What is the definition, the role and challenges of the supply chain for companies?

March 21th, 2024
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Effectively managing the supply chain has become essential for the success of any company. This key function goes well beyond sourcing raw materials. It covers the full range of activities required to obtain, produce, distribute and deliver a product or service, from the supplier network to the end user. The supply chain is therefore of strategic importance and raises key challenges in risk management, sustainability and efficiency.

Supply chain: Definition

The supply chain refers to all the functions and business processes that aim to optimise the flow of goods, information and funds from the purchase of raw materials through to the delivery of the finished product to consumers. Good supply chain management therefore involves coordinating these flows from end to end.

Behind it all is a network of companies and subcontractors, with their teams and technologies, which make up the components of this supply chain. These are the suppliers, manufacturers, wholesalers, service providers and retailers involved in every stage of designing and distributing the goods.

The supply chain therefore covers a whole range of activities, which can be broken down into five main parts.


To meet customer demand, companies start by planning and managing the resources required to design their product.


The next step is to order the raw materials, goods and services needed to manufacture said product. This includes procurement with order placement, receipt, stock management, etc.


With the various resources shipped in, companies can then manufacture their product, test their quality and package them for future shipping.

Transport and logistics

Companies then have to manage customer orders, schedule deliveries and ensure distribution.


Today more than ever, companies also have to manage the entire product life cycle. They must therefore rely on an existing network or dedicated process to collect the product in case of returns.

The role of the supply chain in business

Supply chain management involves controlling, organising and coordinating the flows and people involved at each stage, while optimising supply chain processes. Companies must continually accelerate supply chain operations and eliminate waste, by being ever more efficient, agile and responsive. Especially as they have to meet increasingly demanding requirements in terms of cost, quality, lead times and safety.

In Lean language, waste refers to any activity that consumes resources (time, money, labour, etc.) but does not provide value to the end customer. This can take the form of excess stock, unnecessary movement, defects, etc.
In summary, good supply chain management implies aligning four key principles: Service levels, costs, stock and sustainability.

Service levels

This includes keeping the delivery promise, but also meeting lead times, providing value-added services (assembly and/or installation, take-back of old equipment for recovery, etc.).


As the name suggests, this step covers all costs (procurement, logistics management, transport, etc.).


This principle consists of monitoring raw material, work-in-process and, of course, finished goods stock.


It is now imperative to consider the impact on the environment that the global supply chain has, with greenhouse gas emissions, energy consumption, waste generation, etc.

A factor of competitiveness, differentiation and customer loyalty, the supply chain therefore plays a key role in ensuring business sustainability. This is why it must skilfully combine operational, economic and environmental performance.

Supply chain challenges

With globalisation and technological developments, supply chains have become increasingly complex. On top of this comes an uncertain environment marked by multiple crises (ecological, geopolitical, energy-related…).

This raises three main challenges for global supply chains in the coming years.

Enhancing risk management

It is now imperative to have enough visibility over your supply chain to be able to anticipate and limit the impact of any type of incident as much as possible.

According to the latest barometer published by KYU, a management consulting firm, dealing with risks within the supply chain, organisations fear various types of risks, such as:

· Inability to meet demand;

· Rising costs;

· Cyber attacks;

· Heightened geopolitical tensions in supply zones;

· Demand volatility.

Accelerating the transition to a sustainable supply chain model

There is no doubt: Tomorrow’s supply chain will be sustainable or it will not be. And for good reason: 90% of supply chain managers say they are implementing a dedicated CSR roadmap1. The key topics are: Reducing greenhouse gas emissions (especially scope 3), but also waste management and health and safety at work.

There are many courses of action:

· Using low-emission means of transport;

· Consolidating shipment;

· Implementing sustainable procurement policies;

· Introducing recycled and recyclable packaging, etc.

Continuing the digital transformation

The digitalisation of the supply chain makes it possible to improve traceability, agility, communication and coordination between the various players. It is a tremendous lever to boost the efficiency of a given company, but also of its entire ecosystem. As such, over two thirds of supply chain directors are launching a digital transformation plan1.

The implementation of solid information systems and data control are the prerequisites for such an approach. Organisations can then initiate the digitalisation of their supply chain, starting with complex and automatable execution processes:

· Logistics execution in warehouses;

· Order management;

· Sourcing;

· Production scheduling;

· Source-to-contract, etc.

The supply chain is therefore much more than a simple logistics function. It is at the heart of companies, playing an essential role in the success of their activities. Tomorrow, it promises to be even more efficient and responsible, enabling companies to gain resilience in the face of crises and stand out in an increasingly competitive market.

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