Supply Chain

Managing the supply chain is a crucial process for a company because an optimized supply chain results in lower costs and a faster production cycle. The entities in the supply chain can include producers, vendors, warehouses, transportation companies, distribution centers, and retailers.

Frequently Asked Questions
  • What is the difference between direct and indirect distribution channels?

    Direct distribution is a direct-to-consumer approach where the manufacturer controls all aspects of distribution. Direct distribution gives companies more control over the whole process. Indirect distribution involves third parties, like warehouses, wholesalers, and retailers. Indirect distribution may allow companies to focus on their core business while outsourcing distribution to an expert. A manufacturer is responsible for different costs, depending on which channel it uses.

  • How are value chains and supply chains different?

    The value chain is a process in which a company adds value to its raw materials to produce products eventually sold to consumers. The supply chain represents all the steps required to get the product to the customer. The value chain gives companies a competitive advantage in the industry, while the supply chain leads to overall customer satisfaction.

  • How do I calculate inventory turnover?

    Inventory turnover is a ratio that shows how many times inventory has sold during a specific period of time. The ratio helps the company understand if inventory is too high or low and what that says about sales relative to inventory purchased. Dividing the cost of goods sold (COGS) by the average inventory during a particular period will give you the inventory turnover ratio.

  • What are the benefits of Just in Time (JIT) production?

    Just-in-time (JIT) is a production strategy in which a company only produces an item after a buyer has made an order, therefore keeping inventories low. Lower inventories make a company look more efficient and also boost the return on total assets (ROTA), a key measure of how well a company uses funds to boost profits. JIT allows companies to spend less on parts and labor, as well as limit the risk of items losing value from sitting around too long.

  • What is an endorsement in blank in a bill of lading?

    A bill of lading is a legal contract between a shipper and a carrier of goods that details the type, quantity, and destination of the goods being transported. The shipper is the seller or exporter of the goods, while the carrier is the company that transports the goods from one destination to another for a fee. A blank endorsement on a bill of lading indicates the seller has not specified a recipient or buyer for the goods. If a seller or exporter does not have a buyer for their goods at the time of shipment, they can indicate "to order" or "to order of" in the consignee section of the bill of lading. The carrier now becomes responsible for the delivery of the goods and for any ancillary costs related to the shipment.

Key Terms

Explore Supply Chain

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Continuous Operations Definition
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Intermodal Freight
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Claused Bill of Lading
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Page Sources
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  1. Export Council of Australia. "DDP - Delivered Duty Paid - Incoterms® 2020 Rule." https://export.org.au/ddp-delivered-duty-paid-incoterms-2020-rule/