The supply chain is Concept and classification

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

If there is anything eternal in our industrial world, it is logistics. Being essentially an auxiliary activity, modern logistics has gone far ahead in comparison with many manufacturing industries. Revolutionary changes primarily relate to a new approach in the form of DRM - supply chain management. Behind this abbreviation is a fundamentally new attitude towards modern production as a whole.

The fact that the most reputable international institution in the field of logistics was renamed from the Council Of Logistics Management to the Council Of Supply Chain Management speaks volumes.

What exactly did logistics supply chains bring? Let's try to figure it out.

Formulations and clarifications

Thinking from the perspective of a delivery team, a supply chain is a set of organizations thatinvolved in this supply: suppliers, consumers, manufacturers, intermediaries. All of them are connected by a single technological line of execution.

If you think from a process point of view, then the supply chain is a set of processes for creating additional value in parts of the chain to meet consumer requirements.

Both formulations are good and quite acceptable to quote depending on the context. One way or another, this is a set formed by technological connections.

If you look at it, a supply chain is a group of successively connected suppliers and consumers, each of which interacts with its neighbors and receives a new role in the process. Each consumer becomes a supplier for the next participants in the chain.

Usually such a chain is commanded by a central company (often a general contractor), which forms a chain, selects participants, puts them in their places. Everyone knows their place well and understands their tasks and their sequence: this is one of the main advantages of processes in the supply chain.

Suppliers and consumers

Participants in supply chains are also divided into levels:

1. Suppliers and consumers of the first level are companies that are contractually bound with a central organization - a general contractor.
2. Participants in the second-level chain are essentially suppliers of suppliers and consumers of first-level consumers.

Often one second level is not enough. Any member of the chain can build their own supply chain and play the role of a central contractor in their area. Thus, modern supply chains can take on a bizarre and complex branching pattern, the main thing in which is a clear and logical sequence of actions of each "player".

Classification of supply chains in logistics

Classifications are usually made according to several criteria, and deliveries are no exception. Here is how they are subdivided:

• by branching - the number of levels of suppliers and consumers;
• by type of delivered product;
• by nationality or geographic location.

According to the number of levels of participants in the supply chain, they can be as follows:

1. The direct supply chain is a relatively simple sequence of actions with a central company at the head. All deliveries are built around a general contractor. The number of participants can be very different. The main thing is that they are all directly connected to the central company.
2. Maximum supply chain is a more complex combination of a central contractor and two multi-population groups. In the group on the left, all counterparties interact, and in the group on the right, intermediaries and distribution networks all the way to the end consumer.

According to the type of product delivered, supply chains are divided into two large groups:

1. Delivery of goods. Everything is clear here.
2. Supply services. These may includea variety of related services such as warehousing and storage, insurance, stock management in the supply chain, customs clearance, repairs, etc.

National and international shipments

Another kind of classification based on "geographical" criteria:

1. National supply chains are produced on the territory of one state with all the ensuing consequences. The organization of such chains is much simpler, because both raw materials and consumables are mined and produced here, in their native territory. In such cases, there are no problems in many issues: for example, with customs declarations or a different approach to drawing up contracts. But even in textbooks, frankly, national-scale logistics operations are not studied.
2. International supply chains are a different matter in terms of complexity and cost-effectiveness. Most modern logistics schemes are international. Logisticians were the first to understand the meaning and prospects of a new concept - a single global economic space.

Global Supply Chain Systems

The phenomenon of globalization can be treated differently: the arguments of supporters and opponents are generally serious. But professional logisticians will always vote for globalization because it expands horizons. Especially when it comes to supply chains without borders. The process of globalization has signs:

• appearance of world currencies;
• pricing independent of national settings;
• freedom from national regulation on offshorezones;
• formation of economic transatlantic alliances and associations.

Global supply chains go beyond the boundaries of not only states, but also continents. The national identity of buyers and sellers is losing its significance with astonishing speed and does not affect the formation of processes in any way.

Chain links may be located in different countries. Most often, the production of a product is located near the source of raw materials and in places with traditionally low wages. Further, the products through distribution structures enter the most diverse regions to the final consumer. Supply chains can cross national borders many times, the main thing is consistency, cost reduction, speed and overall high quality.

Trends and factors for further development

Supply chain management does not stand still. According to the most authoritative company Gartner Research, the importance of logistics will continue to grow due to the following factors:

• The rapid growth and opening of new markets in developing countries, which will further expand supply chain opportunities. An example is the most popular trend in the location of screwdriver production in the territory of such countries (for example, the automotive industry).
• Changes that are taking place at breakneck speed in international trade, especially in commodity markets. Logisticians lose time for planning. Those who can react to changes faster and who know what will win will win.stands for the word "diversification".
• The boom of outsourcing, which forces logisticians to become real multidisciplinary experts. Now the requirements for the qualification of logisticians in serious companies have increased tenfold: logistics is becoming one of the key success factors in almost any company, regardless of its profile.
• The huge demand for modular, standardized supply chain solutions. The high quality of services in logistics is not even discussed now, it is implied by default both for standard modules and for individual supply chains.

The MIT Council 2020 Unique Project

MIT is the famous Massachusetts Institute of Technology, and the MIT Council 2020 is an exciting long-term project created at the university's supply chain management center. The project is now eleven years old and aimed to identify factors that will influence the success of supply chains in the future - by 2020.

Two statements in the form of hypotheses (they still need to be proven) were formulated in advance:

1. Hypothesis 1: The “best practice” phenomenon does not work and does not exist.
2. Hypothesis 2: Companies with well-established DRMs beat competitors. DRM largely replaces part of corporate strategy.

World leaders in DRM today

As part of the Council 2020 project, MIT is also involved in global logistics rankings. The leaders in DRM were Amazon, P&G, Apple, Dell, IBM, McDonald's, POSCO, and Wal-Mart. Mart according to the following criteria:

• Presence of a special strategy of the UOC within the framework of the corporate business strategy.
• Special working model for executing core business strategy and supply chain planning.
• Balance set goals with business strategy and operating model oriented to it.
• Optimization and minimization of the number of links (logistics objects) in supply chains.

The project is ongoing and the world's professional logisticians are looking forward to the results. In particular, are, for example, two input hypotheses confirmed? So far everything is moving towards this…

Conclusion

If your kids don't know where to go to study, send them to universities that specialize in logistics, you won't regret it. And go there to study, if circumstances permit. And take the UCP for coursework topics. Courage, analytics, force majeure adrenaline surges in the blood, a huge space for beautiful creative solutions, international career opportunities - what else does a person with a good head and a desire to move through life need? Good luck!