Supply Chain Explained
The words "Supply Chain" are all over the news these days. Be it Apple or our PM Modi, everyone wants to build a robust Supply Chain. How? Read on.
The news channels in India are lit with Apple’s plans to shift ~20% of its manufacturing from China to India. They are doing this to de-risk and diversify their "supply chain.” The media-folks also keep talking about 'global supply chain' and 'supply chain disruption' and what not. To add to that list, PM Modi, in his 12 May, 2020 20:00 PM address to the nation said "We have resources, power and talent to modernise our supply chain."
So, what do they mean by a supply chain?
We thought of de-jargonifying this word for you.
(Did we just make a new word? De-jargonify?)
Breaking It Down, Word-by-Word
Supply chain is what gets you a fresh loaf of bread every morning from the farmer's field. It's also what gets you that smartphone in your hand.
A supply chain is all the activities and processes involved to convert plastic and metal (raw material) into that phone (finished product) in your hand.
Simply put, it is a "chain" of activities that are undertaken by a business to "supply" your favourite product to you.
Supply chain “managers” obsess about getting your desired products in your hands, at the lowest cost, ensuringhighest quality and in least time possible.
Let us look at an example.
Say you want to make a shirt for your friend. Think for a few seconds about the activities you would undertake to do that.
No. Don’t read ahead. Think.
Now read on (pun intended).
You would be involved in the following activities:
Design the shirt or just copy a design from somewhere
Remember: Everything is made twice – once in the head, then in the real world.Getting cloth (raw material) for the shirt from the market:
Go to the market;
Negotiate with lots of suppliers;
Bring the cloth yourself / get it delivered (inbound logistics).
Now, you labour away and struggle with your tools: needles and knitting machines (processing).
After hours of knitting and cutting, your self-made shirt (finished product) is ready!
Now, just ship it to your friend or go deliver it to him (outbound logistics).
This is essentially what a simple supply chain looks like.
Current Context
Globalisation (all the world's a village - interconnected through internet, airlines, ships and railroads - one global nation)has made supply chains look complicated. You can buy a piece of cloth from China, get it processed in India, and sell it to your friend in the US.
That's what Apple's been doing - manufacturing in China and selling iPhones all over the world. After the corona-virus pandemic crippled "outbound logistics" from China, Apple is having a hard time selling iPhones. Hence, to not be dependent on only one country for getting the phones manufactured (de-risk and diversify), it plans to shift some production to India (Yayy!)
Reliance, through its offline to online (O2O) strategy is doing the same - disrupting the old grocery supply chains and paving for a new, digital one. You can read Reliance's story here.
As the way of doing business changes, the core of a business - supply chain - will also keep changing, keep evolving. And that's what our Supreme Leader expects from us.
Stay tuned. Read On.
Watch our video explaining the term. Original and 100% jargon free. And, don't forget to share it with your friends. Everybody deserves to understand these terms.
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