A very basic example of a supply chain can be seen from the process of a customer buying an item from a supermarket. A customer goes to a supermarket store to purchase a kettle. The supply chain begins with the customer and their need for that specific item, in this case the kettle. The supermarket fills its shelves using stock that may have been supplied from a finished goods warehouse that the supermarket manages or from a distributor using vehicles supplied by a third party. The distributor, in turn, is supplied by a manufacturer. The manufacturing plant had received the raw material from a variety of suppliers who may have been supplied by lower tier suppliers i.e. packaging material may come from a packaging company while they receive raw materials to manufacture the packaging from other suppliers.
The stages involved within a supply chain are influenced by the needs and wants of the customer(s).
In the previous example, the supermarket provides the product, as well as pricing and availability of information, to the customer. Funds are transferred, by the customer, to the supermarket.
The supermarket conveys point-of-sales data, as well as any replenishment order, back to the distributor.
Funds are transferred to the distributor by the supermarket after replenishment has taken place. The distributor also provides pricing information and sends delivery schedules to the supermarket.
Similar information, material, and finance flows take place across the entire supply chain.
The primary purpose of any supply chain is to satisfy customer needs whilst in the process generating profits for itself.
Take a look at this great video that explains a supply chain in a way that is easy to understand;