A supply chain is what it says: a chain or network of various resources who together share the objective of supplying a particular result or achieving a planned objective. These resources include (internal and external) organizations, people, activities, information, and raw materials involved in moving a product or service from a supplier to a customer.
Simply put, supply chain activities include transforming natural (and other) resources, raw materials, and components into a finished product that is then delivered to the end customer when the customer needs or wants it. So, it's not just minding inventory and shipping products. A supply chain is much more involved and complex.
Management of inventories goes beyond counting how many containers are sitting in a warehouse: it's a balancing act of keeping enough inventories on hand so that all customer and client expectations are met. Appropriate timing prevents delays; appropriate quantity prevents insufficient inventory while reducing the effect on profits.
Supply chain activities close to the raw material stage are known as upstream activities and activities between the manufacturer and end consumer are downstream activities. Typically, a supply chain is made up of multiple organizations that coordinate activities with the objective of setting themselves apart from the competition.
In today's business world, no stone can be left unturned in efforts to be solvent and better still, become and stay profitable. Smart firms recognize that effective supply chain management is an essential portion of their business model.
For this chapter's use case, let's pretend there is an organization named Folly Surf located in South Carolina in the US, which distributes surfboards. Their supply chain group is responsible for the procurement of the fundamental components of the product (the various types of surfboards) as well as assembly (which includes a process known as shaping), and finally delivery to the customer, who in this case is various independent surf shops who have placed orders for the boards.
In the years since its inception, born in some surfer's garage, the company's product has grown in popularity, driven by both the surfer's reputation and a high level of satisfaction (the board performs as advertised). This has increased demand beyond the company's ability to provide the product and is threatening not only short-term profitability but the company's future plans to expand its store locations.
Various efforts to improve operational efficiencies have had undesirable results.
For example, when deliveries are all on time, overall product quality has suffered, resulting in unhappy consumers and returns. When it is ensured that quality levels are met or exceeded, deliveries have been late, again resulting in unhappy customers and lost sales. Finally, when assembly teams are expanded, ensuring quality as well as the ability to deliver on time, the assembly team runs out of materials and parts.
Before things get too far out of control or beyond a repairable situation, the Folly Surf group is interested in seeing what insights can be identified with their data and Watson Analytics. So, using the Watson project methodology we identified in the previous chapter, let's jump in.