Supply Chain Concepts: Objectives of a Supply Chain

Supply Chain

A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. This network includes different activities, people, entities, information, and resources. The supply chain also represents the steps it takes to get the product or service from its original state to the customer.

Supply chains are developed by companies so they can reduce their costs and remain competitive in the business landscape.

A supply chain involves a series of steps involved to get a product or service to the customer. The steps include moving and transforming raw materials into finished products, transporting those products, and distributing them to the end user. The entities involved in the supply chain include producers, vendors, warehouses, transportation companies, distribution centers, and retailers.

The elements of a supply chain include all the functions that start with receiving an order to meeting the customer’s request. These functions include product development, marketing, operations, distribution, finance, and customer service.

• A supply chain is a network between a company and its suppliers to produce and distribute a specific product or service.
• The entities in the supply chain include producers, vendors, warehouses, transportation companies, distribution centers, and retailers.
• The functions in a supply chain include product development, marketing, operations, distribution, finance, and customer service.
• Supply chain management results in lower costs and a faster production cycle.

The objective of a supply chain

The objective of every supply chain is to maximize the overall value generated. The value of a supply chain generates is the difference between what the final product is worth to the customer and the effort of the supply chain expands in filling the customer’s request. For most commercial supply chains, the value will be strongly correlated with supply chain profitability, the difference between the revenue generated from the customer and the overall cost across the supply chain.

For most commercial supply chains, the value will be strongly correlated with supply chain profitability, the difference between the revenue generated from the customer and the overall cost across the supply chain.

For example, a customer purchasing a computer from Dell pays $2,000, which represents the revenue the supply china receives. Dell and other stages of the supply chain incur costs to convey information, produce components, store them, transport them, transfer funds, and so on.

The difference between the $2,000 that the customer paid and the sum of all costs incurred by the supply chain to produce and distribute the computer represents the supply chain profitability. Supply chain profitability is the total profit to be shared across all supply chain. Supply chain success should be measured in terms of supply chain profitability and not in terms of the profits at an individual stage.