Have you
ever purchased a product, started using it, and suddenly began philosophizing
about where it came from? How
was it made? Who, or what, helped manufacture it? The answer to these questions
lies in what marketers call the supply
chain, the various firms involved in
performing the activities required to create and deliver a product or service
to consumers or industrial users. The various firms that aid in the
production process include suppliers and producers. The suppliers provide raw
material inputs to the producers who manufacture the goods using these resources,
selling the products to intermediaries (wholesalers, retailers, dealers, etc.)
who then deliver the finished products to consumers. Essentially, the supply
chain is one big series of linked suppliers and customers purchasing from each
other until a finished product reaches the ultimate consumer.
Supply chain management is the
integration and organization of information and logistics activities across
firms in a supply chain for the purpose of creating and delivering products and
services that provide value to consumers. Companies use sophisticated
information technology to share and operate systems for ORDER PROCESSING, TRANSPORTATION
SCHEDULING, and INVENTORY and FACILITY MANAGEMENT.
The following
diagram exemplifies the supply chain of the global enterprise SolarWorld Private Limited (AG), one of
the world’s leading solar power system corporations.
SolarWorld employs 2600 people at 11
branches in 8 countries on 4 different continents of the world with distribution
facilities in every key market in the world. As displayed in the above diagram,
the company itself, in addition to a joint venture facility in Qatar, harvest
the raw materials (silicon) from three locations: two in Germany and one in
Qatar. The company sends raw materials to two manufacturing hubs (Hillsboro, Oregon, U.S.A. and
Freiberg, Germany) to convert the SILICON into SOLAR WAFERS to then form SOLAR
CELLS which make up SOLAR MODULES. Next, an inspection procedure occurs before the shipping process.
Finally, the Hillsboro plant
delivers the finished solar panels to distribution facilities throughout North,
Central, and South America, while the Freiberg
plant distributes them to such facilities in Europe, Africa, Asia, and
Australia. These distribution facilities are also known as marketing channels (of distribution), which consist of individuals and firms involved in the process of
making a products or services available for use or consumption by consumers or
industrial users. These individuals or firms, known as intermediaries, make possible the flow of the finished products to
the consumer. Watch this video about the manufacturing portion of SolarWorld to get a better idea of the production process:
Coca-Cola uses
intermediaries associated with the company known as distributors. These are
branches of the company with warehouses where their products are stored. The
distributors are also wholesalers who maintain inventories and sell to
retailers, like supermarkets and grocery stores (known as “Off-Trade Channels”).
These stores prove the final stage of the supply chain as they provide the
consumer with the finished good. Check out this beautiful looking aisle at THIS grocery store! Do you see the fancy display method of 2 Liter Bottles of Coca-Cola?
The final
term to discuss this post is the idea of logistics,
the activities that focus on getting the
right amount of the right products to the right place at the right time at the
lowest possible cost. Companies strive for the high performance of these
activities, known as logistics
management, the practice of
organizing the cost-effective flow of raw materials, in-process inventory,
finished goods, and related information from point of origin to point of
consumption to satisfy customer requirements.
Three
elements can be used to summarize this definition:
1.
Flow: of the product; from raw material
to consumption.
2.
Cost-effective: relating to the above decisions.
3.
Customer service: satisfying customer
requirements.
Logistics
and Logistics Management are nicely represented in the concept of supply chain
and supply chain management in that companies often recognize the need for
smooth running logistics, thus collaborating, coordinating, and sharing
information among manufacturers, suppliers, and distributors to create a
seamless flow of products and services to the consumer. UPS stands strongly by
this idea, and heavily advertised this part of their mission for their
customers via ads like these:
Hopefully,
after this introduction to the Supply Chain and Marketing Channels, you now
realize the significance of these two in the business world. Logistics, a
related category to these two concepts, assists companies in operating
effectively and efficiently and proves a crucial aspect of any marketing
strategy. Remember, the supply chain is essentially the framework of any
business. Without it, companies would literally not exist. The more organized
and well-managed, the more efficient and successful a business will operate,
resulting in increased sales and brand reputation. Remember this in your
professional career. Please enjoy this SNL UPS parody to conclude.
See you
soon!
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