How the Supply Chain Works

 

Illustration 53488356 © Bakhtiar Zein - Dreamstime.com

The lifeblood of commerce is the supply chain. A supply chain is a multi-step process that transforms raw materials into consumer goods, and businesses of all kinds depend on them. Here’s what you need to know about this crucial process.

Manufacturing

Manufacturing is the first part of any supply chain because it is how materials become parts or products before being shipped to the next business in the chain. Manufacturing typically takes place in a factory and utilizes equipment like an industrial mixer in tandem with an assembly line operated by workers. In many cases, products are complete before leaving the factory, while mechanical parts are often shipped on their own.

Distribution

Distribution is the phase of the supply chain during which the product is shipped from the manufacturer to a retailer. Distribution often takes the form of shipping products by plane or by truck, but cargo ships are sometimes utilized for international shipping. Distributors often add value to the products they ship in order to incentivize retailers to buy from them instead of directly from manufacturers. In addition to distributors, wholesalers also offer this kind of service. Wholesalers tend to accrue products in bulk from a variety of distributors, giving retailers the option of using them as a one-stop-shop.

Retail

Retailers are businesses that sell goods to consumers, making them the end of the supply chain. Retailers can buy their stock from manufacturers, but they tend to buy from distributors or wholesalers at a markup in order to take advantage of the convenience and quality on offer. Retailers can also utilize more than one distributor in order to get a wide range of products.

Mastery of the supply chain is the key to success for retailers. Retailers depend on reliable and cost-effective distribution in order to provide consumers with the products they need. This model is fairly common, but the supply chain can take numerous forms.