(CBS Baltimore) — Why are the shelves at the local grocery store always partly empty? Why do deliveries take so much longer than they used to? Why is everything more expensive? The short answer is the supply chain. The long answer is not that simple.
It goes without saying that the once-in-a-lifetime COVID pandemic has exacerbated existing issues. That includes a shortage of workers along the path that products take from the factory to a consumer’s doorstep, creating multiple bottlenecks in a system that depends on timeliness to function, just as demand has drastically increased for those products.
Even that more complicated explanation doesn’t fully explain why consumers can’t buy what they want when they want. That’s because there are no easy answers and no easy fixes.
What Is The Supply Chain?
The supply chain is the series of steps that brings a product to a customer. Martin Dresner, Professor and Chair of the Logistics, Business and Public Policy Department at the R.H. Smith School of Business at the University of Maryland, describes it as the “network of manufacturers, their suppliers, distributors, retailers that are responsible for getting products from point of origin to the final customer.”
The network for any given company can start with suppliers of raw materials and other inputs, and include shipping those supplies to a manufacturing facility. Once inputs are transformed into a finished product, it is moved to a warehouse or a store and then ultimately to the final customer. Various agents, brokers, vendors, transportation companies, and distribution centers can play key roles along the way in ensuring a product gets made and reaches its final destination.
A supply chain for large company can get very complicated very fast. Dresner describes just how complicated in an example of a typical packaged goods company: “A packaged goods manufacturer has many suppliers, and those suppliers will be supplying raw materials for use in the production process. And that could be farmers, or farmers can sell through distributors. Or the product used by the manufacturer might be manufactured themselves, so they may have other components suppliers.
“We think of the suppliers that sell directly to Procter & Gamble or Kellogg’s as first-tier suppliers,” he continues. “But then there are people who supply them, and we would call those second-tier suppliers. And there could be third-tier, fourth-tier suppliers as well, all the way back to where the components of the product originate. That manufacturer also may not do all the manufacturing themselves. They contract out some manufacturing. Those contract manufacturers are also suppliers to packaged good manufacturers. And they have their own supply chains.”
Once a product is produced, it must find its way to the consumer.
“Manufacturers will often not sell directly to customers, but they will sell through distributors,” Dresner further explains. “Distributors may sell to retailers, and manufacturers may sell directly to retailers. There can be other companies involved in the sale and distributions of products. There can be agents or brokers, transporters. There are all sorts of companies that need to be involved in getting the product to their eventual end user. All these companies, they’re a part of that focal firm, that packaged goods manufacturer’s supply chain.”
So many steps along the way leave plenty of opportunities for slowdowns. And those slowdowns build upon each other to create growing delays for a company.
Click here to read more.