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Supply Chain Explained

March 16, 2022

That new laptop computer you're thinking about buying didn't just appear in the store by magic. It underwent a journey through what is known as the supply chain. That journey included collecting raw materials, creating all the parts, testing each component, assembling the final product, and shipping it to the store so you can decide whether to purchase it.

Many of these steps take place in different locations and require multiple modes of transportation, an extremely fine-tuned communication system, and the collaboration of thousands of people all over the world.

Here's how it happens.

What is the supply chain?

The supply chain is the process of creating and delivering an item. It consists of all the steps and processes, including logistics that are required to transport these products or services from the place where it's created to the consumer who utilizes it. Each step presents challenges that can either result in delays and empty shelves or the simple quiet success of a well-stocked store awaiting consumers.

You can think of the supply chain as a pipe that connects supply and demand. It's a complex network of various entities that work together to enable us as consumers to receive our products in the time that we expect; anything and everything, from food to cars. It comprises many different components including raw materials, factories, warehouses, transportation and, of course, people to make it all work.

How does the supply chain work?

With all its complexity, the supply chain contains 4 steps. Here are those steps and how they work.

Step 1: Planning- This is where the manufacturer decides how many items to produce based on estimates of demand versus available supply, along with other economic factors including popularity of the product, consumer spending, employment, and so forth.

Step 2: Sourcing- This step involves gathering raw materials or components needed to manufacture the products that will eventually be offered for sale. These materials must be collected, transported, and stored until used in the manufacturing process.

Step 3: Manufacturing- Manufacturing or making the product from sourced materials also involves several other embedded processes including quality control, testing, and packaging.

Step 4: Delivery- During this step, finished products go to a distribution center for delivery to suppliers and retailers and ultimately the customer. This process can include the so-called last mile, a name used to describe the final delivery leg that moves the product from the supplier/retailer to the customer's doorstep.

Supply chain and the economy

Traditional mainstream economic thought has long held that the economy is driven by manufacturing and services. Some economists now believe the supply chain economy is a distinct category that deserves special consideration.

Although the supply chain economy plays a crucial role in the creation of well-paid jobs which clearly provides a boost to the overall economy, it's not just about wages. "The supply chain of chip manufacturing equipment runs the world, and the US is currently leveraging this in their favor," says Steven Zhou, CEO of Moov, an online marketplace for manufacturing equipment. "Many are calling the computer chip the new oil and the infrastructure that will save our economy."

What is the global supply chain?

In some ways, a global supply chain is just a bigger version of the local supply chain. In that sense, global supply chains are networks that span multiple continents and countries for the same purpose as a local supply chain — sourcing and supplying goods and services.

Think of the global supply chain as an interconnected network that stretches across the world linking raw materials, manufacturers, distributors and consumers. The global supply chain allows, for example, tiny microchips made in China to be used in cars manufactured in Detroit.

This ability to link on a global basis can lead to real advantages including reduced costs, the ability to expand markets and develop new suppliers, and access to more skilled supply routes. There are challenges as well. Longer lead times and an increased need to plan far in advance adds complexity. Reputational risk when dealing with unfamiliar cultural customs or politics can hurt a brand name or cost business.

Fluctuations in exchange rates can add financial uncertainty to the bottom line and communication disconnects may require additional efforts when it comes to expectations. Finally, loss of quality control in a global market is often cited as an expensive and sometimes embarrassing factor.

MHCare Medical provides compliant medical PPE and consumable products to clients across multiple sectors. We’re known for our global procurement expertise ensuring fast, reliable delivery and hassle-free ordering. Contact us to learn more.

*This article is not meant to be taken as medical advice. Please follow the advice of your local health authorities when making decisions about your own health and the people around you.

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