SCM Awareness: What is a Supply Chain.
Some of our clients have asked for information on the basics of Supply Chain Management for their staff with the aim of making their entire organisation familiar with the fundamentals of the Supply Chain. This is important because there is hardly a department in a company that is not in some way part of or impacted by the supply chain. We have prepared information and presentations for them and will share some of this here in a series of articles over the next few weeks.
What is a Supply Chain?
Ever since mankind moved on from being hunter gatherers there have been supply chains. Once people started to live in villages there has been a need to develop supply chains to support those villages with food and equipment. There is evidence that spices, textiles and metals were being traded over long distances 5000 years ago. These were component parts that were then transformed into everything from meals to clothes to weapons. Supply chains have been with us for so long we take them for granted. But they are the very backbone of civilisation.
So what is a supply chain? Well to begin to answer that question think about the device in front of you as you read this.
- Where did you get it?
- And where did they get it?
- And where did their supplier get it?
- How did they make it?
- Where did they get the components?
You can dig deeper and deeper and deeper. The device in front of you has a complex supply chain. In fact every component part of the device in front of you has a complex supply chain. Hundreds, possibly thousands of components. Hundreds possibly thousands of companies. Thousands, possibly millions of employees. All involved in the apparently simple task of getting the device in front of you from a designer’s mind to your desk. Now look beyond that device. Look around you. Everything you see had a supply chain. Books, furniture, equipment, the building you sit in, even the paint on the walls.
A traditional phrase you will hear in Supply Chain Management is “From Farm to Fork”. This is an easy supply chain to imagine. To illustrate this I’m going to imagine you have a piece of fruit in front of you. Lets say an apple (go get one if you want. Count it as one of your 5 a day). OK so look at the apple. What is the supply chain for that apple?
Maybe if you bought the apple in an organic Farmers Market then it may just be
- Farmer to You.
But lets assume you didn’t and you bought it in a shop. So you may think the chain is:
- Farmer to the Shop to You
But is it? In a few rare cases like a Farmers Co-operative it may well be. But if you bought that apple in a typical supermarket or small store then there were more steps:
- Farmer – Wholesaler – Distribution Center – Shop – You
That’s it. Fairly straightforward. But is it. Look carefully at the apple. Is it shiny? Well that’s probably wax. Has it a sticker? Was it in a bag? Was the bag of apples in a box in the store? How did the box get from the distribution center to the store? Very quickly you can see that even a simple apple can have a supply chain where it passes through many hands and even has some component parts?
And I haven’t even mentioned transportation in all that. The trucks, planes, boats etc that transport the products from step to step and eventually onto the customer. As well as planning the materials someone has to plan the movement.
This is all “Supply Chain Management”
So far from being simple and straight forward your supply chain will be very complex both internally and externally. It is not just your company. At the very least it includes your suppliers and your customers. But is also includes the suppliers of your supplier. And suppliers and customers of your customer. For example if another supplier lets down your customer they may have to change or delay their order with you. Or if your customer’s customer suddenly places an un-forecasted order they will have to place a rush order on you.
And it builds and builds. Depending on the supply chain and it’s complexity you could have more of a matrix of companies than a supply chain. Again just think of the device in front of you and how many complex parts it has. So is it an impossible task? No. Because there are some basic principals you can apply. Mainly around common functions and managing the flows.