The Eight Components of Supply Chain Management

Chain Management

Supply chain management refers to all the processes involved, from when raw material is obtained to when the final product is consumed. The chain starts with the raw material and ends with product consumption. A simple example of such a chain is what is involved in processing the bread we eat. It all starts with the farmer growing wheat, then selling it to a baker, who bakes bread and sources a supplier; the supplier sells it to a shopkeeper who sells it to us. The processes are critical in that they determine financial management, operating costs, and customer service. The entire supply chain management has eight components outlined below;


This is the first and one of the critical components of supply chain management. In planning, you try to find out the demand for the product you want to deal in. Assessing the demand is essential because not every product will be ideal. One also decides where to set the market and what scope it will cover – local or international. You choose whether you will make the entire product yourself or will source some parts elsewhere. The challenges, benefits, opportunities, and threats to the business are considered here. Determine whether you will make products on order or make them in advance.

Information gathering

The information-gathering stage is a critical part of supply chain management. Supply trends and demand shift unpredictably. Thus, it is for you to try to get all the pieces of information regarding this business. Without proper knowledge of your field, you could dig your grave and sign in for flops in the business unit you are venturing into. Remember that information is dynamic; what held weight last year no longer holds weight today. The product you want to sell was highly held by customers the previous season, but due to the current events, the trend has shifted. What if you did not know that and looked at what was there last year? You will be wasting time and resources. Hence, dig deeper and equip yourself with the most recent information.  

Raw materials sourcing

At this stage, you find, evaluate, and engage suppliers to provide goods and services to your business. Suppliers are an essential component of the chain and significantly define the quality of the end product. You need to get suppliers who will provide you with the raw materials at the right, within the stipulated time and specified quantities. Keep in mind that you must stay competitive in the market and maintain a reputation by producing high-quality products. What if the supplier gives you the raw materials at a high cost? It means you will have to exaggerate the product’s price and lack customers, go for cheap suppliers, produce low-quality goods, and have no one to buy them.

Inventory designing

An inventory is a list of raw materials used in producing goods, finished products ready for sales, items in the manufacturing process, or other things useful in supply management. It is essential to keep an up-to-date inventory to create the boundary between the available stock and the required stock. Without a proper inventory, a business experiences dead stocks and backlogs and eventually goes downhill as it cannot sustain itself.

Goods’ production of Chain Management

The production of goods is one of the eight components of supply chain management. Its actualization depends on whether or not the other components are in tandem with each other. You will only produce goods if you plan thoroughly, gather enough information about the product, get a good supplier from whom you will source raw materials, and have an updated inventory. Suppose any of the mentioned components is not in order. In that case, you could only be spelling doom on your investment, for the whole chain could collapse. Once the goods are produced, they are tested to see if they meet the set standards, packaged, and prepared for delivery.

Location choosing

Deciding on a suitable place where you will set up your business is vital to supply chain management. In choosing a location, ensure that the most essential resources are not far away from that location. If a critical resource is already scarce, there would be no need to set up the industry there. You will affect the company’s goodwill and compete with the community for the resource. A beverage production factory wouldn’t be set up in a dry area. Additionally, for the business unit to survive and flourish, the required manpower must be available.

Transportation factors of Chain Management

Transportation is an equally significant component of supply chain management. It is needed to move raw materials to the production unit and deliver the final products to the market. For a business’ processes to happen smoothly, a sound transportation system is mandatory. Ensure that the chosen transportation means ascertains zero-damage and minimal losses in transit. To make this possible, a company must invest in a safe and secure system characterized by flawless invoicing and a properly-managed logistics system.

Return of goods

A properly managed supply chain facilitates the return of faulty goods. It provides a consumer grievances redress unit that promptly responds. The malfunctions could be caused by a machine experiencing technical problems and failing in the middle of a process. If such a lapse occurs, the product is recalled instantly. An apology is issued to maintain customer bonding and the business’s goodwill. 

Conclusion of Chain Management

The eight supply chain components discussed here are interconnected. For a business unit to survive and flourish, it has to pay to each of them without overlooking any. If well attended to, the business runs smoothly, the company maintains a good reputation, and chances of success increase. It’s not possible to have a flawless system parse. Still, by working in harmony with the above tenets, a system can be close to perfect. The bottom line is profit-making and in achieving this, every person in the business unit has to play by the existing rules. Additionally, no gaps should be left unattended to and any lines of weakness detected should be instantly repaired.


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