Fundamentals of Business

Consequences of Supply Chain failure

Example
Extract from the Times Newspaper April 5, 2006 "Sainsbury sees market share edge past Asda" Sainsbury's was once Britain's biggest supermarket but was overtaken by Tesco in 1995 and pushed into third place by Asda in 2003.

J SAINSBURY has overtaken Asda to become the UK's second largest supermarket, according to the latest figures from ACNeilsen, the market research firm. Eleni Nicholas, group managing director of ACNielsen in the UK and Ireland, said: "Sainsbury's has been working hard to improve performance, with lower prices and improved availability availability, as recognised by their customers". Thousands of price cuts so that everyday items are competitive with rivals. Brought in Lawrence Christensen, a supply chain expert, to fix problems with warehouses and store systems that had left shelves empty empty.

Logistics network/supply network
is a coordinated system of organizations, people, activities, information and resources involved in moving a product(tangible) or service(intangible) in physical or virtual manner from supplier to customer. Supply chain activities transform raw materials and components into a finished product that is delivered to the end customer.

This supply chain begins with the extraction of raw material and includes several production links, for instance; component construction, assembly and merging before moving onto several layers of storage facilities of ever decreasing size and ever more remote geographical locations, and finally reaching the consumer.

The logistics chain includes the owners (wholesalers and retailers), manufacturers agents, and transportation channels that an item passes through between initial manufacture and final purchase by a consumer. At each stage, goods belong (as assets) to the seller until the buyer accepts them.
Distribution includes four components:
Manufacturers' agents agents: Distributors who hold and transport a consignment of finished goods for manufacturers without ever owning it. Accountants refer to manufacturers agents inventory as "material" in order to differentiate it from goods for sale.
Transportation Transportation: The movement of goods between owners, or between locations of a given owner. The seller owns goods in transit until the buyer accepts them. Sellers or buyers may transport goods but most transportation providers act as the agent of the owner of the goods.
Wholesaling Wholesaling: Distributors who buy goods from manufacturers and other suppliers (farmers, fishermen, etc.) for re sale work in the wholesale industry. A wholesaler's inventory consists of all the products in its warehouse that it has purchased from manufacturers or other suppliers. A produce wholesaler (or distributor) may buy from distributors in other parts of the world or from local farmers. Food distributors wish to sell their inventory to grocery stores, other distributors, or possibly to consumers.
Retailing Retailing: A retailer's inventory of goods for sale consists of all the products on its shelves that it has purchased from manufacturers or wholesalers. The store attempts to sell its inventory (soup, bolts, sweaters, or other goods) to consumers.