Supply chain is a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer (Anna, 2006). It is also defined as a set of linkages providing goods and services to end users and to intermediate customers (Chartered Institute of Purchasing & Supply, 2009). It is a complex dynamic supply and demand network which is also regarded as part of the overall value chain, which has both demand and supply components that need to be balanced dynamically at levels of uncertainty and risk, and which focuses on optimizing net value added at each linkage, as well as in total to the end user (Wieland & Wallenburg, 2011).
A linkage is defined as a connection or relationship between two or more parts; a part that connects two or more things (Merriam Webster, 2013).
According to Business Dictionary (2013) linkage is defined as relationship and interaction between tasks, departments and organizations that promote flow of information, ideas and integration in achievement of shared objectives.
Shared objective in supply chains is customer satisfaction through timely delivery of the right product in the right condition (Coyle, Bardi & Langley, 2003). Supply Chain Linkages
Supply chain consists of various linkages: upstream linkages also known as sources of supply, internal linkages inside the organizations involved in supply chains and downstream linkages which include distribution and ultimate customers (Hugo, Badenhorst-Weiss & van Rooyen, 2002). Upstream Linkages
Upstream linkages consist of suppliers and manufacturers/producers. Suppliers include suppliers who supply materials and other goods required by producers. The upstream linkages are important in ensuring material flow from suppliers and their upstream suppliers (Baltzan, 2008). Suppliers and their Upstream Suppliers
The suppliers in supply chain focus on the supplies into the supply chain. They come in a variety of forms. They provide additional capacity as well as other commodities to the supply chain arrangement. For example, there are those that provide raw material, transportation and logistics services and other professional services as accounting, legal and contracts management (Saungweme, 2009).
There is need therefore to assess all suppliers’ core or strategic competencies with a view of identifying capable suppliers who fit well into the entire supply chain arrangement (Saungweme, 2009). Critical to this function is the need to make appropriate sourcing decisions. Proper mechanism for supplier selection must be put in place to ensure that identified and selected suppliers of either goods or services are in line with the strategic vision of the supply chain arrangement in place. Importance of Suppliers to Modern Business
A supplier is conversant with all product regulations that apply to the business and is always informed about any changes to them. Suppliers checks the list of mandatory standards and bans within the supply chain, he gets and supplies copies of relevant standards and related documents and assesses a product’s risks and identifies its hazards. Suppliers make sure they have regard for product end user, place of use, any sort of possible miss-use, hazards related to the supply and end product, shipment and storage effects on the supply among other issues (Australian Competition and Consumer Commission, 2013). Using an effective safety compliance program to comply with the law is a requirement for suppliers in supplying safer materials/products within supply chains. Supplier compliance programs include quality assurance systems and staff training. Failure to comply
with supplier requirements may make business face penalties and other consequences which may affect the supply chain negatively. Suppliers within the supply chain are important in considering each product on its merits. Key factors that suppliers look into are: reliability of raw materials, reliability of supplier’s suppliers, material types used and whether they are affected by environmental changes, storage conditions required to ensure the product remains safe, compliance and history of the product or similar products and design and production tolerances built into the product and any associated risks. Suppliers help in material testing to ensure they are safe and free of faults and consistently meet any mandatory standards that apply (Australian Competition and Consumer Commission, 2013). Suppliers who supply products covered by mandatory standards or bans must ensure that every item complies. Supplier must be able to support supply compliance with evidence through an effective compliance program that helps to gather evidences. Suppliers are instrumental in monitoring customer complaints. Having a complaints handling system in place helps suppliers pick up on any adverse incidents and trends relating to supplies. Suppliers work with other suppliers and/or trade customers on product handling and marketing. Manufacturers
Manufacturers also form part of supply chain upstream linkages. Manufacturers of the end product ideally achieve their goals by lean production to ensure costly amounts of stock do not build up through the use of methods which enable a rapid response to meet changing consumer demands. Much of the production process may be automated with repetitive tasks performed by machines. Quality control is an important part of the production process and many companies now empower all employees to undertake quality control activities at any stage of the process. Manufacturers perform similar roles like other upstream suppliers. Compliance and other requirements of suppliers within the supply chain also apply to manufacturers. Internal linkages within Organizations in the Supply Chain
Linkages within supply chain partner organizations are: purchase and supply, production and operations, finance and accounting, human resource, ICT, transport and logistics, public relations, sales and marketing etc (Coyle,
Langley & Bardi, 2003). All these departments aim to achieve organizational objectives which are to make profits and satisfy customer demand. Anything any department does has an effect on the bottom-line. Everything each person in every department does, however minor, has an effect on the department, the organization and the supply chain (Coyle, Langley & Bardi, 2003). For example, accounting department as a linkage tracks all that is done in all departments, translate it into revenue or expense and reports the same to stakeholders or managers. The reports on consolidation determine the organization’s profit or loss and share value. The Finance departs prepares funding plans for various organizational undertakings and finances them as per organizational budget. Production and operations ensure that the organization produces the right cost-effective products that meet customer demands and that sales and marketing are responsible for selling and marketing the product. Sales and marketing department ensure that customer preferences are communicated to the organization so that various adjustments are made to achieve the ever changing customer demands. All departments work in collaboration and the output of this collective arrangement determine supply chain performance, taking note that a chain is as good as its weakest/worst link. So all linkages, internal and external must be adaptive and responsive to business requirements in order to survive in the supply chain (Coyle, Bardi & Langley, 2003). Downstream Supply Chain Linkages
The role of downstream supply chain linkages is distribution of products to customers and their downstream customers at all levels. Downstream linkages are distributors, wholesalers, retailers and end customers. Importance of Downstream Supply Chain Linkages to Modern Business Each player in downstream supply chain is instrumental in collecting, analyzing, and distributing transactional information to all relevant parties. Downstream supply chain systems help all the different entities in the supply chain work together more effectively (Baltzan, 2009). Downstream supply chain linkages assist significantly in improving forecasting abilities of supply chain partners. Businesses today have access to modeling and simulation tools, algorithms, and applications that can combine information from multiple sources, including distributors, retailers and customers, to build forecasts for days, weeks, and months in advance (Baltzan, 2009).
Importance of Distributors to Modern Business
Distributors play a vital role in keeping the lines between manufacturers and users operating smoothly. They can expedite response times, enhance a supply chain partners’ reach and even create value-added packages. Even the most efficient companies will find it virtually impossible to be all things to all people at all times. A strong distributor network can help make that scenario viable. Distributors have long been relied on to serve as a bridge between manufacturers and customers. In today’s increasingly globalized marketplace, this link becomes even more important. One of the most resounding arguments for a solid distributor network is the speed with which manufacturers can respond to customer demands. It is crucial today to be able to respond to customers quickly and in real time. Because they are more localized and nimble, distributors can typically offer a faster response. Customer-driven, manufacturers need to adjust their businesses to meet the needs of the customer, which in today’s marketplace means local service, local inventory and technical sales people. Distributors do not only offer benefits to manufacturers, they can also be a boon for users. Because distributors represent multiple products and companies, they can bundle. If they are selling the pump, the coupling and the mechanical seal, they can provide a system. The user’s buying process is streamlined, and costs are often lowered, as well.
Distributors also have the benefit of reducing inventory and service burdens for both the manufacturer and the user (National Association of Chemical Distributors, . This is especially crucial now, when many users have been forced to cut back on in-house inventories and service staff. In modern supply chains, distributors, now more than ever before, are service providers. They do not just provide products. They provide aftermarket services, cost reduction and process optimization strategies, as well as inventory management. Distributors create value by providing total solutions for their customers. Importance of Customers in Modern Business
Customer is the life-line of supply chains in modern business. Customers can determine the existence, success or doom of the supply chain. Therefore,
customer role and his/her satisfaction is of paramount importance.
Customer is important in giving feedback concerning products supplied through each supply chain. His/her preferences call for all supply chain players to respond by adjusting to meet the ever changing customer needs. This has resulted in customer oriented supply chains as the modern panacea of business.
A satisfied customer can be an ambassador for the supply chain partner organization. Customers through their channels of communication will ensure that other people know about their good experience with the organization/supply chain. Satisfied customers will not move to a different supplier, but will establish a relationship with the current suppliers and continue to do business with them. The lifetime value of a customer is the sum of all the transactions over time that occur. Good customer service will entice the customer to continue relying on the supply chain. Excellent customer service within the supply chain should extend to customers’ customers. Making it easy for the customer to deliver products to their customers will ensure that they return to do further business. Summary and Conclusion
This article defined supply chain linkages as composed of upstream, internal and downstream linkages. Suppliers and manufacturers are found within the upstream linkage of the supply chain. Various departments of supply chain partner organizations form internal linkages. Downstream linkages are composed of distributors, wholesalers, retailers, logistics and transport service providers and customers. All these linkages are important for the success of supply chains.
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Cite this Supply chain Linkages
Supply chain Linkages. (2016, Oct 20). Retrieved from https://graduateway.com/supply-chain-linkages/