industries, particularly for consumer goods sector, a good functioning of the supply chain is essential for their competitive ability. It becomes a key competitive advantage because it allows the companies to deliver to their customers what they want in the required time and at an acceptable price.

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Last update: 20.06.2018

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