A basic supply chain model consists of three entities and four flows. The three entities are the physical supply system, manufacturing network, and physical distribution system. The four flows are product flow, cash flow, reverse product flow, and information flow.
The physical supply system brings materials and components to the manufacturing facility. The manufacturing network is a web of manufacturing companies that transforms the material into desired finished goods. Finally, the physical distribution system takes these finished goods through warehousing facilities, distribution centres and retails stores to the customers.
If product flow is the activity of the supply chain, then the cash flow is the objective of the supply chain.
The product flow happens from the upstream to the downstream that is from the supply side to the demand side. Product flow is the mission of the supply chain. The cash flow is opposite to that of the product flow, which is the reward for performing the supply chain activities.
The reverse product flow is for return, repair, refurbishing, warranty, reuse, recycle, recovery and responsible disposal of waste products. The information flow is bidirectional. It flows in both the directions. That is from downstream to upstream and vice versa. In fact, information or time kick starts the other three flows.
This is an excerpt from the sessions of Certified Inventory Optimization Professional (CIOP) of Integrated Institute of Supply Chain Management (IISCM). CIOP is based on Inventory Management Body of Knowledge (IMBoK v2.0).
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