Supply Value Chain

A supply chain of a particular product is a complex network of retailers, distributors, transporters, storage facilities and suppliers that participate in the sale, delivery and production of a particular product. A participant in the supply chain may belong to several networks. A participant is a link in each of the networks he belongs to.

David Simchi-Levi defined Supply Chain Management as “a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide costs while satisfying service level requirements.”

Each actor in the supply chain must insure the continuous, efficient and timely physical flow of the product. The continuous physical flow of goods is dependent on both the continuous flow of information and funds.

Each actor of the supply chain principally performs activities involved in sourcing or procuring, making or storing and delivering. He has to plan and manage these activities. In order to insure the continuous flow of the product, his activities must be supported by a plan which links the needs and demands of the three principal activities – source, make, deliver –, by activities to support the flow of funds and flow back of unusable goods. This is reiterated by all other actors in the supply chain. This is illustrated in the diagram below.

There are many points of contact between the trading partners. At these points, trading partners must be able to communicate with each other and exchange information or data, for this reason it is expected that there is a common language and a common way of identifying or naming objects between trading partners. Since this process is repetitive and each actor in the supply chain deals with many trading partners, it is to his advantage if there is a common business language and a global way of identifying articles or trade items.