The supply chain is ... Concept and classification

Well, if there is something eternal in our industrial world, then this is logistics. Being essentially an auxiliary activity, modern logistics has gone far ahead in comparison with many manufacturing industries. Revolutionary changes primarily relate to a new approach in the form of DRM - supply chain management. Behind this abbreviation is a fundamentally new attitude to modern production as a whole.

One fact that the most prestigious international institute in the field of logistics has been renamed from the Council of Logistics Management Council to the Council Of Supply Chain Management says a lot.

Modern logistics

What exactly did the supply chain bring ? Let's try to figure it out.

Formulations and clarifications

If you argue from the point of view of the supply chain, the supply chain is a set of organizations that participate in this supply: suppliers, consumers, manufacturers, intermediaries. All of them are connected by a single technological line of execution.

If we argue from a process point of view, then the supply chain is a set of processes for creating additional value in sections of the chain to satisfy consumer requirements.

Both formulations are good and quite acceptable for citation, depending on the context. One way or another, this is an aggregate formed by technological ties.

Supply Chain Management

If you look, the supply chain is a group of successively connected suppliers and consumers, each of which interacts with neighbors and gets a new role in the process. Each consumer becomes a supplier for the next in the chain of participants.

Usually such a chain is commanded by a central company (often it is a general contractor), which forms a chain, selects participants, arranges them in their places. Everyone knows their places well and understands their tasks and their sequence: this is one of the main advantages of processes in the supply chain.

Suppliers and Consumers

Participants in the supply chain are also divided into levels:

  1. Suppliers and consumers of the first level are companies that are bound by contractual obligations with the central organization - the general contractor.
  2. The participants in the second level chain are in fact suppliers of suppliers and consumers of consumers of the first level.
    Logistics Chains

Often, one second level is not dispensed with. Any participant in the chain can build their own supply chain and play the role of a central contractor on their site. Thus, modern supply chains can take a bizarre and complex branched pattern, the main thing in which is a clear and logical sequence of actions of each "player".

Classification of supply chains in logistics

Classifications are usually made according to several criteria, and deliveries are no exception. Here's how they are divided:

  • branching - the number of levels of suppliers and consumers;
  • by type of product delivered;
  • by national or geographical affiliation.

According to the number of levels of participants in the supply chain, they can be

  1. A direct supply chain is a relatively simple sequence of operations with a central company in charge. All deliveries line up around the general contractor. The number of participants can be very different. The main thing is that they are all directly related to the central company.
  2. The maximum supply chain is a more complex combination of a central contractor and two populated groups. In the group on the left, all counterparties interact, and in the group on the right, intermediaries and distribution networks to the final consumer.
Process approach

According to the type of product delivered, the supply chain is divided into two large groups:

  1. Deliveries of goods. Everything is clear here.
  2. Supply of services. These may include a variety of related services such as warehousing and storage, insurance, inventory management in the supply chain, customs clearance, repair, etc.

National and international supplies

Another type of classification according to the "geographical" criterion:

  1. National supply chains are produced on the territory of one state with all the ensuing consequences. The organization of such chains is much simpler, because both raw materials and consumables are mined and produced here, in their native territory. In such cases, there are no problems in many matters: for example, with customs declarations or a different approach to the execution of contracts. But even in textbooks, frankly, logistics operations on a national scale are not studied.
  2. International supply chains are another matter in terms of complexity and cost-effectiveness. Most modern logistics schemes are international. Logisticians were the first to understand the meaning and prospects of a new concept - a single world economic space.

Global supply chain systems

The phenomenon of globalization can be treated differently: the arguments of supporters and opponents are generally serious. But professional logistics will always vote for globalization, because it expands the horizons. Especially when it comes to supply chains without borders. The globalization process has signs:

  • the emergence of world currencies;
  • pricing independent of national attitudes;
  • freedom from national regulation in offshore zones;
  • the formation of economic transatlantic unions and associations.

Global supply chains go beyond the borders of not only states, but also continents. The nationality of buyers and sellers is losing its importance with amazing speed and does not affect the formation of processes.

Supply chain

Chain links may be located in different countries. Most often, product production is located near a source of raw materials and in places with traditionally low pay. Further, products through distribution structures fall in a variety of regions to the final consumer. Supply chains can cross state borders many times, the main thing is consistency, cost reduction, speed and overall high quality.

Trends and factors of further development

Supply chain management does not stand still. According to the most respected company Gartner Research, the importance of logistics will continue to grow due to the following factors:

Supply chain
  • The rapid growth and opening of new markets in developing countries, which will further expand the supply chain. An example is the most popular trend for the placement of screwdriver industries in such countries (for example, automotive).
  • The changes that are occurring at cosmic speed in international trade, especially in commodity markets. Logisticians have no time for planning. Those who will be able to respond faster to changes and who know what the word "diversification" means will win.
  • The heyday of outsourcing, which forces logisticians to become real multidisciplinary experts. Now the requirements for the qualifications of logisticians in serious companies have increased tenfold: logistics is becoming one of the key success factors in almost any company, regardless of its profile.
  • Huge demand for modular, standardized supply chain solutions. The high quality of services in logistics is not even discussed now, it is implied by default for both standard modules and individual supply chains.

Unique project “MIT 2020 Council”

MIT is the famous Massachusetts University of Technology, and MIT 2020 is an interesting long-term project created at the university center for supply chain management. The project is already eleven years old, its purpose was to identify factors that will affect the success of supply chains in the future - by 2020.

smart logistics

Two statements in the form of hypotheses (they still need to be proved) were formulated in advance:

  1. Hypothesis 1: the phenomenon of "best practice" does not work and does not exist.
  2. Hypothesis 2: companies with well-established DRM outperform competitors. DRM largely replaces part of the corporate strategy.

Global leaders in DRM today

As part of the Council 2020 project, MIT is also involved in global logistics ratings. Amazon, P&G, Apple, Dell, IBM, McDonald's, POSCO, and Wal-Mart were identified as leaders in DRM by the following criteria:

  • The presence of a special strategy of the UOC as part of a corporate business strategy.
  • Special working model for the implementation of the main business strategy and supply chain planning.
  • The balance of goals with the focus on business strategy and working model.
  • Optimization and minimization of the number of links (logistics facilities) in supply chains.

The project is ongoing, and professional logisticians of the world are looking forward to its results. In particular, will, for example, two input hypotheses be confirmed? While everything is going to this ...


If your children do not know where to go to study, send them to universities where there is a specialization in logistics, you will not lose. And go there yourself to study, if circumstances permit. And take coursework by topics of course. Courage, analytics, force majeure adrenaline rush in the blood, a huge space for beautiful creative decisions, international career opportunities - what else does a person with a good head and desire to move through life need? Good luck!


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