What is the supply chain and how does it affect consumers?

If you’ve noticed that items on your shopping list are harder to find lately, or that they’re taking longer to show up after placing an online order, the supply chain is likely the issue.

And the delays caused by supply chain problems may become more noticeable as we enter the holiday season.

But what exactly is the supply chain? And how do issues within it affect you as a consumer?

Let’s break it down.

What is the supply chain?

The term “supply chain” describes the system used by a company to produce and distribute a product, generally starting with sourcing raw materials and ending with a consumer buying the product.

Despite the word “chain” indicating a strictly linear progression of production, supply chains are often networks, operating with a web of interconnected suppliers, manufacturers, distributors and more.

What are the steps of the supply chain?

In basic terms, the steps of the supply chain include moving and transforming raw materials into finished products, transporting those products and distributing them to their final destination or end-use.

At a basic level, a supply chain could have the following steps:

▪ The raw materials are sourced by a supplier.

▪ The supplier moves the raw materials to a manufacturer.

▪ The manufacturer makes a product out of the raw materials.

▪ The product is moved to a distributor or to a warehouse for holding until it is needed in the market.

▪ The distributor moves the product to a retailer.

▪ Consumers buy the product at the retailer.

Depending on the product being made, the complexity of the supply chain needed can vary. Some large companies may have hundreds of links in their supply chains.

Why do supply chains exist?

▪ Supply chains manage the flow of production, which can allow companies to better meet and respond to consumer and industry demand for products.

▪ Supply chains — especially efficient ones — can help companies reduce their production costs, which can lead to more profit for the company, as well as lower prices for consumers.

Who is involved in the supply chain?

Generally, the entities involved in the supply chain can include:

▪ Suppliers, which supply component parts and raw materials to producers.

▪ Producers and manufacturers, which produce component parts of the product or the final product.

▪ Warehouses, which store either component parts of the product or the final product

▪ Transportation companies, which move components of the product or the final product.

▪ Distributors and distribution centers, which distribute components or the final product.

▪ Retailers, which sell the final product to consumers.

▪ Consumers, who buy the product.

Other components of a supply chain might include marketing, finance, inventory management, customer service and more.

What challenges do supply chains face?

▪ Disruption at links along the chain. Because supply chains are interconnected and have many parts, a disruption at any point of the chain, such as reduced labor or difficulty sourcing raw materials, can lead to disruptions and delays at other points in the chain, including product shortages at the final destination. A leading reason for current supply chain delays is labor shortages throughout the chain.

▪ Insufficient planning. An inefficient supply chain, often the result of poor planning and chain management, can make products more expensive to produce, leading to higher prices for consumers and increased waste of products and resources.

▪ Changing demand. Much of the supply chain depends on industry and consumer demand for products. As demand changes, the supply chain should adjust to meet it. If it doesn’t, a company may not be able to adequately respond to consumers’ needs — causing delays or, in some cases, ending up with excess inventory.

▪ Consumer expectations. With the increase of online shopping and fast shipping options, consumers may have heightened expectations of how quickly they will receive a product. Efficient supply chains assist in this process. Inefficient supply chains can lead to longer wait times for product delivery and unhappy consumers.

These challenges, and many more, can often be avoided through supply chain management.

What is supply chain management?

Supply chain management is the oversight and management of all activities in the supply chain, which can include everything from product development and sourcing to manufacturing and transporting the products. This can involve both physical and information flows.

▪ Physical flows in the supply chain involve the actual movement and transportation of goods and materials within the chain.

▪ Information flows involve the coordination and communication between links of the chain. Coordination can be long-term, such as from the beginning of the chain to the end, or short-term, such as with day-to-day chain activities.

Supply chain management is designed to make supply chains as effective and efficient as possible, keeping costs low for companies and consumers.