Supply Chain Basics

The Bridgefield Group Inc. (www.bridgefieldgroup.com) defines a supply chain as:

“The linked set of resources and processes that begins with the sourcing of raw material and extends through the delivery of end items to the final customer. It includes vendors, manufacturing facilities, logistics providers, internal distribution centers, distributors, wholesalers and all other entities that lead up to final customer acceptance. The extended supply chain for a given company may also include secondary vendors to their immediate vendors, and the customers of their immediate customers.”

The traditional model is known as the “push” model, whereby suppliers and vendors on top push their products or services through the supply chain to the end consumer. Costs are accumulated through the chain with the end consumer typically incurring much of the cost.

“Pull” Model for Supply Chains

E-Procurement has given rise to the concept of a “pull” model supply chains. In this model, the consumer has the most power in the supply chain, and suppliers must react to their demands. Greater efficiencies in the supply chain can occur, and the linear nature of the chain may be broken as customers become better able to circumvent middlemen and resellers.

E-Procurement’s Effect on Supply Chains

Besides the general shift to a “pull” model, e-procurement can have many other effects on the supply chain. For example, with greater visibility comes greater efficiency. Resellers are forced to truly bring some sort of added value to the table lest customers deal directly with their suppliers and remove them completely from the equation. Suppliers can now quickly respond to consumer demand and limit excessive inventory and associated storage costs. Shipping logistics become easier to control, and costs are reduced. Customers can handle most, if not all, shipping tracking, notification, auditing, documentation, and labeling online. This reduces paperwork and overall time required for products to pass through the distribution system.