What is Supply Chain Management? Definition, Introduction, Process & Examples - AIMS UK

Summary

The video explains the concept of a supply chain, which is a global network used to deliver products and services from raw materials to end customers. It details key components like suppliers, producers, and customers, as well as the four essential flows: physical goods, cash, information, and returned products. The script further explores three types of supply chain strategies—stable, reactive, and efficient reactive—and describes both vertical and horizontal integrations. It concludes by outlining the stages of supply chain management, from basic dysfunction to fully integrated enterprises, emphasizing the importance of supply chain evolution and collaboration.

Takeaways

• 🔗 A supply chain is a global network that delivers products and services from raw materials to end customers through the flow of information, distribution, and cash.
• 📦 Four key flows connect supply chain entities: physical materials, cash, information, and reverse flow of returned products.
• 🏭 Supply chain strategies include stable (focused on efficiency and cost), reactive (responding to demand changes), and efficient reactive (balancing efficiency and cost).
• 💸 Primary flows in supply chains include product flow (left to right), cash flow (right to left), and information flow (both directions).
• 🍰 An example of a simple supply chain involves a bakery where a supplier provides ingredients, the bakery produces cakes, and the customer buys the final product.
• 🔋 Service industries, such as utilities or software providers, also follow supply chain models to deliver services to customers.
• 🏗️ Vertical integration is when a company owns its supply chain, while horizontal integration involves expanding by acquiring similar businesses.
• 📈 Vertical integration offers control and reduced dependency, while horizontal integration allows companies to achieve economies of scale and grow market share.
• 📊 Supply chains evolve through multiple stages: from multiple dysfunction, semi-functional enterprise, integrated enterprise, to extended enterprise.
• 🌍 Supply chain management is about managing the flow of goods and services, ensuring products reach end users through collaboration between various organizations.

Q & A

What is a supply chain?

A supply chain is a global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.

What are the four basic flows that connect supply chain entities?

The four basic flows are: the flow of physical materials and services from suppliers to end customers, the flow of cash from the customer to the raw material supplier, the flow of information back and forth along the chain, and the reverse flow of returned products.

Who are the main entities in a basic supply chain?

The main entities in a basic supply chain are the seller (supplier), the producer, and the customer.

What are the three types of supply chain strategies?

The three types of supply chain strategies are stable, reactive, and efficient reactive.

What is a stable supply chain strategy?

A stable supply chain strategy focuses on execution efficiencies and cost performance, using simple connectivity technologies with little need for real-time information.

How does a reactive supply chain strategy work?

A reactive supply chain strategy works by fulfilling demand from trade partners, such as when manufacturers of sports apparel produce more products based on a team advancing to the next round.

What is the difference between vertical and horizontal supply chain integration?

Vertical integration means a company owns different parts of its supply chain, producing various items to satisfy a common need. Horizontal integration involves acquiring similar companies in the same industry to expand and increase market share.

What are the primary benefits of vertical integration?

The primary benefits of vertical integration include control over the supply chain, reduced dependency on external components or services, and synchronized operations with other company functions.

What are the four stages of supply chain management evolution?

The four stages are multiple dysfunction (stage 1), semi-functional enterprise (stage 2), integrated enterprise (stage 3), and extended enterprise (stage 4).

What is supply chain management?

Supply chain management is the management of the flow of goods and services, including the movement and storage of raw materials, work-in-process inventory, and finished goods from origin to consumption.