Supply chain

The supply chain is the chain of value-creating processes that create products and services suitable for satisfying the needs of the customer base across cooperating companies.

The concept of supply chain can be interpreted in several ways. In a narrower interpretation, it can be considered as the group of independent companies in which the product or service goes through the production process. Simplifying this interpretation, just one business can encompass the entire supply chain. In this case, the logistics processes within the company are coordinated ensembles, and the integrated logistics system is the supply chain.

Interpreting the concept more broadly, we can consider all actors who cooperate in the process of procurement, production and delivery of the goods to the customer as members of the supply chain. Raw material suppliers, component manufacturers, finished product manufacturers, logistics service providers, wholesalers and retailers are also part of the chain. Through them, the goods reach the consumer at the end of the chain. Moreover, the financiers of all these processes can also be included in the chain. 

In this approach, the three stages of the supply chain are: procurement, production (including suppliers, subcontractors) and distribution (resellers and warehouses, transport operators, carriers). 

Considering the complexity of the actors, we can distinguish three stages of the supply chain. A supply chain is direct if it consists of only one company, its supplier and the consumer of its product. 

The supply chain can be extended in both directions in a longer vertical. In the latter case, in addition to the manufacturer, it includes the supplier as well as its supplier, and on the other hand, in addition to the direct customer, it also includes the customer of the customer. This chain encompasses the flow of products, services, funds, and information to and from the manufacturer. 

The entire supply chain unites all the participants of the given vertical relationship system from the first supplier to the final consumer, ensuring the flow of products, services, funds and the flow of information in both directions. In this interpretation, the supply chain goes far beyond the concept of distribution. It manages the manufacturer, all its direct and indirect suppliers, all resellers involved in the sales route, logistics service providers and, of course, the customer base as a single, coordinated system. 

In the entire chain, the interdependent processes of value creation can also be clearly identified: 

• product development, 
• acquisition, 
• production processes, 
• demand support with marketing tools, 
• logistics processes of order fulfillment, 
• maintenance of customer relations, 
• customer service activities 
• and the coordinated management of all these.  

In the case of transnational or multinational companies, all these activities can be carried out by subsidiaries and independent enterprises in various parts of the world, in many countries, organically built on each other in the international vertical. Many international companies are building their global market presence in this way, combining their subsidiaries operating in other countries as well as outsourced activities in value-producing chains.