What is a Supply Chain?
A supply chain is the interconnected set of entities — suppliers, manufacturers, warehouses, distributors, retailers, and customers — together with the flows of materials, information, and finances that link them. The goal is to deliver the right product, to the right place, at the right time, in the right quantity, at the right cost.
Modern supply chains are global, multi-tier networks. A smartphone, for example, may contain minerals from Congo, semiconductors fabricated in Taiwan, assembled in China, and distributed through logistics hubs across five continents — before landing in a consumer's hands in less than two weeks after ordering online.
Three core flows run through every supply chain:
- Material flow — goods moving forward from raw material to finished product, and reverse flows for returns/recycling
- Information flow — orders, forecasts, shipment status, and invoices flowing in both directions
- Financial flow — payments, credit terms, and invoicing flowing from customer back to supplier
Supply Chain Management (SCM) is the discipline of designing, planning, executing, and continuously improving these flows to achieve strategic objectives: cost leadership, service excellence, agility, and sustainability.
Five Core Functions of Supply Chain Management
- 01
Plan — Demand forecasting, supply planning, Sales & Operations Planning (S&OP), capacity balancing, and risk management across the network.
- 02
Source (Procurement) — Supplier identification, qualification, contracting, purchase-order management, and supplier performance monitoring.
- 03
Make (Manufacturing) — Production scheduling, quality control, work-in-process tracking, shop-floor execution, and lean/six-sigma improvement.
- 04
Deliver (Logistics) — Order management, warehouse operations, transportation planning, last-mile delivery, and trade compliance.
- 05
Return (Reverse Logistics) — Product returns, recalls, repairs, remanufacturing, and end-of-life recycling — increasingly important for sustainability regulations.
The SCOR Model
The Supply Chain Operations Reference (SCOR) model, maintained by ASCM (Association for Supply Chain Management), provides a standardised language and set of metrics for describing any supply chain.
Six SCOR process types:
- Plan — balance demand and supply, establish and communicate plans across the chain
- Source — procure goods and services to meet planned or actual demand
- Make — transform product to a finished state to meet planned or actual demand
- Deliver — provide finished goods or services to meet demand, including order management, transportation, and distribution
- Return — handle defective or excess products, support post-delivery customer service
- Enable — manage rules, performance, data, contracts, regulatory compliance, and network design
Each process is drilled down across three levels:
- Level 1 — Strategic scope (e.g., "Deliver")
- Level 2 — Configuration category (e.g., "Deliver Stocked Product")
- Level 3 — Process element (e.g., "Pick Product")
SCOR also defines standard performance attributes — Reliability, Responsiveness, Agility, Cost, and Asset Management Efficiency — with benchmark metrics such as Perfect Order Fulfilment, Order Fulfilment Cycle Time, and Total Supply Chain Management Cost.
Supply Chain KPIs and Benchmarks
| KPI | Definition | World-Class Target | SCOR Attribute |
|---|---|---|---|
| Perfect Order Rate | % of orders delivered complete, on-time, damage-free, with correct documentation | ≥ 98% | Reliability |
| Order Fulfilment Cycle Time | Avg. days from order placement to customer receipt | ≤ 1–3 days (e-comm) | Responsiveness |
| Inventory Days of Supply | Inventory value ÷ daily cost of goods sold | 15–30 days (FMCG) | Asset Management |
| Cash-to-Cash Cycle Time | Days payable outstanding − days inventory outstanding − days sales outstanding | < 30 days | Asset Management |
| Supply Chain Cost % Revenue | Total SCM cost as % of revenue | 5–8% (manufacturing) | Cost |
| Forecast Accuracy (MAPE) | Mean Absolute Percentage Error of demand forecast | < 15% | Reliability |
| Fill Rate | % of demand satisfied from available inventory | ≥ 99% | Reliability |