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What is Supply Chain?

Updated on December 29, 2017
heidithorne profile image

Heidi Thorne is an author and business speaker specializing in sales and marketing topics for coaches, consultants, and solopreneurs.

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A company is only as good as those that support it. What is a supply chain? A supply chain is every vendor that provides goods or services to be used either in the production of the business' primary offerings or in the operation of the business.

The chain analogy comes from the fact that in the production of goods and services, every vendor is linked to the next vendor or customer in the process. An easy example to illustrate would be a small bakery. Their simplified supply chain could look like this:

Flour, sugar, dairy and paper good producers → Ingredient and bakery supply wholesalers → Bakery

When the bakery sells their pastries, they start another supply chain, particularly if they sell to restaurants or catering companies. Then the following chain would continue:

Bakery → Restaurant → Diners in the restaurant which are the end of this line

Each step in the supply chain has additional vendors such as freight and trucking, processing plants and a whole lot more. Each link in the chain could fail, causing the rest of the process—or even the business!—to fail.

For example, say that the flour producer suffers a major catastrophe or weather emergency at their plant. They cannot deliver to the bakery wholesaler, who in turn cannot deliver the flour ingredients, causing the bakery to be short or even run out. Subsequently, the bakery cannot then supply the restaurant, resulting in unhappy diners and the possibility that the restaurant discontinues doing business with the bakery.

Socially Responsible Supply Chain Management

Developing a company's supply chain of vendors has taken on new importance with greater emphasis on corporate social responsibility (also known as "CSR"). Stories of sweatshop labor used in manufacturing, poor working conditions and environmental violations make front page news which can lead to sales losses or even a company's failure.

Sometimes it's overwhelming or nearly impossible to assess every step in complex supply chains. Think of a complex item such as a smartphone or car with hundreds or even thousands of components and the labor it took to assemble, transport and sell them. This is where recruitment of responsible vendors and manufacturer representatives becomes key.

This supply chain recruitment and trust becomes even more critical when one's brand name is being placed on a product. Recall the number of celebrities who get slapped with accusations of unethical behavior when a questionable source is identified in their branded products supply chain.

The Internal Supply Chain

Supply chain issues don't only deal with the production of goods and services. They also can apply to purchases for the company's own internal operations. Troubles along this chain, too, can spell disaster.

Say that a company's electricity or water supply is limited, or even shut down, by a weather emergency or system failure experienced miles away from the plant. This could completely cripple a manufacturing operation. Some very large operations take steps to avoid these catastrophes by having backup generators and water supplies.

There's also a social responsibility factor to this internal supply chain. For example, if a company is promoting eco friendly and green values, the marketing they do better be green, too.

How Hurricane Sandy Almost Canceled Christmas

Those of you familiar with the stop-motion animated Christmas classic, Rudolph the Red-Nosed Reindeer, know that a winter snowstorm almost cancels Christmas one year. The holiday is saved thanks to Rudolph, of course.

But in 2012, Hurricane Sandy almost canceled Christmas for one of my customers. The hurricane pummeled a number of my industry's supply chain partners on the East Coast that provide holiday gifts... right as the holiday rush was getting underway. One was under several feet of water and had much of their operation destroyed.

Luckily, due to my supplier's commitment to keeping their customers (like me) and my customers happy, they pulled off an almost impossible operation recovery and came through with the order later than normal, but still in time for Christmas.

They get my "Rudolph" award... and my business!

Source

When the Supply Chain Breaks: A Personal Story

One of the niche markets I serve is unions and other organizations who support American workers. Many of these customers have a zero tolerance policy when it comes to items manufactured overseas or anywhere outside the United States borders. Therefore, items on this specialty shopsite are Made in the USA, many of them also union made.

An inquiry for a sample came in from a potential customer for a Made in USA mug. No problem. Had the supplier ship one off to the customer.

Then I got THAT email. The one that said something to the effect, "How could you send me a sample mug that was Made in China?" I immediately looked at all the specs on the supplier database which noted Made in USA. What happened?

Apparently, it was just a data entry error on the supplier's part. This is one of my best suppliers and they were quick to help resolve the issue. In fact, they went out of their way to send the customer a personalized Made in the USA gift item to apologize.

But, unfortunately, the end result was that I lost the order.

While this story didn't have an ideal ending, I was impressed with the supplier's response to the situation. Things can happen at every link in the supply chain. How vendors in that chain respond to these types of incidents is key to deciding whether to continue doing business with them or not.

Best Practices for Supply Chain Management

Supply chain management is a critical component of a company's survival and success. Best practices for any size of company in this area include:

  • Research Vendors Before You Need Them. Desperation can cause businesses to choose vendors that may not meet criteria for quality, reliability or social responsibility. Begin researching, even interviewing, potential vendors before they're needed. Going to trade shows, networking and doing research online are ways to meet candidates.
  • Have a Plan B. Develop a list of secondary, but still suitable, vendors that can be called upon if primary sources fail.
  • Treat Vendors Like Partners. Treat vendors like business partners because they are!

Disclaimer: The author/publisher has used best efforts in preparation of this article. No representations or warranties for its contents, either expressed or implied, are offered or allowed and all parties disclaim any implied warranties of merchantability or fitness for your particular purpose. The advice, strategies and recommendations presented herein may not be suitable for you, your situation or business. Consult with a professional adviser where and when appropriate. The author/publisher shall not be liable for any loss of profit or any other damages, including but not limited to special, incidental, consequential, or other damages. So by reading and using this information, you accept this risk.

© 2013 Heidi Thorne

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  • heidithorne profile imageAUTHOR

    Heidi Thorne 

    4 years ago from Chicago Area

    Hello FlourishAnyway! I figured people could probably easily identify with the bakery scenario. Unfortunately, stuff happens. But it's in those moments that we learn who's really on our side. I've been blessed with so many wonderful vendors that have really come through for me and I rate all newcomers on their examples. Have a lovely week!

  • FlourishAnyway profile image

    FlourishAnyway 

    4 years ago from USA

    You provide a great example of the supply chain here that everyone can identify with (the bakery), and I like the example you provided, too, of service recovery. Not everything goes perfectly all the time. It's what you do about it that counts.

  • heidithorne profile imageAUTHOR

    Heidi Thorne 

    4 years ago from Chicago Area

    Happy Sunday, billybuc! Agreed, social aspects of the purchasing process are getting more and more attention. After decades of the race to the bottom when sourcing, I think the tide is slowly turning. But it is a difficult balancing act for many organizations, especially small businesses. Thanks for your kind input, as always!

  • billybuc profile image

    Bill Holland 

    4 years ago from Olympia, WA

    This is so important in today's political, social and business environment. I am happy to note that social responsibility is becoming important in our society today with regards to business...hopefully it will continue to be the growing trend.

    Happy Sunday to you my friend.

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