Wednesday 11 October 2017

Investopedia: What is the 'Supply Chain' ?

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Supply Chain

What is the 'Supply Chain'

A supply chain is a network between a company and its suppliers to produce and distribute a specific product, and the supply chain represents the steps it takes to get the product or service to the customer. Supply chain management is a crucial process, because an optimized supply chain results in lower costs and a faster production cycle.

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BREAKING DOWN 'Supply Chain'
Business logistics management refers to the production and distribution process within the company, while supply chain management includes suppliers, manufacturers and retailers that distribute the product to the end customer. Supply chains include every business that comes in contact with a particular product, including companies that assemble and deliver component parts to the manufacturer.

How the Flow of Manufacturing Costs Works

The flow of manufacturing costs refers to the process of using materials and labor to complete a finished good that can be sold to a customer. A supply chain management system can reduce the cost and complexity of the manufacturing process, particularly for a manufacturer that uses many component parts. A clothing manufacturer, for example, will move raw materials into production first, such as fabric, zippers and other pieces that are used to make clothing. The manufacturer then incurs labor costs to run machinery and perform other work using the materials. Once the items are completed, they must be packaging and stored until they are sold to a customer. A supply chain management system can forecast when materials are needed and can plan production, and the system can also help minimize the amount of material and component parts that sit on the factory floor waiting to be used in production.
Examples of Reliable Suppliers

An efficient supply chain management process requires suppliers that are reliable. This means that they produce a quality product that meets the manufacturer’s needs, and the product is delivered on time. Assume, for example, that XYZ Furniture manufactures high-end furniture, and that a supplier provides metal handles and other attachments. The metal components need to be durable, so that they can be used on the furniture for years, and the metal parts shipped to XYZ should work as intended. The supplier must be able to fill the manufacturer’s orders and ship metal parts to meet XYZ’s production needs. These steps are necessary to produce a quality product that is shipped to a customer in a timely manner
Factoring in Economic Order Quantity

Many firms that use supply chain management apply the concept of economic order quantity (EOQ). EOQ is a tool to determine how to order materials, parts and inventory to minimize costs and meet production needs. EOQ considers the cost to place an order and the time it takes to receive the order. For example, XYZ needs 100 brass drawer handles a week for production, and it takes three weeks for the handles to arrive after they are ordered, at a cost of $10. EOQ can determined the ideal order size and the timing of the order.
Next Up Supply Chain Attack

    Supply Chain
    Supply Chain Attack
    Supply Chain Management - SCM
    Value Chain
    Supply
    Manufacturing
    Holding Costs
    Chain Store Sales
    Reverse Fulfillment
    Back Order

Supply Chain Attack
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A cyberattack that attempts to inflict damage to a company by exploiting vulnerabilities in its supply chain network. A Supply Chain Attack entails continuous network hacking or infiltration processes to gain access to a firm’s network. More than 60% of cyberattacks originate from the supply chain or from external parties exploiting security vulnerabilities within the supply chain, according to a 2016 survey by Accenture.
BREAKING DOWN 'Supply Chain Attack'

The adoption of various forms of emergent technology has brought about an enormous amount of data in various forms. Through resources like the internet, cell phones, and cloud computing, companies can now electronically obtain data and share it with their partners and third party vendors. Entities like individuals, businesses, and governments believe that that relevant information that can be mined from the data set can be used to better improve their operations and processes, and thus, improve their customer engagement. But the exchange of data conducted among various companies brings with it a certain level of risk which entails cyber theft. Sophisticated cyber criminals also realize the importance of the data held by companies and device strategies to gain access to the sensitive data. The supply chain network is a frequent targets for cyber crimes, as a weak link in the supply chain can grant the cyber criminals access to the larger organization in custody of the data sought after.
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