In the past few months you may have had more time on your hands, watched more news, or been reading more. So, you may have heard recently this phrase “breakdown in the supply chain”. We thought we would visit this topic with a broad overview of what is a supply chain.
There are several basic steps on the supply chain. First, before anything else raw materials have to have been identified and cultivated. If you are looking for an engagement ring – one of the first places on that supply chain must be mining for the diamond. If it is a pair of pants then you have to start with planting cotton, let’s say for simplicity.
The raw material step may itself have several steps. Let’s look at our pants. The cotton grower may actually purchase seed from someone else, so the seed producer is the first step. The grower of the cotton may not do anything else but grow it and pick it, then the next step is curing the cotton – cleaning and spinning it into thread. That processor may not actually turn that cotton thread into fabric, so that material now needs to travel to a fabric processor.
Now that we have all this fabric there needs to be someone to get it to the people who will make the pants. Most processors are too small to be able to deliver their fabric all over the country, maybe even all over the globe. That is where the supplier comes in. A supplier usually focuses on getting goods from processor to manufacturer so they may have a wide variety of products they provide. A fabric supplier may also deal in other things their customers will need – if they are delivering to their customer who will make our pants, they may also pick up buttons, and zippers, maybe even the paper for labels for the pants, they may even supply sewing machines and their parts.
Once the manufacturer of our pants receives all the materials it needs it can go through the manufacturing process which will include things like design, sizing, cutting, stitching the parts together, and labeling for sale.
Now that the pants are made, unless the company that made them is huge and can afford their own trucks and drivers, it will have to engage a distributor to deliver the pants to the retail stores that would like to sell them.
Like suppliers, distributors can carry many different products. So, when they drop off those pants, they may also drop off shirts and purses to the retailer they have gathered from other different manufacturers.
The retailer now has the pants and they need to find a way to sell them. They have to find a way to get in touch with customers and encourage them to come in and look at the pants – so that means being in a location where there is a lot of foot traffic or advertising, get the word out to a wide variety of people.
The consumer steps into the store, spots the pants, treies them on and likes them, decides to buy them and all is well in the world. The supply chain has worked the way it was supposed to. Everyone happy.
On The Whole
Though it is called a ‘chain’ it is much less linear in a world economy and more like a web. When the pandemic broke out in China, many factories were initially affected by workers not coming to work because they were sick. That was a break in the manufacturing link of the supply chain. All the businesses before and after that step are negatively affected. If you have raw cotton, but the fabric processor doesn’t need it because the factory that manufactures the pants is shut down because too many people are sick, you are left with a lot of cotton and nothing to do with it. If it doesn’t get processed it will go to waste. If the processor has no one to sell to they can’t very well carry on processing cotton into fabric, they only have so much capital to spend and only so much storage space to hold on to unsold fabric.
On the other side, the customer will come into the store and find no pants on the shelves so they may walk away and go to another store. The suppliers and distributors in between are equally affected.
If there are supply chain disruptions all along the line, because of illness, or as with our “stay at home” orders, it puts the whole system in trouble. Because supply chains for almost all products are increasingly global and web-like, what happens in other countries can really affect what happens in ours. And all the workers along the line, at all the steps, are also consumers of our pants. We really are all in this together, on a lot of levels.