You’ve heard about supply chains. You know they must be important (and they are!) But if you never quite understood exactly what they were? You’re in good company.
Rhonda didn’t know what supply chains were.
If you’re a regular PCat reader, you know that Rhonda is a retired nurse who now runs a business making wooden items in her garage workshop. Gnome-shaped wooden beer mugs are her top seller.
Recently, Rhonda’s friend Process Cat stopped by to visit her and was surprised by what he found outside!
PCat was almost too nervous to ring the bell, but when he finally went in, he found out the story from Rhonda. Apparently, she had heard that all sorts of industries were experiencing shortages due to supply chain problems. So she decided to buy as much wood as she could find before it ran out!
“But,” she said nervously, “I’m not sure I actually understand what supply chains are! Can you explain it?”
And of course, Process Cat was happy to oblige.
The Ins And Outs Of Supply Chains
A supply chain includes all of the businesses that stand between raw material and the final end customer of the finished product. Let’s make this more concrete with an example: here are Rhonda’s customers, her supplier, and its supplier.
Now let’s look at how information flows through this chain.
Money also flows through the chain
And so do materials (both raw materials and progressively finished parts.)
The important things to note for now are 1) that information, money, and materials flow through at all levels of the supply chain; 2) they are usually much more complex than this one! (Even Rhonda has more than one way of selling her items. Customers can buy directly from her at a craft fair or on her website, but she also wholesales to a few local stores, adding another link in those cases.) 3) Notice that the order sizes will usually get LARGER as you go further towards the supplier end of the chain. That’s going to be important later 😉
For now, just make sure you understood this week’s article. It hopefully seems pretty simple and it is, but it’s important to get those basic points before moving on. And come back next time for more on the implications of supply chains!