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What is a supply chain?

Learn basic principles and concepts regarding supply chains in this video from the University of Twente.
JOS VAN HILLEGERSBERG: Today’s supply chains are transformed into dynamic networks of businesses. They deliver customised products and services to the consumer in ever more smart and sustainable ways. How does this work? Meet Hans and Crystal. Crystal buys most of her clothes online. Sometimes, she orders at the online store that can deliver within three hours. She often returns clothes that do not fit well. She usually orders multiple colours and returns the ones she does not like. She has recently subscribed to a home delivery meal service that ships a box to her home every weekend, with fresh ingredients to cook three meals a week. Hans loves to go out shopping.
He often buys electronics in local stores to try out the products and get more service. He thinks of the life cycle costs of what he buys. He likes to get information on energy usage and environmental impact. Sometimes, his equipment breaks down and he wants quick repairs. In some cases, he sends back the entire product. Luckily, some companies offer product monitoring and provide service remotely to help Hans use his products. Hans buys his clothes from an internet shop that offers customised shirts and suits. His shoes, he gets from a local store so that you can try them on. If his size is not on stock, he asks the store to ship the shoes directly to his house.
Retail stores today are innovating hard to service modern customers like Crystal and Hans. Retailers install equipment like 3D printers to customise products. They are integrating their physical and online stores. We call this omni-channel service. They transform traditional stores into experience centres. Digital price tags help them to dynamically manage prices. They monitor web traffic to learn about the interest of consumers for new products. They try to predict demand and share this information with the logistics service provider and the manufacturer. The logistics service providers experience these changes. Order size decreases, product variety increases. More frequent and fast deliveries are demanded. They risk that volumes are becoming too small.
They have difficulty to fully fill trains and barge vessels and have increasingly used trucks. Even these are hard to completely fill, leading to empty miles. To fight these trends, they try to collaborate horizontally and bundle goods. In this way, they can reduce empty miles and use more sustainable modalities like rail and water transport. They set up multimodal terminals to be flexible in using water, road, and rail. They set up distribution centres near busy commercial and industrial centres to bundle last mile transports. In synchro model transport, the transport modality is always optimised to meet demand. A lot of effort is put into bundling and fine-tuning delivery times in favour of energy efficient transport and storage modes.
As soon as the market changes or emergency events require this, modalities can be changed on the fly. All of these efforts require a lot of sharing of information and intelligent planning. By embedding sensors in products, whereby asking end users to share usage data with manufacturers, the need for service and maintenance can be predicted. This allows producers to organise proactive maintenance and to anticipate where spare parts are needed and when. Products that do break down or reach their end-of-life will be returned to repair centres, refurbished, or recycled in specialised recycle centres. There is no need to transport them all the way back to the original manufacturer. Components and resources may be reused in other supply chains, and waste will be reduced.
To coordinate all these activities, high-quality information collection and sharing is key. ICT enables supply chains to anticipate much better on what needs to be done. Knowing the current state of the supply chain is greatly supported by real time information on, for example, sales, stock levels, returns, location, and volume of stock. Trucks, trains, and ships can be followed using their location information. Using all this information, plans can be computed, shared, and discussed. Actors in the supply chain can anticipate on changes and adapt plans as needed. Information can be aggregated to enable higher level decisions, such as how to design the structure of the supply chain network.
Using ICT smartly, it will change the supply chain manager’s profession from a firefighter to a strategic business manager.

In this animation our lead educator Jos van Hillegersberg explains the basic concepts of a supply chain. We also show how product structure and supply chain are related. Make or buy decisions depend on several factors and determine the shape of a supply chain.

Make to stock, assemble to order and make to order are different supply chain strategies that can be used depending on the type of product and market demand.

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Supply Chain Innovation: How Technology Can Create a Sustainable Future

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