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Reviewed by Oct 25, 2021| Updated on
A supply chain refers to a network consisting of a company’s suppliers, contract manufacturers, and all activities until the product reaches the customer. An efficient supply chain helps a company have a better market reach and market penetration, and increase its turnover. A well-managed supply chain also helps in optimising costs associated with production and supply.
A supply chain consists of a number of activities, which are part of the sourcing of the raw material and production of goods. It includes sub-contracting of work, packaging, and supplying to distributors. A network of external warehousing and transportation are also essential to an efficient supply chain. The costs of the supply chain and the time, both should be optimised.
The various entities included in a supply chain are producers, contractors, vendors, warehousing facilities, distributors, and retailers. The supply chain enables the production and distribution of a product. A supply chain begins with a customer’s order. The critical functions of the supply chain are developing a product, operations, finance, marketing, distribution, and customer service.
The various components of a supply chain are interlinked to each other and require expertise and different skills. A company in the textile industry may not have the required dyeing facilities. It may outsource the dyeing work to another entity on a job work basis.
A company should ensure a smooth flow of goods and keep the supply chain well-networked. If one of the links in a supply chain breaks-down, it affects the smooth functioning and cost overruns for the company.
Supply chain management is an important component of business planning. A company should plan for the efficient supply of goods, marketing, and transportation. It should also identify bottlenecks and resolve the issues.
A company must ensure the availability and reliability of all the entities of a supply chain. The suppliers must be able to supply raw materials on time. The contract manufacturers should complete their job and deliver the goods on time for further production. Similarly, the logistics should be efficient in carrying out a timely and good delivery. An efficient supply chain generates more business for the company.