Broadly, a supply chain refers to the start-to-finish process of researching, designing, manufacturing, producing, distributing and selling products to customers – any and all types of products. Every step involved in the creation, transportation and sale of products is part of the supply chain.
Supply chain management efforts are focused on analyzing the entire life cycle of production and every single task within that chain and then analyzing those steps so that efficiency can be increased at every opportunity. This lowers costs for the company in the process of making and selling its products and delivers better products to customers more quickly.
The typical global supply chain journey carries a product or idea through four stages: supplier, manufacturer, distributor and customer.
What Is Supply Chain Management?
If you produce any product for eventual sale, there is a process from the creation of the idea of the product all the way to the end stage when it reaches the customer. Every part of this process includes parts, people, activities and sources, which are collectively referred to as the supply chain. Supply chain management efforts are designed to enhance and improve efficiencies throughout every stage of the process, making it quicker, easier, more affordable and more valuable to both the company and end users of the product.
If you’re asked to define a global value chain, you can turn to this definition of a supply chain. The typical global supply chain journey takes you through four stages: supplier, manufacturer, distributor and customer. The customer is also an important part of the equation.
When considering making the process more efficient to get the product to the customer, a supply chain analyst also has to consider how to create and manufacture products that respond to customer demand. So, it's not only the process of creating the products and making them cheaper and more efficiently, it's about doing so with the end goal of giving the end users more of what they want in that product, whether it's features, enhancements, lower prices, better availability or something else.
Examples of Global Chain Management
If you buy an iPhone, the idea first comes from Apple. They've listened to feedback from their customers after the last model release, and they know what they want the next phone to be able to do. Most likely, these enhancements will include things that previous models didn't do or perhaps didn't do as well as users might like.
Next, Apple creates an idea for a new phone. Design, shape, functionality, size, weight and every other element of the device are considered. They then work with a parts resource who can supply all the parts needed to make the new iPhone. Then, the phone is manufactured and distributed in response to orders placed by Apple.
The new model phones are shipped to various distribution points, whether that's an Apple store, a carrier like Verizon who also sells iPhones or to other online or in-person retailers who sell phones. Those folks in turn then work to sell the new iPhone to the customer.
Supply Chain Management Process
Supply chain management along this entire process analyzes and examines each step and identifies changes that could be made to increase efficiencies in the manufacturing process. This in turn makes the product move quicker from idea to reality. It is less expensive to produce from a parts, labor and manufacturing standpoint and provides more efficient distribution and increased sales.
Supply chain management is also about relationships and risk management, customizing relationships to work optimally for all parties involved while minimizing the risk of negative outcomes. All of these efforts lead to a quicker, better, cheaper and faster journey from point A (idea) to point B (the users holding their new iPhone in their hand).
Global Supply Chains
Global supply chains involve partnering with foreign companies that will be able to help improve supply chain efficiencies. These efforts typically focus most heavily on cost savings. It is generally much cheaper, for example, to manufacture a product overseas than in America. Labor is less expensive overseas, parts are much cheaper and the end result means a product that's sold at a lower cost for the consumer than if the product was produced 100 percent in the United States.
Maximizing these efforts requires precise evaluation and deep understanding of everything involved in the supply chain. Making mistakes that devalue your product in the eyes of the consumer can be costly and can make for a challenging recovery. If you cut corners in an attempt to lower costs and end up with an inferior product that doesn't work correctly, you haven't really saved money because you've lost sales. So, this involves a careful understanding of every link in the chain and the ability to make the best decisions every step of the way, from ideation to manufacturing to transportation and distribution.
Companies are always looking for ways to improve their efficiencies and produce goods at a lower cost while managing supply and demand so there is not too much or too little of each. Supply chain management also takes into account market fluctuations, global currencies and import/export fluctuations so that those highs and lows have less effect on companies and their manufacturing and distribution processes. It's a delicate balancing act and requires years of experience to understand and implement.
Global Value Chains
Global value chain, or GVC, is just another way to talk about the supply chain, specifically when that chain includes foreign companies, workers, parts and products. It refers to operations on a global level that focus on increasing efficiencies that will lead to a company's economic growth and job creation.
GVC can include focusing on different strategies and methods to cut costs, add efficiencies and minimize waste, such as outsourcing, lean manufacturing (manufacturing products in a way that requires fewer resources, materials or labor) or total quality management (awareness and focus of quality and efficiency throughout the process). It may also mean expanding into new markets or going deeper into existing markets. Lastly, it also requires an understanding of and focus on policymaking. Import/export laws and trade laws, restrictions and best practices are integral to successful globalization.
Supply Chain Management Salary
Supply chain management jobs can be lucrative but are also very competitive. These logistics-driven, data-heavy positions help improve total operations around a company's production procedures and require a specialized skill set. Companies may continuously be looking for improvement not only in their actual supply chain but in the manager who drives those efficiencies.
Salaries can vary widely depending on experience, complexity and the location of the job but generally can range anywhere from $70,000 a year to upward of $125,000 a year. One estimated national average salary for a supply chain manager is just shy of $90,000 a year. The Bureau of Labor Statistics classifies these jobs as "logisticians" and puts the average closer to $74,500.
These jobs are in high demand. Students who graduate with a degree focusing on supply chain are highly likely to quickly get a job in their field and begin building their professional experience and climbing the ladder of success. Starting salaries can be in the mid 50s, and it is a growing field. You might begin as a buyer or expeditor, work in sales or work in the operations department.
Analysts, statisticians and even loading operators are all part of the supply chain, and those positions all afford opportunities to act as a launching pad for a career in supply chain logistics.