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 purchases occurring in the supply chain include: manufacturing and plant equipment, information technology, office supplies, professional business services, etc.
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.
Raw Material Suppliers
These organizations 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. Example: a copper mine that extracts and refines copper from copper ore.
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. Example: an electrical wire manufacturers that purchases copper.
Advanced Component Manufacturers
These companies use basic components to produce products that offer a significant function needed within a larger product. Example: a manufacturer of electrical power supplies purchases electrical wire.
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. Example: a smartphone manufacturers purchases electrical power suppliers.
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. Example: a trucking company moves products from one supply chain member to another.