The three flows of supply chain
So now that you have a better understanding of your supply chain, let’s discuss the three flows of supply chain.
Let’s dive right into it. Supply chain management is the management of these three flows:
- Material (Product) Flow
- Information Flow
- Financial Flow
Material (Product) Flow
This is the flow of the physical product from supplier all the way down to the customer. This flow is usually uni-directional, that is, it only flows one direction from supplier to customer; however, in certain instances, when the customer returns the product, the flow occasionally goes in the other direction. A typical flow of materials usually begins with the raw materials suppliers to manufacturers to warehouses and distribution to the the final customer.
Information flow is the flow of information from supplier to customer and from customer back to supplier. This flow is bi-directional, that is, it goes both direction in the supply chain. The type of information that flows between customers and suppliers include quotations, purchase orders, delivery status, invoices, customer complaints and so on. For supply chain to be successful there has to be constant interaction between supplier and Customer. In many cases, other partners like distributors, dealers, retailers, logistic service providers are involved in the information network.
kpakpakpa.com is an information network for product makers, suppliers and consumers of goods made in Nigeria. Check out the information flow in our Q&A community.
Lastly, financial flow involves the movement of money from the customer to the supplier. Usually, when the customer receives the product and verifies it, the customer pays and the money travels back to the supplier. Sometimes the finances flow the other direction (from supplier to customer) in form of debit.
For an efficient and effective supply chain, it is important that all three flows are managed properly with minimal effort. By understanding your supply chain and how products, information and money flows through it, you will be in a good position to find several inefficiencies and figure out how to significantly improve your business.