WHAT IS SUPPLY CHAIN?
A supply chain from the perspective of Harrison and Van Hoek is a group of partners who collectively convert a basic commodity (upstream) into a finished product (downstream) that is valued by end-customers, and who manage returns at each stage.
In a supply chain it is important to understand that while products or services flow forward through the chain, information, things like demand forecast, order transmissions, delivery status reports, customer feedback, and payment flows back. You also have to be aware of flow of products from customers back to suppliers and request for refund, servicing etc. all this will give you reverse logistics also known as “closed loop” supply chain.
The length of the supply chain will depend on the context meaning it could be very long or it could be short. If you walk in a restaurant and order chicken for lunch, it could just be the case that the owner of the restaurant has a chicken coup. The owner is therefore producing the goods and selling directly to his/her customers. Now imagine buying a phone, how many organizations were involved in the process leading to your purchase?
Nature of supply chain relations
The simplest way to understand supply relations therefore is to look at it as the connection in upstream and downstream operations. This approach tend to give you the dyadic or two party supply chain relationship, that is, immediate supplier who supplies to a firm and the firm sells to immediate customer, basically inputs , firm, output.
Looking at it from this point of view will mean that a firm just focuses on how to make things right with their immediate upstream suppliers and what it could offer its immediate buyers. It is worth noting that while managing of immediate upstream and downstream relations are still important, since this is how you foster relationship with suppliers and your customers, supply process is bigger than that.
In most business set ups you end up with complex network of suppliers and various tier levels in short you end with a supply network.
Understanding the “chain” in supply
The chain aspect when looking at supply process and relationship is crucial for a number of reasons
- It emphasizes serial co-operation on working together in which case each player contributes value at each stage of the sequence of activities
- Given that each link in a chain is essential if the chain is to be strong, it emphasizes mutual dependency and collaboration because failure, for instance, under performance by a supplier may disrupt the flow of supply
- It emphasizes the importance of linkages or as Michael porter puts it, value is added not just by each element in the chain, but by the quality of the relationship between them
- It is continuous and non-directional. Remember any point in the flow can be the focal firm and you can have upstream and downstream operations as well as reverse logistics
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