The supply chain has 3 main links:
- Materials flow from the supplier to deliver to other supplier and firms needing supplies.
- Transformation of materials into finished and semi-finished products through the organization‘s own production system.
- Distribution of finished products to customers.
The following are the key factors during supply chain.
1. Production – This is the process of transforming of raw materials into finished and semi-finished state where it can be consumed by customers.
Production can be made responsive by:
- Centralizing production to get better economies of scale.
- Producing in smaller parts that are close to major groups of customers.
- Using flexible manufacturing techniques to produce a wide range of products.
2. Inventory – It can be made responsive by:
- Stocking products at many locations so as to have inventory is close to customers.
- Stocking high levels of inventory for a wide range of products that customers can choose from.
- Reducing inventory that don‘t sell frequently.
1. Location – A responsive location should be one where a company opens many locations so as to be physically close to its clients and also where by operating from only a few locations and centralizing activities in common locations.
2. Transportation – It is the movement of products from one place to another. It can be made responsive by:
- Adopting a mode that is fast and flexible.
- Transporting products in large batches in order to reduce costs.
- Originating products from a central location instead of many branch locations that are expensive.
- Use of modes such as ship, rail and pipeline.
3. Information – This driver grows stronger each year as technology for collecting and sharing information becomes more wide spread and less expensive. Companies in these supply chains i.e. from distributors to big retails stores collect and share data about
consumer demand, production schedules and inventory.
4. Information Technology – Technology changes abruptly and firms have to be at the ready to adopt the latest technology. It enables faster sharing of information on business processes, products and markets on various procurement platforms.
5. Consumer Behaviour – This greatly dictates various changes on the supply chain, dictating its direction. Every organization needs to understand customer demand in terms of preference, tastes etc. and its effect on the supply chain.
6. Legislation – These are the policies revolving around production, goods, works and services.
7. Financing – This helps fuel the supply chain.
8. Human Resource/ Workforce – This is found at all levels of the chain to coordinate activities.