Supply Chain Basics

A supply chain is a network of individuals, companies, resources, activities, and technologies used to make and sell a product or service. It starts with the delivery of raw materials from a supplier to a manufacturer and ends with the delivery of the finished product or service to the consumer.

Supply Chain Management or “SCM” is the management of the flow of goods and services and includes all processes that transform raw materials into final products. It involves the active streamlining of a business's activities to maximize customer value and gain a competitive advantage in the marketplace.

SCM oversees each stage in the delivery of a company's product or service, from initial creation to the final sale. Steps along the supply chain can add value through efficiencies or reduce value through increased costs or poor design. Ideally, SCM can increase revenues, decrease costs, and impact a company's bottom line. By managing the supply chain, companies can cut excess costs and deliver products to the consumer faster. This is done by keeping tighter control of internal inventories, internal production, distribution, sales, as well as the inventories of company vendors.

Managing the supply chain is important because it can help achieve several business objectives. For example, controlling manufacturing processes can improve quality, reducing the risk of recalls and lawsuits while helping to build a strong consumer brand. At the same time, controls over shipping procedures can improve customer service by avoiding costly shortages or periods of inventory oversupply. Overall, supply chain management provides several opportunities for companies to improve their profit margins and is especially important for companies doing business globally.

Supply chain management has five key steps: Planning, Sourcing Raw Materials, Manufacturing, Delivery, and Returns.


Planning involves developing an overall strategy for the supply chain, while the other four steps execute that plan. Companies must develop expertise in all five areas to have an efficient supply chain and avoid expensive bottlenecks. A disruption to any part of the Supply Chain can be very costly to business and consumers resulting in rising prices, shortages, and delays such as we are seeing now.

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