by Justin Manucci

Created on: November 18, 2010

The supply chain consists of all parties involved, directly or indirectly in the procurement of a product or raw material. This is one of the most important aspects of running a business, which is why it’s a very complex topic, and involves a lot of different subtopics of information.

For example, Supply Chain Management involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.  The four basic components of supply chain management include:

-Supply Chain Strategy: the strategy for managing all the resources required to meet customer demand for all products and services

-Supply Chain Partners: The partners chosen to deliver finished products, raw materials, and services including pricing, delivery, and payment processes along with partner relationship monitoring metrics.

-Supply Chain Operation: The schedule for production activities including testing, packaging, and preparation for delivery.

-Supply Chain Logistics: The product delivery processes and elements including orders, warehouses, carriers, and defective product returns.

These functions require a lot of different processes to run and maintain the supply chain system. A typical supply chain might run something like this:

SupplieràStorage(raw materials)àManufacturingàStorage(finished goods)àdistributionàretaileràCustomer

An effective and efficient supply chain management system can enable organizations to become more successful and more profitable. An efficient supply chain management system allows businesses to decrease buyer power, increase supplier power, increase switching costs to reduce threat of substitute products or services, create entry barriers to reduce the threat of new competition into the market, and increase efficiencies while seeking a competitive advantage through cost leadership.

Some more fundamentals of supply chains include the main three links of the supply chain:

-Materials flow from suppliers and their upstream suppliers at all levels

-Transformation of materials into semi finished and finished products

-Distribution of products to customers and their downstream customers at all levels.

Like a lot of business functions, information technology actually plays a large role in making business processes easier and more accessible. Information technology effects supply chain in a lot of different ways. Supply chain visibility is the ability to view all areas up and down the supply chain, which is made possible because of information technology. Businesses can use information technology to implement a supply chain software or process on the computer, which can help eliminate false information and make editing the supply chain much easier. If there is false information, the bullwhip effect occurs when distorted product demand information passes from one entity to the next throughout the supply chain. This can be cut down significantly through the use of information technology.

Other uses of information technology in the supply chain include the supply chain planning system, which uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain while reducing inventory. Another example of information technology effecting supply chains is with supply chain execution systems, which automate the different steps and stages of the supply chain. This includes electronically routing orders from a manufacturer to a supplier, or something similar.

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