What Are the Five Basic Components of a Supply Chain?

Supply Chain

Supply chain management is a very interesting subject in economics, which begins with the very raw material with which goods are made, runs through the whole process of sourcing and making goods, and more importantly to deliver the product to the final customer with the contingency of returning the product.

The popular definition of Supply chain management as done by SCMA Canada is:

*The process of strategically managing flows of goods, services, finance, and knowledge, along with relationships within and among organizations, to realize greater economic value through:

  • Supporting enterprise strategic objectives,
  • Contributing to the achievement of strategic competitiveness of the enterprise,
  • Contributing to the enhancement of the competitive advantage of the enterprise
  • Enhancing customer satisfaction.”

Components of a Supply Chain

The following are the basic supply chain components:

1. Planning

Planning deals with the development of a plan layout or a strategy for the transformation of raw material into finished products or services according to the demands, needs, and necessities of the customer or the end-user. Also to make sure planning should be carried out in a way that maximum profit can be yielded.

Modern companies have  Enterprise resource planning software developed and all the planning and strategy development is done through software efficiently. Click here to read about the different types of loan .

2. Sourcing

Sourcing is the allocation of raw materials and choice of vendor from which that raw material will be procured or bought. Similarly for services the essentials and the assistance required to execute the service.

Normally for companies, sourcing is a regular process, and to get the maximum benefits like discounts or concessions these companies egg on the relationship-building aspect with the supplier and vendors because it will be useful in the future.

3. Making

This is part that one is good at, to make/ manufacture/ create the product as per the requirement of the customer. It is not done product development, there are other stages such as quality control. Also measures to make the process efficient and cost-effective.

The final product is then packaged and ready to be shipped to the next level.

4. Logistics

This is the area from where the supply chain management came into being. As the best production or manufacturing was always known but what made the difference was the logistical cost and time.

The network of shipping, transporting, and maintaining the sanctity of goods are the primary concerns of logistics. There is an added cost of logistics but that all depends upon the product and concerns of the consumer.

This process concludes when the product reaches the end-user. For services, it encompasses the rendering of service, and all the logistics to make that happens is dealt with in this phase.

5. Return

This packed product is delivered to the consumer in a state that should be acceptable to him. So not only that the product should be in one piece but also there is a time factor involved. Often time some goods are time-critical as well.

If the consumers’ requirements are not met whether quality, the integrity of the product, or the time frame within which the product had to be delivered all of this would be for no one’s gain.

So mechanisms are placed as if there is an issue from the customer side there is always a contingency of returning the goods. This process is then repeated all over again if the goods are returned based on quality, integrity, or time issue.


These five components of supply chain management make it possible to develop effective strategies to manage your activities more efficiently and can help your company to improve efficiency, optimize resource utilization, and control costs.

Any company needs to have the right supply chain management in place to maximize its revenue and profit.

And by understanding how each link in the chain – stakeholders and suppliers – plays a role, you’ll gain insights that help you decide on the best way to go about getting the job done.

Now with the added influence of technology, supply chain management is becoming more critical for business, but interestingly this technology is also contributing to the development of the supply chain networks, through software and hardware and cloud solutions that help streamline these processes of the supply chain.

In the end, customer satisfaction is the key for any business to grow and retain. Product delivery is made easy by choosing the right option like a package locker from Stowfly, has a network of shops and stores where your orders are safely received and handed over to your customers at their convenience.


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