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Beginners Guide to The Supply Chain: What is it and how does it work?

What is a supply chain?

In simple terms, a supply chain is a network between customers and suppliers, used to deliver goods or services. This network can include a range of different activities, people, resources and information, and will vary depending on the supply chain. The core focus of the supply chain is to convert raw materials or elements into a finished product or service which is then delivered to a consumer, whether this is to another business or the public.

How does a supply chain work?

How a supply chain operates will differ for every business and industry, with several entities being involved including producers, warehouses, distribution and retailers. However, there are a number of basic steps which have to be taken within a supply chain including:

  • Obtaining raw materials
  • Turning those materials into basic parts
  • Combining those basic parts to create a product or service
  • Selling that product or service and fulfilling any orders
  • Delivering the product or service
  • Post-sale customer service, including returns and support

The initial sourcing of raw materials and transporting of those to the start of the manufacturing process is often referred to as procurement. Operations are the next step in which the materials are made into the product or service as well as the finished item being distributed to the consumer.

Types of supply chains

Many different types of supply chain models focus on making the supply chain more responsive and efficient. Deciding on what supply chain model to use will depend on the business, including the industry they operate in, the size of the business, their value proposition and how management wishes to run the business.

The 6 supply chain models are:

  • Continuous-flow. Focussing on efficiency, this model is best suited to businesses with a repeated and consistent production line with products that require few design alterations, such as a paper manufacturer.
  • Fast chain.
  • Focussing on responsiveness, this model is ideal for businesses that change their production line often, such as fast-fashion manufacturers.
  • Efficient chain. For end-to-end efficiency, this model is ideal as it relies heavily on product forecasting and is ideal for those businesses in a highly competitive market.
  • Agile. For businesses with speciality items, this model is the preferred model as it allows for small batches of products with less automation for all the supply chains to react and change.
  • Custom-configured. This model is almost a hybrid between the agile and continuous flow models and allows for custom setups during production and assembly.
  • Flexible. This model is trying to offer the best of all the models, giving the business flexibility to react to high demands and manage long periods of low volume – ideal for seasonal businesses.

How does technology fit into the supply chain?

As supply chains become more complicated and technology develops, it makes sense to merge the two to enable an efficient supply chain whilst reducing excess costs in production, transportation and distribution. It also means that value chains are connected and distribution channels are more automated where needed.

There are many types of technology involved within the supply chain including:

  • Demand forecasting – accurate forecasting allows for accurate inventory data, maximising sales whilst also keeping stock levels correct, reducing cash caught up in stock or the lack of stock.
  • Warehouse robotics – implementing robots within certain warehouse roles is known to increase work rates and accuracy, particularly in order picking.
  • Blockchain – giving greater visibility of the supply chain by providing relevant information in a manageable way which makes the supply chain more effective, such as dates, prices and locations.
  • Electric proof of delivery systems (EPOD) – although perhaps not a new technology, EPOD is extremely important for many businesses looking to make the delivery element of the supply chain more effective.
  • Smart sensors – arming production staff with real-time information on inventory levels, machinery and purchased materials enable better demand forecasting and optimise sourcing.

Supply chain challenges

Often, supply chains are complicated with many moving parts and partners involved. This can contribute to common challenges within the supply chain including:

  • Lack of transparency
  • An inefficient supply chain, causing waste products
  • Delayed or lost goods
  • A fragile supply chain when sudden issues occur, such as the COVID-19 pandemic

What is supply chain management?

With many potential challenges within the supply chain, a management tool is crucial to ensure an effective and efficient supply chain which is critical to business operations. Supply chain management (SCM) oversees the supply chain and takes a broader view of influences that could affect the current flow and movement of goods including the materials, finances and information. It’s there to link up the network of suppliers and distributors involved within the supply chain to continuously move the products through every stage.

Benefits of an effective supply chain

Although there can be a number of challenges for businesses to overcome with their supply chain when running efficiently, an effective supply chain can deliver some of the following benefits:

  • Better collaboration with the supply chain management software reduces bottlenecks and allows for the seamless transfer of information.
  • Reducing overhead costs – SCM enables more accurate demand predictions which allows warehouse costs to be reduced, as well as reducing the costs associated with producing and storing excess slow-moving stock.
  • Better visibility with real-time data on the levels of raw materials and products increases supply chains efficiencies as well as implement backup plans in case of unexpected issues.

How does TouchStar fit in?

As part of the supply chain, there are many moving parts and elements to consider. Here at TouchStar, we offer a number of solutions to make the whole process run more smoothly.

Our PODStar system can be integrated to a number of third-party software packages including ERP, Accounts and WMS. The latter provides an effective first stage automation process, notably for medium-sized organisations. Linking WMS to EPOD provides a greatly enhanced level of supply chain transparency and real-time process control. The WMS will typically govern classical aspects of the warehouse operation, including multi-client processing, receipt of goods, put-away, picking, loading of vehicles, perpetual inventory etc. EPOD will extend the visibility of stock beyond the warehouse, through to end-delivery. Integrating the two systems will allow for real-time control over functions such as stock replenishment and client invoicing. Increasing the visibility of stock control in this manner is a concept that Touchstar describe as ‘Wide-Area Warehousing’.

In theory, PODStar can be linked to any third-party software system using our own Evo-Link middleware tool. Click this link for more information on integration options.