What is a supply chain?

A supply chain is made up of a network of players contributing to the elaboration of a certain product. It includes a whole set of logistics which ranges from the supply of raw materials to distribution along with the production of goods.
supply chain

Various sub-contracting companies, independent from one another, are part of this chain, which ultimately results in substantial inter-dependence.

In-house inter-dependence is referred to when the process addresses only management issues within the company whereas external inter-dependence refers to a process that includes relationships with third parties: suppliers, subcontractors, distributers, consumers.

Disruption of the supply chain may also be caused by internal or endogenous factors: strikes, sabotage, poor management, etc. or by external factors called exogenous which have bearings on third parties: natural catastrophes, stock market fluctuations, political crises,…

The supply chain, a complex network

The diagram here-below features the strong interdependence ties between the different players of the supply chain. The disruption of one of the chain links will trigger a domino effect that may impact all the companies involved.

The company is located at the center of a network of suppliers, subcontractors, distributers and customers. Each member of the network is at the core of a logistical chain having its own ramifications of subcontractors, suppliers and customers.

Upstream, the company depends on suppliers in the first place (direct suppliers) who, on their turn, depend on those located in the second and third rank. Downstream, the company depends on the due progress and functioning of the transportation networks, and critical infrastructure such as electricity networks power grid and communication systems.

Example of supply chain

Supply chain and globalization

The dissemination of information and communication technologies has sped up the phenomenon of globalization. Nowadays, it has become easy to deal with a supplier located at the other end of the planet, providing products at more advantageous prices. This is referred to as “Global Sourcing”.

Fragility of the supply chain

Globalization does not only present advantages. Indeed, the extension of the suppliers’ chain triggers some fragility due to the higher exposure to risks: late delivery, sinking of a shipment, change of regulations in a third country, the occurrence of a natural disaster in a high-risk region…

The globalization of manufactured goods goes hand in hand with the deregulation of capital flow. The liberal model is there to facilitate financial transactions, which prompts companies to diversify their suppliers and relocate their production sites.

In the United Kingdom, some sectors such as that of the manufacture of electronic gear, have outsourced more than 80% of their operations (1).
The 2017 report drafted by the Business Continuity Institute (BCI) (2) pinpointed the immense complexity of global supply chains.

Supply chain players

The number of players

The survey conducted with 408 international organizations of 65 countries has shown that :

  • 28% of the companies have between 20 and 100 key suppliers
  • 8% declared having more than 100 suppliers
  • 2% more than 1000 suppliers
  • 7% of the companies cannot keep track of the number of their suppliers because of the complexity and depth of their supply chains.

Number of incidents

Still according to the 2017 report of Business Continuity Institute (BCI), 75% of the organizations quizzed declared having sustained one or several disruptions of their supply chain in the course of the last twelve months.

supply chain incidents

(1) Survey conducted by Cranfield University in collaboration with the British Department for Transport “Creating Resilient Supply Chains, A practical Guide”, Dept for Transport & Cranfield University.
(2) www.thebci.org/news/bci-supply-chain-resilience-report-2017.html

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