The building blocks of the supply chain

Universal model of supply chain

The front end of the supply chain that we are all familiar with stands on the shoulders of the long established building blocks of primary production, raw material and component manufacturing.

It is worth noting that everything we consume comes from just two primary sources, (apart from the air we breathe and the freely available materials around us).  That is mining and agriculture.  We grow it or we dig it up*.

Most food production is unique in requiring little if any additional processing before it can be consumed.  This is why there is an emerging trend of farmer direct to consumer food supply as people look for quality and a unique story in their food supply.

Next comes the raw material producers who turn raw food into processed food,  cotton and wool into thread, crude oil into food and plastics, metals into sheet, rod and billet forms, minerals into chemicals and so on until we have the raw materials for the component manufacturers.  Unlike agricultural products, consumers have little use for theses basic raw materials.

The component manufacturers turn thread into cloth, metal sheet into Colourbond roofing, rod into nuts and bolts etc.  There may of course be many links in the component supplier chain with ever increasingly elaborate transformation up until you get a computer chip or an electric motor, or pharmaceutical ingredient.  At some point in the supply chain the components are put together into a finished product which is ready for consumption or use by the end user.  

At any point in this component manufacturing supply chain there are likely to be wholesalers and distributors and of course when this happens there is an opportunity for short circuiting the middle man and going direct to the customer.  An example of this is when large construction companies buy fasteners direct from manufacturers in China instead of sourcing from local distributors.

This concludes my overview of the modern supply chain.  For those who have not thought through what goes into the end result of being able to walk into an Apple store and buy a new iPhone, I hope this was useful.  Without doubt, supply chain is an amazing and complex human endeavour that involves a significant part of the workforce and impacts all of us.

*As with everything there are a few particular exceptions, notably in the medical field where there are human derived raw materials such as blood and organ donation which in one sense could be thought of as a variant of agriculture as it is grown but would not be put into this category.

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