What Is a Supply Chain?

A supply chain is the entire network of entities involved in the creation and delivery of a product or service. This network starts with the producers of materials or services and ends when they are refined into a finished product and distributed. Services provided after the sale, like returns or customer support, are often included in the supply chain.

A standard network of a supply chain includes:

  • Producers: The manufacturers that produce and refine raw materials or manufacture parts or final products.
  • Vendors: They engage in the buying and selling of materials crucial to the production process.
  • Delivery Agents: Responsible for the transportation of finished goods to retailers.
  • Retailers: Retailers are the outlets, whether physical or online, where goods are sold to consumers.
  • Consumer: These are the ultimate end-users who purchase goods and services.

An efficiently managed supply chain can reduce costs, increase profits, and promote sustainability. However, any disruption or inactivity in one part of the chain can ripple through the entire chain and halt it entirely.

Supply Chain Examples

In today’s world, there are hundreds of thousands if not millions of supply chains that make up the modern world economy. Here are a few options from some of the world’s largest companies.

1. Tesla Automobiles

Tesla is a popular automobile brand that builds high-end electric vehicles (EVs) for customers. Tesla works with many third-party vendors who supply it with chips, batteries, chassis, engines, rubber tires, metal bodies, and many more. The company works with over 200 suppliers, including Emerson Electric and Garmin Ltd, which all have their place in the supply chain.

These components are assembled to create the final vehicle, which is shipped out to the end consumer.

tesla factory car in production

2. Typical Coffee Supply Chain

The diagram above is a great example of a relatively simple supply chain that produces coffee.

Everything begins with the farmers who grow coffee beans. The coffee beans produced by a large number of farmers are pooled together in farming cooperatives, which start the export process so that they can get their goods to the desired location.

The goods are shipped to the destination country where they are imported and certified. They are eventually sent to industrial roasters, where the coffee beans are finally made into a finished product. Finally, they are packaged and distributed to coffee shops, stores, or sometimes directly to consumers.

Supply Chain vs. Value Chain

A supply chain includes all the networks and components involved in producing and distributing a product or service for sale. A value chain begins in the idea creation phase and focuses on where the product’s value comes from to make it as valuable to customers as possible.

It involves the physical production of goods and value-driven activities such as production planning, marketing and sales strategies, design, innovation concepts, and more.