Operations Management: An Integrated Approach, 5th Edition

COMPONENTS OF A SUPPLY CHAIN FOR A MANUFACTURER

A company's supply chain structure has three components: external suppliers, internal functions of the company, and external distributors. Figure 4-2 shows a simplified supply chain for packaged dairy products.

External suppliers include the dairy farmer, cardboard container manufacturer, label company, plastic container manufacturer, paper mill, chemical processing plant, lumber company, and chemical extraction plant. Internal functions include the processing of the raw milk into consumer dairy products and packaging and labeling dairy products for distribution to retail grocery outlets. The external distributors transport finished products from the manufacturer to retail grocers, where the products are sold to the customer. The supply chain includes every activity from collecting the raw milk, producing the consumer dairy products, packaging the dairy products, distributing the packaged dairy products to retail grocers, to selling the finished dairy products to the customer.

Let's look at each component of the supply chain in detail.

External Suppliers

Dairy products manufacturing involves several companies, as shown in Figure 4-2. The dairy products are packaged either in cardboard or plastic containers made by tier one suppliers. Note that any supplier that provides materials directly to the processing facility is designated as a tier one supplier (in this case, the dairy farm, the cardboard container manufacturer, the label company, ...