The Supply Chain - Part 1: What is it?
“The supply chain stuff is really tricky.”
- Elon Musk
Leave it up to Elon Musk to say in just seven words what it can take others thousands to describe. Musk is correct, the global supply chain is tricky. One easy way to look at it is that the chain is like a spider’s web with an infinite number of connections and offshoots moving across the globe. Even one connection, when interfered with, can have substantial consequences that affect everyone, causing a ripple effect all throughout the "web".
Supply chain issues can have a direct impact not only with your business decisions, but your personal ones as well. In this three-part series we will try to answer the following questions:
1. What is the supply chain?
2. How do interruptions in the supply chain impact day to business?
3. What does the future look like?
So, what exactly is the supply chain?
Simply put, the supply chain is the entire network of manufacturers, suppliers, and distributors through which a product is delivered to the end user. Think of the spider web analogy for a moment. The complexity of the spider web is mind boggling and amazing at the same time, with each part of the web serving a purpose.
There is one part of the supply chain that most people don’t realize exists and don’t consider. Most of us think of the chain as moving physical items, but that is only one part. The other is the intangible side. Human resources, regulation compliance and transportation are just some of the intangible parts of the supply chain. Companies themselves have many moving parts that affect the whole. A simple mistake in governmental reporting can cause a company to be shut down. Even a minor delay can reverberate and be magnified throughout the chain.
Many companies will contract with outside sources to assist with their internal operations. The outside sources then become part of the chain as they will need to acquire products for their operations. The need for tangible products (computers, office furniture, stamps…) to support the intangible. As you see, it is getting even more tricky.
How does the supply chain function in a global economy?
The reality of the supply chain is nothing new, and it has existed since the start of commerce. When the first person sold goods that they purchased from another, the supply chain was born. As commerce has grown, the supply chain has evolved and become more complex to keep up with the demand. If allowed to operate with minimal outside interference, the global supply chain can be extremely effective and efficient.
It is only relatively recently that we have begun to actively study the supply chain and learn more about how it operates. The more we learn and understand, the quicker we can make corrections when negative situations arise and reduce the overall impact these negative situations will have. Another positive in studying all aspects of the supply chain has to do with our ability to accurately forecast a company’s needs for products months in advance. With modern IT systems, state of the art analytics, and a grasp of the global supply chain, a company’s logistical team can accurately predict their company’s needs.
In the next installment, we will look at what happens when something comes straight out of left field that nobody anticipated and the domino effect this can have on day to day business as the global supply chain spirals out of control.
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