A supply chain involves the process of moving goods from the providers of raw materials all the way through to finished products for the end customers. Supply chain organizations use logistical methods that manage the entire process. The organizational structure of the supply chain management systems determine how they accomplish these goals.
A standard supply chain consists of companies that buy and sell goods and services from each other. The objective of these transactions is to produce an end product for customer use. Each company in the chain contributes a step in the process. The supply chain often starts with the harvesting of raw materials, then goes to a processing or manufacturing stage, then to a distribution or transportation hub until finally arriving at the retail outlet.
For instance, the supply chain for a furniture store can start with the logging companies that harvest the wood for tables and chairs. The chain continues to the sawmill that cuts the wood into smaller pieces, then to the assembly plant where the pieces are cut and shaped into the furniture components. Workers assemble the components and polish the finished product before shipping it to a distribution center. Vehicles carry the finished products to the furniture store for display to waiting customers.
The primary functions of a supply chain organizational structure include increasing the efficiency and reducing the costs involved in supply chain management. These tasks also include the management of suppliers and vendors on either end of the supply chain system. Workers in the supply chain organizational structure can accomplish these goals with the implementation of stringent quality control methods and an effective internal auditing procedure throughout the entire supply chain.
The supply chain organizational structure incorporates elements of both horizontal and vertical differentiation. The horizontal differentiation separates workers by task. In the supply chain, workers assigned to the harvesting of raw materials are on an equal plane with those in the manufacturing, distribution and retail links in the chain. The vertical differentiation orders workers by rank, seniority and experience. A plant supervisor will oversee an assembly line worker just as a retail manager will direct a member of the sales staff.