What is a Supply Chain? 6 Components & Models

Supply chain is a system that connects all the companies and activities involved in sourcing, producing, and delivering products to customers.

Every business depends on its supply chain to bring products to market. And many businesses play a key role in the supply chains of others. When a supply chain runs smoothly, it helps businesses meet customer needs and operate efficiently.

At Flexi Couriers, we offer a reliable, temperature-controlled supply chain for businesses across Perth. With services like frozen storage, pick-packing, and real-time tracking. We ensure your perishable goods are handled with care and delivered on time.

Now, let’s explore what a supply chain is and how it works to keep businesses growing.

What is a Supply Chain? How Does it Work?

“A supply chain is a network of processes and individuals involved in everything from sourcing raw materials to delivering the final product to the customer.”

Supply chains and networks involve some key players or stakeholders who work together to ensure the whole process runs smoothly. They are:

• Producers: Individuals or companies that are responsible for extracting or growing the raw materials needed for production.
• Vendors: They buy and sell these materials, facilitating their availability for manufacturers.
• Manufacturers: These entities convert raw materials into finished products through various processes.
• Logistics Providers: They transport goods throughout the supply chain and ensure timely delivery.
• Supply Chain Managers: These professionals oversee the entire process, from sourcing materials to managing delivery and returns.
• Retailers: They sell the final products to consumers, whether through physical stores or online platforms.
• Consumers: They purchase and use the products, completing the supply chain cycle.

At Flexi Couriers, we know the complexities of the supply chain and the importance of each player in the network. That’s why, we offer reliable temperature-controlled delivery services. Ensuring your products are stored and transported in the best conditions. Whether frozen, chilled, or at ambient temperatures. If you’re wondering, why a supply chain is important for your business.

Here are some key reasons why an efficient supply chain matters:

• Cash Flow – an efficient supply chain frees up cash by reducing excess inventory and minimizing costly shipping.
• Revenue – it boosts responsiveness to customer needs, potentially driving increased sales and revenue (ROI).
• Profitability – it helps lower costs, positively impacting profit margins.
• Competitive Advantage – it allows businesses to meet customer demands for fast deliveries, setting them apart from competitors.
• Risk Management – A well-managed supply chain helps minimise risks from disruptions like bad weather or demand spikes, protecting a company’s reputation.

6 Simple Steps Involved in Supply Chain

The supply chain is a complex system that moves goods from one point to another. It makes sure they reach customers on time and in perfect condition.

But what’s the whole process? What does it involve?

Here’s the detailed supply chain process covered in easy six steps:

Supply Chain Management | From Raw Material to Order Fulfilment

Supply Chain Management (SCM) is all about coordinating the various stages and steps involved in getting a product from its initial raw materials to the customer’s hands.

Effective SCM ensures that products are made, stored, and delivered efficiently. It focuses on improving every step, reducing delays, and cutting down waste. This is especially important for businesses that deal with temperature-sensitive items. Any mistake can lead to spoilage or loss of quality.

Every supply chain, whether big or small, consists of some key components. These components are important for businesses to achieve efficiency, profitability, and supply chain sustainability.

6 Basic Components of Supply Chain Management

1. Planning and Analysis

Planning is the foundation of SCM. It includes two important parts:

• source planning – it manages the supply.
• demand planning – it predicts customer needs.

Both elements help businesses maintain a healthy cash flow and meet customer expectations. Supply chain planning isn’t just about making a perfect plan. It aims to balance inventory and resources effectively. A well-crafted plan involves:

• Creating an effective strategy
• Setting goals
• Deciding the necessary actions to achieve those goals
• Focusing on supply and demand balance
• Organizing resources, people, and materials
• Lowering operating costs
• Streamlining processes

This ongoing process helps businesses anticipate future needs and develop a clear vision.

2. Procurement / Sourcing

Once planning is in place, the next step is sourcing.

This involves finding vendors or suppliers for the raw materials, goods, or services needed to meet demand. Efficient sourcing is important for the supply chain’s success. As it directly impacts cost and quality.

Organizations often have sourcing agents who handle the procurement of raw materials and services. Establishing clear expectations with vendors ensures that businesses receive quality products on time and at the right price.

Successful negotiations include understanding delivery schedules and order requirements.

3. Inventory Management

Inventory is important for any business aiming to sell products. It serves as a buffer between supply and demand. It ensures that there are always enough goods available to meet customer needs.

Balancing inventory levels is critical. Because;

• having too much can lead to waste.
• having too little can cause missed sales opportunities.

Thus, effective inventory management involves tracking goods from suppliers to storage and then to customers.

4. Manufacturing / Production

Manufacturing is the stage where raw materials are transformed into finished products.

This can involve various processes, such as assembly, packaging, and quality checks. Continuous improvement in production is necessary to maintain quality. Ensure that the right amount of product is produced without overstocking.

5. Transportation / Warehousing

Transportation refers to moving products from one location to another, whether to other businesses or directly to consumers. It involves deciding how to efficiently deliver goods through various channels, including:

• Direct Sales – manufacturers sell directly to consumers.
• Wholesale – wholesalers buy products in bulk and sell them to retailers.
• Brokerage – brokers negotiate sales on behalf of manufacturers.
• Dual Distribution – some businesses use multiple channels, such as selling to both wholesalers and directly to consumers.

Moreover, warehousing management systems (WMS) along with advanced technologies also play an important role. They enable supply chain managers to effectively plan the distribution process and implement strategies that enhance resilience and reliability.

6. Return of Goods / Reverse Logistics

The return of goods is a vital part of SCM. Especially when customers receive defective or unsatisfactory products. This process includes handling returns and managing refunds efficiently.

Having a smooth returns process helps build customer satisfaction and loyalty. Happy customers are likely to return and recommend the business to others.

Supply Chain Models

Many companies design their supply chains based on specific models that align with their business goals. The choice of model often hinges on two main aspects:

• Efficiency – focus on keeping costs low.
• Responsiveness – goal to respond quickly to customer needs.

Let’s review the common supply chain models based on their focus on cost efficiency or responsiveness:

Cost-Effective Supply Chain Models

These models prioritise keeping the costs down:

Responsive Supply Chain Models

These models prioritise quick responses to changes in demand:

Supply Chain Challenges & Resilience

Nowadays, supply chains and networks are facing many obstacles. They can affect their efficiency and productivity. Understanding these challenges is key to building resilience and ensuring smooth operations. Let’s go through the challenges given below:

What Are Supply Chain Challenges?

• Waste from Poor Production Cycles:

When businesses misjudge their supply, demand, or production abilities, they risk ending up with too much inventory, leading to waste.

• Lack of Transparency:

Without clear visibility, it’s hard for everyone involved to understand where things stand in the supply chain.

• Dissatisfied Partners and Customers:

The main aim of supply chain management (SCM) is to meet customer needs. This means managing expectations realistically while delivering a valuable product.

• Adaptability to Sudden Changes:

Unexpected events can affect supply chains, so it’s essential to be prepared to adjust quickly.

• Lost or Delayed Goods:

If items go missing or are delayed at any point, it disrupts the entire process and negatively impacts customers.

• Rising Customer Expectations:

With advancements in technology and new competitors, customers expect more than ever, which can be challenging to manage.

What Is Supply Chain Resilience?

Supply chain resilience is about a company’s ability to adapt and thrive during both known and unknown disruptions.

Here are three steps organisations can take to build long-term resilience:

• Quick Response Strategies: This involves taking immediate actions to identify and address gaps in the supply chain. While these actions are helpful in the short term. They should be paired with more comprehensive, long-term strategies.
• Coordinating Operations: To strengthen resilience, companies can focus on:
  • Planning for extreme supply and demand scenarios.
  • Establishing a central hub for coordinating responses.
  • Reevaluating just-in-time inventory strategies.
• Achieving Long-term Resilience: For long-lasting resilience, companies can:
  • Run ‘what if” scenarios to prepare for various situations.
  • Increase data sharing with suppliers.
  • Create digital replicas of critical supply chain elements for testing.
  • Consider setting aside a small part of the team to focus on resilience.

Moreover, enhancing transparency across multiple supplier levels is vital for managing supply chain risks. For example, leveraging digital tools and improving processes helped an aerospace company enhance its supply chain resilience.

6 Best Practices for Effective Supply Chain Management

As the global market becomes faster and more complex, supply chain managers need to adapt effectively. Here are some best practices to consider:

• Boost Inventory Velocity: Ensure that supply aligns with demand. So businesses can respond to changing needs quickly. Lean methods can aid in this effort.
• Collaborate with Other Businesses: Work closely with partners in the supply chain to optimise processes across the board. Not just for one company.
• Shorten Cycles: As supply chains grow more complex. Processes can lengthen. Keeping these cycles short is essential for meeting customer expectations.
• Utilise Supply Chain Technology: Technology helps integrate supply chains. Enhances collaboration among team members.
• Implement Useful Metrics: Establishing clear metrics allows managers to assess the efficiency and effectiveness of their supply chain operations accurately.

Are you looking for reliable temperature-controlled supply chain solutions?

Contact Flexi Couriers for Reliable and Scalable Supply Chain Solutions for Your Business

We help businesses optimise their supply chains with our range of reliable and scalable logistics services. Whether you need warehouse storage solutions or temperature-controlled storage for your perishable goods. We offer frozen, chilled, and ambient storage options tailored to your specific needs.

Let us help you streamline your operations and meet your customers’ expectations.

Contact Flexi Couriers today!

Get reliable supply chain solutions now!