DEFINITION: SUPPLY CHAIN
I hesitate greatly to offer any definition of the supply chain, as there are likely so many better ones to be found. However, knowing that there are likely a wide variety of definitions available, I do feel somewhat safe in adding a new one to the mix.
The total movement of raw materials, services, finished goods, and monies between suppliers and their customers, from product inception to final product disposition.
Key to this definition and for the purpose of understanding that the supply chain is both internal and external, is that there is something moving between a â€œsupplierâ€ and a â€œcustomerâ€. One party is providing goods to another party.
In the external supply chain, the â€œcustomerâ€ is the company who purchases, and the â€œsupplierâ€ is the company who sells to the customer. A company purchasing raw materials takes these goods from a supplier in exchange for (a typically monetary) payment.
In the internal supply chain, the â€œcustomerâ€ can be thought of as the department or group receiving something from a â€œsupplyingâ€ department or group. A simple example is when the warehouse receives finished goods from manufacturing. However, this could also be true of the relationship between the shipping department and the billing department: when a shipment is sent to a customer, notification must be given to the accounting department to invoice the customer for the goods that were shipped.
Just because something of value (i.e. money) is not the basis for, or exchanged as part of, the transaction, the concept of the supply chain is no less valid. In fact, in this example, the value of the merchandise to the customer represents more than the merchandise on the warehouse shelf, as receivables are assets to a company, and the sale price should be higher than the item cost. Thus, merchandise value can be viewed as transferred from the shipping department to accounting department.
The â€œholisticâ€ view of the supply chain must consider both the internal and the external supply chain. The concept of the supply chain does not stop at the organizationâ€™s walls.
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Guest Author: Norman Katz
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