supply chain

A supply chain is the entire system of processes and resources required to produce and sell a product from start to finish, typically starting with raw materials and ending with the customer in possession of the product.

Major stages of a supply chain include sourcing raw materials, refinement of these materials as components in the manufacturing of finished products, and sale and distribution of the products to customers. But supply chains also encompass the organizations, workers, equipment, facilities, and other resources required for these steps.

For example, the manufacture and selling of complex goods like cars or computers requires a large network that encompasses sources of raw materials (such as the rubber for tires or the silicon for microchips), manufacturing of components, assembly, and distribution. Of course, some products consist of far fewer components, but even the simplest products require a multiple-step supply chain (for example, bananas must be grown, harvested, and transported before being sold).

The term supply chain can be used in the context of a single company or applied to the broader economy (the term global supply chain can be thought to refer to the vast, interconnected network of supply chains around the world).

Supply chains typically involve several basic steps:

• Finding and gathering raw materials, such as natural materials like metals and wood.
• Refining raw materials into usable parts, such as refining cut timber into wood planks.
• Using parts to manufacture final products, such as using wood components to make furniture.
• Distributing products to retailers or selling and delivering them directly to customers.

In addition to these basic steps, there are many other processes that typically also happen as part of a supply chain, such as transportation of components or goods between locations, storage, tracking, and activities related to customer service.

Not all companies sell “final” products to retail customers—in supply chains, buying and selling typically happens several times throughout the process, between different companies.

Supply chains are often very complex and include many different companies or organizations. Even if a supply chain only involves a single company, that company must manage and organize all of the components within that chain, including production and storage facilities, vehicles, and places where consumers can purchase the goods.

Due to the interconnectedness and complexity of supply chains, disruptions in one stage can cause far-reaching effects. For example, shortage or unavailability of a particular raw material can disrupt several different industries that rely on that material for the manufacture of goods.

The functioning of supply chains can heavily impact prices and the availability of goods, especially if they are disrupted. For example, during the COVID-19 pandemic, worldwide supply chain delays and disruptions were caused by a number of factors related to the pandemic, including border closings and labor shortages.

Though the term supply chain is most closely associated with tangible goods, the selling of services often also involves a supply chain.

Example: We work with multiple parts suppliers to avoid disruptions in our supply chain.

In economic terms, supply can refer to the quantity of a commodity that is in the market and available for purchase—this is the sense used in the term supply and demand. Use of the word supply in the term supply chain is typically thought to be more narrowly focused on the practical considerations of supplying goods to consumers (but it refers to more than just distribution and delivery).

In supply chain, the word chain is used in the sense of “a series of things connected or following in succession.” This sense is very similar to the one used in the term food chain.

The term supply chain has been used since at least the early 1900s. Of course, supply chains have existed for as long as raw materials have been turned into products and sold. But supply chains have grown increasingly complex with the advancement of global trade and commerce.

What are some words that share a root or word element with supply chain?

• supply
• chain
• supply and demand
• food chain

What are some words that often get used in discussing supply chain?

• economics
• raw materials
• manufacturing
• distribution
• products
• retailer
• customer
• consumer
• logistics

The term supply chain is typically used in the context of economics. Disruptions in the supply chain are often discussed in terms of the problems they can cause for companies and especially consumers, including product shortages, shipping delays, and higher prices.

President Biden has just signed an executive order to strengthen U.S. supply chains. It orders a 100-day review of potential vulnerabilities in U.S. supply chains for critical items, including computer chips, medical gear, electric-vehicle batteries and specialized minerals.

— Kyle Griffin (@kylegriffin1) February 24, 2021

UK car industry warns 2019 production to fall to lowest levels since 2011 after Brexit disrupted assembly lines in April, when car output fell by 44.5% year-on-year. Some plants shut down for month in expectation of supply chain disruption for March 29 Brexit that didn't happen.

— Andrew Neil (@afneil) May 30, 2019

Microsoft CFO on Thai floods & PC prices: "I think historically the global supply chain has been pretty resilient to occurrences like this.”

— Brier Dudley (@BrierDudley) October 20, 2011

Which of the following is often the first basic step of a supply chain?

A. Selling products to customers
B. Making products out of basic parts
C. Sourcing raw materials
D. Turning raw materials into parts