A supply chain is a series of processes linked together to form a chain. It is the sequence of processes involved in the production and distribution of a commodity. The supply chain is the network created among different companies producing, handling and/or distributing a specific product. The supply chain encompasses the steps it takes to get a good or service from the supplier to the customer.

Supply chain begins with the ecological, biological, and political regulation of natural resources, followed by the human extraction of raw material, and includes several production links (e.g., component construction, assembly, and merging) before moving on to several layers of storage facilities of ever-decreasing size and increasingly remote geographical locations, and finally reaching the consumer.

KEY NOTE: Logistics is not supply chain. logistics refers to the distribution process within the company whereas the supply chain includes multiple companies such as suppliers, manufacturers, and the retailers.


A supply chain network shows the links between organization and how information and materials flow between these links.  The more detailed the supply chain network the more complex and web like the network becomes.

A supply chain network can be strategically designed in such a way as to reduce the cost of the supply chain; it has been suggested by experts that 80% of supply chain costs are determined by location of facilities and the flow of product between the facilities.Supply chain network design is sometimes referred to as ‘Network Modelling’, due to the fact a mathematical model can be created to optimize the supply chain network.


The two types of flow in a Supply Chain Network are:

  1. MATERIALS/CARGOES FLOW: Is the movement of goods from raw primary goods (such as Wool, Trees and Coal etc.) to complete goods (TV’s, Radios and Computers) that are to be delivered to the final customer.
  2. INFORMATION FLOW: Is the demand from the end-customer to preceding organizations in the network.

Supply chain allows Firms to move product from the source to the final point of consumption. Leading firms around the world, from large retailers to high-tech electronics manufacturers, have learned to use their supply chain as a strategic weapon.


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