LoginSupport+852 3018 8089

Why the Supply Chain is More than Just Manufacturing and Logistics

Ask many people what “the supply chain” is and they’ll probably tell you that it’s about making products and getting them to the customer. It’s certainly true that manufacturing (making goods) and logistics (moving those goods) are the most visible parts of the supply chain, so it’s understandable that people think that way. But, if you look a little deeper, it’s fascinating to learn just how much more there is to supply chain management.

From early planning, through design and procurement, to point of sale, the supply chain is a rich, interdependent, deeply connected ecosystem that spans companies and continents. We’ll dig into how everything works together, explain the main components of the supply chain, and show why it’s so critical to everybody’s life and work.

Supply Chain Management: The Big Picture

Before we get into the details, let’s take a high-level look at all the components and processes in the majority of supply chains. They are:

  1. Planning, forecasting, supply, and demand management.
  2. Product design and development.
  3. Sourcing, ordering, procurement, and buying.
  4. Supply, manufacturing, and quality.
  5. Logistics, shipping, and storage.
  6. Distribution and point of sale.
  7. Supply chain sustainability and emissions.


We’ll cover each of these and explain:

  • What that part of the supply chain does.
  • What the main processes are.
  • Why it’s important and its impact.


Supply Chain Planning, Forecasting, Supply, and Demand Management

Businesses need to understand what the likely demand will be for their products, how quickly their suppliers can make those products, and how long it will take to receive and store them. This is because there are often long “lead times” between initially placing an order for an item and having it ready to sell to a customer. This first part of the supply chain means businesses can balance supply and demand, and plan ahead. 

The main processes in this area are:

  • Demand management: Understanding the likely future demand for products.
  • Supply management: Ensuring that supply chain partners have the capacity to manufacture products and ship them to you in time.
  • Forecasting and planning: Combining supply and demand data to predict how much of a product you will need and how soon you need it. 

The Impact of Planning, Forecasting, Supply, and Demand Management

The main purpose and impact of this area are to ensure products are available where and when consumers want them. Businesses can only achieve this through strong forward planning that orders products well ahead of when they will be needed. Ths planning and forecasting are shared with product development and procurement to ensure that products are designed and ordered ahead of when they will be needed. Getting this wrong means that retailers run out of stock, resulting in lower availability, customer frustration, and lost profits.


Supply Chain Product Design and Development

Businesses want to bring new products to market that innovate, satisfy consumer needs, and stay ahead of the competition. The product design and development framework provides a clear path for taking an idea from the original concept, through prototyping, and into production. New product designs can take account of real-world constraints and choices, creating a positive change in consumers’ lives.

The main processes in this area are: 

  • Product ideation: Creating new ideas for products based on market research and consumer requirements.
  • Product design and prototyping: Designing early versions of products and building mockups and prototypes to check functions, features, and fitness for purpose.
  • Testing and improvement: Trying out different iterations for the products with target consumers and integrating feedback into further development.
  • Finalization and specification: Agreeing on the final design and providing specifications to manufacturers for production.

The Impact of Product Design and Development

Product design and development is the innovation engine behind a product-focused business. It allows companies to scale up their presence in existing marketplaces and expand into new ones. This keeps them competitive and front-of-mind with consumers, as new products meet ever-changing needs in the real world. Once products are developed, these requirements can feed into the ordering and procurement processes. Getting this wrong means a company becomes a laggard, vulnerable to disruption from smaller, more agile competitors.  


Supply Chain Sourcing, Ordering, Procurement, and Buying

Once a company knows the types of products it needs to purchase, and what the demand is likely to be, it’s time for sourcing and procurement. This ensures the company’s intent and requirement to purchase items is captured and sent to suppliers, manufacturers, and others. The ordering process is the vital step between “this is something we need” to “this is something we’re requiring others to make.”

The main processes in this area are:

  • Product sourcing: Identifying the suppliers and manufacturers with the capability and capacity to make your product.
  • Ordering and procurement: Getting the right paperwork and other agreements in place to order stock and setting expectations about cost, speed, and quality.
  • Buying: Making payment for products as agreed with the manufacturer.

The Impact of Sourcing, Ordering, Procurement, and Buying

This area turns a company’s desire and requirements for products into an agreement with suppliers and manufacturers that they will make those products. It allows a business to find suppliers that are “fit-for-purpose” and ensures they assign time, resources, and raw materials to producing the required products, and guarantees payment for receiving those products. This is a necessary prerequisite to manufacturing products.

Getting this wrong means that suppliers and manufacturers are not able to understand what they need to do, cannot meet their commitments, and results in unavailable stock. Examples of this include issues with shortages of lumber or semiconductors, which in turn become very expensive to source, resulting in shortages and higher consumer costs.


Suppliers, Manufacturing, and Quality

This is the part of the supply chain that turns ideas, orders, and raw materials into products that businesses can sell. From sourcing raw materials, through making parts, to producing finished goods, the supplier and manufacturing processes often contain dozens of mini supply chains of their own. “Making products” is one of the more obvious parts of the supply chain, but actually involves many interdependent processes:

  • Sourcing raw materials: Extracting, refining, growing, and otherwise sourcing the ingredients and resources to manufacture goods.
  • Manufacturing parts: Products are made up of many different components and each of these must be made separately.
  • Assembly of products: Finished products are constructed from various parts and turned into their final forms.
  • Product quality and testing: Products are subjected to monitoring and testing to ensure they meet quality, safety, and other requirements.

The Impact of Supply, Manufacturing, and Quality

This area makes the products that consumers buy. It takes the agreements and orders with suppliers and manufacturers and turns them into production runs that create physical goods. Getting this right means producing goods to business and consumer requirements—quickly, and to the appropriate quality and cost. Parts and finished products then move into the logistics and shipping process for onward distribution.

Getting it wrong results in products that are not fit for purpose, resulting in returns and refunds.


Supply Chain Logistics, Shipping, and Storage

A large part of the supply chain is getting products from point A to point B, and that falls to logistics and shipping. Although the concept of moving goods by road, rail, air, or sea sounds simple, fast and efficient logistics requires many different processes working together:

  1. Pickup of products from suppliers and manufacturers.
  2. Consolidating products together for shipment.
  3. Arranging for shipping through various types of transportation.
  4. Optimizing transportation resources according to speed and cost.
  5. Receiving goods and de-consolidating them.
  6. Storage of products as required.
  7. Shipping goods to their final destinations.

The Impact of Logistics and Shipping

Good logistics and shipping mean that products are available when and where consumers want to purchase them. This isn’t just about keeping the right inventory levels for goods, it also requires putting products in the right physical locations. Getting logistics right maximizes the availability of items and means consumers don’t need to wait to receive them. 

Getting it wrong results in there being too much or too little stock for consumer needs. A good example of this is the Suez Canal blockage, which disrupted the flow of goods for several weeks.


Supply Chain Distribution and Point of Sale

The final step in the supply chain is to sell the goods to consumers. This means getting the products from the warehouse into stores or directly to consumer’s addresses, typically known as “Last Mile Distribution.” Once the goods are available, a point of sale process collects money from consumers in exchange for the products.


Processes include:

  • Identifying immediate needs for restocking inventory based on consumer demand and stock levels.
  • Arranging for the delivery of products from a central location to stores and direct to customers.
  • Making products available to consumers online or in-store.
  • Noting when sales have been made to reduce inventory levels and pass the information into the forecasting and reordering processes.
  • Collecting money to allow for payments for new products and to meet operational and other costs in the supply chain and beyond.

The Impact of Distribution and Point of Sale

Distribution and point of sale are about meeting consumer needs. Distribution gets the products into their hands in a fast and cost-effective way, while point of sale ensures that product demand data is properly incorporated into future forecasting and ordering processes. Getting this right leaves consumers satisfied, through a business providing high-quality goods at an appropriate price, when the consumer wants them—and ensures those products will be available in the future. Getting it wrong risks creating frustration or perception of low value for money. 


Supply Chain Sustainability and Emissions

Sustainability and protecting the environment are increasingly critical areas for every supply chain and cover several different areas, including:

  • Greenhouse gas emissions like carbon dioxide, nitrous oxide, methane, and others.
  • Land, air, and water pollution from supply chain activities.
  • Use of natural resources to produce and distribute products.
  • Impact on local communities and workers.
  • Responsible environmental, social, and governance approaches.

Consumers are becoming much more conscious of where their products are coming from, and are increasingly voting with their wallets. An efficient supply chain helps stakeholders and managers to focus on sustainability and reduce their impact. Greater insight into emissions and sourcing means your supply chain ecosystem can focus on green initiatives that drive better environmental and sustainability initiatives.

These include: 

  • Supplier Auditing and Assessment
  • Social and Environmental Factory Audits
  • Chemical Management
  • Packaging
  • Material Traceability
  • CO2 Emissions

Bringing these areas together means you can proactively reduce your impact and demonstrate your successes to end customers.


The Whole Supply Chain is Mission Critical

The impacts of the various parts of the supply chain highlight just how mission-critical every aspect is. The complex, global, and interdependent nature of the supply chain ecosystem means every part has to work in harmony with others, across multiple functions, partners, businesses, and stakeholders. 

Supply chain failures have a huge impact on public perception and profitability, whether it’s empty shelves of toilet paper, gasoline shortages due to hacked pipelines, waiting months for a Playstation 5, or the increased costs of building a home due to scarcity in lumber and construction equipment. Every business needs to have a robust, resilient supply chain infrastructure that highlights problems and allows for rapid replanning in a changing world. 

Putting SCM first makes sense:

  • Getting forecasting right means you can easily meet consumer demand and incorporate trends to allow for correct inventory levels.
  • Optimizing and right-sizing demand and supply will maximize profit margins and minimize capital tied up in stock.
  • Strong product design and development increases competitiveness and lets you expand into new marketplaces.
  • Robust sourcing and ordering processes let you create strong supplier agreements and can help with resilience and contingency in the supply chain. 
  • Working across multiple suppliers lets you optimize the flow of goods and maximize efficiencies in the product manufacture process.
  • Insight into logistics, shipping, and storage makes your inventory and stock management much easier.
  • Strong distribution and point of sale mean you’re satisfying customers and ensuring you’re accurately planning for future demand.
  • Supply chain sustainability and emissions allow you to demonstrate to consumers and regulators that you’re taking your environmental commitments seriously.

Focusing on the supply chain lets you drive down costs, maximize efficiency, deliver high-quality goods, and manages consumer expectations.


To learn more about how your supply chain can benefit, please see:


Share the knowledge and insights

on Facebook on Linkedin on Twitter Copy URL