Supply Chain Market

The supply chain consists of mostly for-profit companies engaged in activities involving product creation and delivery.  Essentially the chain represents major steps needed to manufacture a product that will eventually be sold as a final product.  Each member of the supply chain purchases products and services enabling them to carry out its business objectives.

When making purchase decisions supply chain members may be motivated by such factors as: product cost, return on investment (i.e., benefits obtained exceed price paid), assurance of consistent supply (i.e., product is available and delivery is on-time), reciprocity with supplying firm (i.e., we buy from you and you buy from us), and much more.  Examples of purchasing occurring in the supply chain include: manufacturing and plant equipment, information technology, office supplies, professional business services, etc.

In the table below we arbitrarily identify five main categories of supply chain members primarily based on the stage at which they contribute to the manufacturing process.  However, it is conceivable that these categories can be further divided in order to flush out more specific activities.

Supply Chain Member What They Do Example
Raw Material Suppliers These companies are generally considered the first stage in the supply chain and provide basic products through mining, harvesting, fishing, etc., that are key ingredients in the production of higher-order products. Copper is mined and extracted from copper ore.  Copper is then refined to remove impurities.
Processed Materials or Basic Component Manufacturers Firms at this level use raw materials to produce more advanced materials or products contained within more advanced components. Copper is purchased by electrical wire manufacturers.
Advanced Component Manufacturers These companies use basic components to produce products that offer a significant function needed within a larger product. Electrical wire is purchased by a manufacturer of electrical power supplies.
Product Manufacturers This market consists of companies that purchase both basic and advanced components and then assemble these components into a final product designated for a user.  These products may or may not be sold as stand-alone products.  Some may be included within larger products. Power supplies are purchased by manufacturers of desktop computers.
Support Service Firms These companies offer services at almost any point in the supply chain and also to the business user market.  Some services are directly related to the product while others focus on areas of the business not directly related to production. Distribution companies, such as truck firms and storage facilities, assist in moving products from one supply chain member to another.  However, in most cases they do not take ownership of products that pass through the supply chain.
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