What Is a Supply Chain? (With Stages, Tips, and an Example)
Updated December 1, 2022
A supply chain usually involves many parties and organizations working together to produce, pack, ship, sell, and deliver products to final customers. Professionals working throughout different industries may participate in a supply chain, sometimes without knowing that they're part of a large system that contributes to satisfying the needs of a customer. Learning more about supply chains may help you explore a career path in this field or advance your career in the trading and logistics industry.
In this article, we discuss what a supply chain is, explain the seven stages of an efficient supply chain, and list some tips on how to improve a company's supply chain.
What is a supply chain?
Knowing the answer to “What is a supply chain?” may help you understand how industries such as transportation and shipping or sales or manufacturing work. A supply chain is a system that comprises all the stages of the production, marketing, commercialization, and delivery of a product or service. A supply chain usually involves manufacturers, transportation companies, marketing agencies, wholesalers, retailers, shipping and delivery organizations, and customers. This process can initiate with the production or at the creative stage where product designers and engineers conceptualize the product. It usually ends with the delivery of the item or utilization of the product.
For instance, a car manufacturer's supply chain may start when marketers and product managers interpret and translate data obtained from various market investigations. Next, it might continue through the dealership that orders several units to promote them and sell them in the market. The factory then can produce the cars and contact the transportation company to send the products by sea, which may involve a marine transport company and a border services agency. Then a truck company may pick up the cars and deliver them to the dealer, which can then sell them and deliver them to the customer.
What are the stages of a supply chain?
Here are the most common stages you can find across all the supply chains types:
1. Conceptualization stage
During this stage, companies start a creative process to develop products that can satisfy their customers' wants and expectations. Within this stage, businesses can understand the type of raw material they need, calculate the number of resources required, and estimate the cost of production. Here, companies may conduct market research, test their products, manufacture prototypes, make adjustments, and inform distributors, wholesalers, and retailers about the new items or services. They can also use this stage to identify the best locations and providers from which they can obtain raw materials.
2. Sourcing stage
This stage includes extracting, collecting, refining, processing, transporting, and storing raw materials. Several companies may participate during this stage and involve more than one country or province or territory. For instance, if a company needs oil to produce diesel, it can source this resource from Alberta, the United States, or the Middle East. Its source of primary materials may vary depending on prices, availability, quality, and transportation fees.
When the resources arrive at the factory, it's crucial for the company to have the proper equipment and trained personnel to handle them, the capacity to store these materials, and an action plan to advance to the next stage.
3. Manufacturing stage
After receiving the raw materials, the manufacturer can start processing the resources to generate a new product. Following the design and concepts created during the first stage, product designers and engineers may oversee this phase and ensure that all employees follow standards and quality control procedures.
The manufacturing process also responds to the market demand for the product, the orders placed by distributors, wholesalers, and retailers, and the manufacturer's capacity. Usually, this capacity depends on the company's facilities, meaning its size, the number of employees who work in those buildings, and the technology, machine, and software they use.
4. Assembly stage
During the assembly stage, companies finish the product they want to sell in the market, make adjustments regarding product functionality and quality, and look for production costs that might affect the profitability of the new item. Within this stage, companies can also assess the remaining raw materials and consider creating supplementary products that can add value to the original one.
This stage confirms how much time the company requires to finish an item, which can be useful in calculating its capacity and the demand it can satisfy. After this stage, the organization can evaluate the best way to deliver the product to retailers or wholesalers.
5. Sales stage
During this phase, retailers and wholesalers can launch marketing campaigns, discounts, promotions, and showrooms to attract more customers and sell the product. Usually, this stage requires diverse professionals, such as salespeople, marketing managers, merchandisers, advertising specialists, public relation specialist, graphic designers, and web designers.
To sell the product, these professionals introduce the item to the target audience through various marketing channels, such as social media, e-mail, physical brochures, TV ads, and in-store displays. Here, salespeople can encourage customers to purchase the product by showcasing the manufacturer's reputation, the product design, or its price.
6. Delivery stage
During the delivery stage, retailers, wholesalers, and final customers receive the product. This phase usually involves transportation enterprises, such as trucking companies, railways, border services firms, and air freight carriers. Here, manufacturers guarantee that the product reaches its final destination and that the final customer receives the product in the same condition as it was before the delivery stage began. To do this, they create a series of procedures and protocols that retailers, distributors, and wholesalers can follow when they're handling the product. This might product their reputation and attract new customers.
7. Utilization stage
The utilization stage refers to the phase where the customer receives the product and starts using it. During this stage, both manufacturers and distributors and retailers follow up with the customer to ensure that the product satisfies their expectations and they're using it in the way they expected. They can also send surveys and research processes to know if customers are using the product to its full potential and to get customer feedback. During this stage, other companies can also participate in the supply chain, such as banks, insurers, creditors, customer service firms, service providers, and logistics companies.
Tips on how to improve a business' supply chain
Here are some tips you can use to help a company improve each stage of its supply chain and avoid issues throughout the process:
Ensure a detailed conceptualization process. A comprehensive product design and a good blueprint on how to generate and assemble the product can avoid unnecessary delays during these stages. It's beneficial to encourage creativity among the team members responsible for the design of the product and motivate them to plan every step of the process.
Contact different primary raw material sources. You encourage the upper management to contact different sources of primary raw materials to avoid the risk of not having enough resources to generate the products. You can study different organizations across the world and contact those with good reputation.
Hire enough personnel for the manufacturing stage. To avoid delays during the manufacturing process, it's necessary not only to have the technology or equipment needed but also the staff to handle these machines, software, and manual processes. It's important for companies to activate a recruitment process and identify the best candidates before starting the manufacturing phase.
Contact various transportation companies. Having a list of all the reliable transportation companies that can deliver the product can help the company replace any provider that may cause issues or delays in the supply chain. Consider that some large transportation companies are susceptible to labour strikes that can affect the delivery phase.
Ensure good marketing campaigns. Informing both the retailers and customers about the new product can help it gain popularity and increase the chances of a successful launch. This can ensure enough orders and good return of investment, and keep the supply chain operating.
Send surveys to customers. After delivering the product to a customer, it's crucial to get feedback from them, as this information can help you identify any issue in the final product. Knowing these problems can assist you in investigating when and where the issue occurred and how the company can prevent it in the future.
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