What is supply chain management?

Supply chain management is the area of business that is responsible for planning, managing and keeping the chain of processes flowing optimally, from the sourcing of raw materials, supplies and services for the operation of a company, to the delivery of products or services to end customers.

Supply chain management works to achieve the greatest efficiency in terms of supplier selection, taking into account their number, location, quality and costs; in terms of production facilities and warehouse infrastructure, ensuring a balanced inventory of raw materials, work-in-process and finished goods to match your market demand; and in terms of distribution methods, determining whether they should be centralized, own or third party. All this is achieved by analyzing the available information on specifications, invoices, revenues, orders, and so on. 

How does a product supply chain work?

Roughly speaking, a very simple product supply chain works with three elements: the customer, the producer and the supplier. At the center of this three-link chain is the producer, who acquires raw materials from the supplier and transforms them into a product sold to the customer.

Naturally, in the real market these chains are much more elaborate and resemble a network rather than a chain. Suppliers, in turn, have other secondary links behind them that supply them with materials, components, products and services. At the same time, the producer has different distribution channels that increase the reach of its product.

How does a service supply chain work?

The service industry fits perfectly within the logic of the supply chain, since it also aims to satisfy the needs of a third party and take care of its interests, meaning it must optimally manage all those components that make it possible for it to fulfill its objective, such as qualified personnel and efficient machinery and infrastructure.

In practice, almost all organizations offer services, with the exception of those engaged strictly in agriculture, mining and product manufacturing. Some traditional examples of service companies are those involved in maintenance, repair, cleaning, telecommunications, consulting, distribution or courier services.