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What Is Supply Chain Management?

Supply chains are the institutions and processes that move raw material, works-in-progress, and finished products from the fields, mines, and oceans to our homes and workplaces to satisfy our daily wants and needs. Without supply chains, there would not be the products that society relies on such as food, clothing, shelter, and entertainment. The institutions or organizations involved in supply chain operations includes material suppliers, manufacturers, distributors, retailers, and service providers such as transportation firms.

Supply chain professionals source by raw materials, manufacture B2B and consumer goods, manage inventory, run sophisticated warehouse operations, transport goods between businesses or to the final consumer and keep the world greener by developing better ways to use, return, and recycle both manufacturing and consumer waste.

For example, one would expect the local grocery store to be stocked with all the products available from anywhere in the world. This includes cereal from Battle Creek, wine from France, as well as sushi from Asia. While one may think that any grocery store maintains a large amount of product, it is only about a three- to four-day supply for many items, particularly those that are perishable. Grocers rely on just-in-time supply chains to make sure that shelves remain stocked with the products that consumers want.

With the above as background, one might be asking “What do supply chains do for me?” As suggested above, effective and efficient supply chains provide three types of value to the average consumer. First, they facilitate the sourcing and delivery of products manufactured in many places around the world to a location where the consumer can purchase it. Second, efficient supply chains reduce the cost of the products that one purchases through lowered sourcing, manufacturing, handling, and transportation cost. Third, high-performing supply chains can reduce risks related to weather, congestion, and natural disasters.

Supply chain management is strategic in orientation and recognizes that the competitive strength of a firm is not only determined by its products but also by the operations and activities that place the products into customers’ hands and provide supporting services. The efficient supply chain controls the flow of information, products, services, funds, and knowledge. From the supplier network to market distribution, the supply chain enables efficient manufacturing, capacity planning, develops and enhances the flow of data, supports financial analysis, and meets the needs of a global marketplace.

Eli Broad College of Business

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