If your company makes a product from parts purchased from suppliers, and those products are sold to customers, then you have a supply chain. Some supplychains are simple, while others are rather complicated. The complexity of the supply chain will vary with the size of the business and the intricacy and numbers of items that are manufactured.
Elements ofthe Supply Chain
A simple supply chain is made up of several elements that are linked by the movement of products along it. The supply chain starts and ends with the customer.
• Customer: Thecustomer starts the chain of events when they decide to purchase a product that has been offered for sale by a company. The customer contacts the sales department of the company, which enters the salesorder for a specific quantity to be delivered on a specific date. If the product has to be manufactured, the sales order will include a requirement that needs to be fulfilled by the production facility.• Planning: The requirement triggered by the customer’s sales order will be combined with other orders. The planning department will create a production plan to produce the products to fulfill thecustomer’s orders. To manufacture the products the company will then have to purchase the raw materials needed.
• Purchasing: The purchasing department receives a list of raw materials and servicesrequired by the production department to complete the customer’s orders. The purchasing department sends purchase orders to selected suppliers to deliver the necessary raw materials to the manufacturingsite on the required date.
• Inventory: The raw materials are received from the suppliers, checked for quality and accuracy and moved into the warehouse. The supplier will then send an invoice to thecompany for the items they delivered. The raw materials are stored until they are required by the production department.
• Production: Based on a production plan, the raw materials are moved...