Definition
A supply chain is the end-to-end network of organisations, people, activities, information, and resources involved in creating and delivering a product or service from raw material to end customer. Every stage of this network, from the extraction of raw materials to the final sale, is part of the supply chain.
Supply Chain Example
A clothing retailer’s supply chain includes cotton farmers, textile mills that process the raw fibre into fabric, garment manufacturers that cut and sew the clothing, freight forwarders and shipping lines that transport the finished goods internationally, customs brokers who manage import compliance, a distribution centre that receives and stores inventory, and finally the retail stores or online fulfilment systems that deliver to the consumer.
Supply Chain Tiers
Supply chains are often described in terms of tiers. Tier 1 suppliers are those with a direct relationship with the business. Tier 2 suppliers supply the Tier 1 suppliers. Tier 3 and beyond are further upstream. Most businesses have good visibility of their Tier 1 suppliers and limited visibility of what lies behind them, which is a known vulnerability in supply chain risk management.
Supply Chain Management (SCM)
Supply chain management (SCM) is the discipline of optimising the flow of goods, information, and money through this network. The goals typically include minimising costs, reducing lead times, improving product quality and consistency, building resilience against disruptions, and meeting customer demand reliably.
Supply Chain Resilience
The COVID-19 pandemic exposed the fragility of highly optimised, just-in-time supply chains that had been designed for efficiency rather than resilience. Many businesses discovered that single-source dependencies and minimal safety stock left them unable to meet customer demand when disruptions occurred. Since then, building buffer stock for critical items and diversifying the supplier base have become higher priorities.