The world runs on supply chains. Without them, nothing would be made, shipped, or sold. Explore the different types of supply chains, and find examples of when a supply chain works and doesn’t work.
Supply chain logistics is a big part of our economy. For example, it is estimated that the size of the global logistics industry is almost $10 trillion. Surprisingly this is close to 10% of global GDP. Further, supply chains have grown at an unprecedented rate the last 100 years. Without a doubt supply chains are key to our continued prosperity.
Supply Chains – What Are They And What Do They Do?
The end goal of a supply chain is to deliver a product to a consumer at the agreed upon product specification, price, and time. Previously, hundreds of years ago supply chains did not really exist as most products were local. Consequently, you either produced it yourself (ex, vegetable garden) or you bartered with your neighbor (ex. you traded vegetables to get your wagon wheel fixed).
Today our prosperity rests upon supply chains, many of them global. Now we have advanced-end products that we buy (ex. iPhone) that can have hundreds of components produced by dozens of suppliers from across the globe. To explain what a supply chain is, I like this definition: a collection of manufacturers, suppliers, routes (links) between facilities, and transportation companies who collectively create and deliver a product to the consumer.
3 Types of Supply Chain Networks With Examples.
So you can group most major supply chains into three types according to SmartSheet. Specifically, examples of these types of supply chains are as follows:
“Big Box” Retailer Example:
“Big Box” supply chains have changed the landscape of traditional retailers over the last century. Specifically, retailers like Walmart have economies of scale. For example, Walmart can make a profit on a t-shirt made overseas that retails for $5.00 where a locally sourced t-shirt would cost much more. So how does this supply chain work? To detail, walmart supply chain works like this: Selected manufacturers -> warehouses where manufacturers manage inventories -> large distribution centers -> big box retail locations -> Consumer buys product and takes it home.
Ecommerce Platform Example:
In the twentieth-first century and thanks to the internet, eCommerce supply chains are disrupting “brick-and-mortar” retailers. To explain, this type of supply chain cuts out the local retailer and just ships the product directly to the consumer. So how does this supply chain work? To detail, Amazon supply chain works like this: Select suppliers (brand names, Amazon-owned goods, and independent sellers) -> Amazon warehouses -> Consumer orders product > Amazon delivers product to the consumer.
Manufacturer Direct-To-Consumer. Example:
With direct-to-consumer supply chains, manufacturers remove or minimize retail facilities. Additionally in some cases, the manufacturer eliminates or at least minimizes their supplier network where they will manufacture many of the components of their product. Also, this minimizes transportation and logistics operations within the supply chain. So how does this supply chain work? Specifically, Tesla’s supply chain works like this: Raw material suppliers -> Tesla manufacturing plants -> Consumer orders product -> Product delivered to consumer or consumer picks up from manufacturer retail location.
Examples of When Supply Chains Go Wrong.
Most times supply chains work well, relatively speaking. In fact when things work well, most of us are not aware or even care about supply chains. This is because most supply chains are built with redundancy in mind. As a result, there are backups when things go wrong and so the supply chain itself does not falter. With the recent Pandemic, most supply chains have faltered affecting us all. Below are some examples of supply chains that have gone wrong causing major supply chain shortages.
Suppliers Supply Chain Disaster Example:
Ford and Firestone Tire Recall.
In 2000 after several accidents and deaths, Ford and Firestone issued a recall of 6.5 million tires that Firestone had to pay for. As a result of this supply chain disaster, Ford created a crisis team that ended up in a redesign of their Ford Explorer in 2002.
Production Supply Chain Disaster Example:
U.S. Baby Formula Shortage.
In 2022 an extreme baby formula shortage occurred due a manufacturer, Abbott, shutting down their manufacturing plant due to a recall of its infant formula products.
Routing Supply Chain Disaster Example.
Container Ship Gets Stuck in Suez Canal for Almost a Week.
In 2021, The Ever Given became stuck in the Suez Canal for 6 days blocking all shipping.
Transportation Supply Chain Disaster Example:
Transportation Companies’ Trucker Shortage in U.S.
Recently the continued shortage of truck drivers is causing supply chain problems throughout the U.S. To illustrate, about 71% of the U.S. economy’s products move by truck. As a result, currently the trucking industry is short at least 80,000 truckers causing suppy chain challenges across all industries.
Consumer Expectations Supply Chain Disaster Example:
The Coronavirus Toilet Paper Shortage.
In March of 2020 at the start of the Pandemic, panic buying of toilet paper began creating a situation where retailers’ shelves were bare.
For more examples of supply chain disruptions, see TechTarget’s 15 Examples of Supply Chain Disruptions Throughout History
For more information from Supply Chain Tech Insights, see articles on Supply Chain.
Greetings! As an independent supply chain tech expert with 30+ years of hands-on experience, I take great pleasure in providing actionable insights to logistics leaders. My background includes implementing 100s of innovative solutions using emerging technologies and a data-centric development approach. I have also provided business intelligence (BI) solutions for 1,000s of shippers. For more about me, click here.