What Is a Supply Chain, and Why Is It Important For Australian Businesses?
Published: October 20, 2024 | Last Updated: December 12, 2024
Supply Chain Defined
A supply chain is the entire network of organisations, resources, and processes involved in creating and delivering products from supplier to end user. This network includes everything from raw material sourcing to manufacturing, storage, transport, and final delivery to customers.
The supply chain is an intricate relay race where each participant has a specific role in getting products from start to finish. While a single company might handle multiple parts of their supply chain internally, most businesses rely on partnerships with various specialists throughout the chain.
The term ‘supply chain’ can refer both to the network itself and the sequence of processes involved in product delivery. In modern business, most companies participate in multiple supply chains – both as providers to other businesses and receivers of goods and services they need to operate.
Supply Chain Functions
Supply chain functions include every process related to getting a product to the end consumer. Starting with detailed planning, then sourcing/manufacturing the product, all the way to distributing it. It also includes managing returns (reverse logistics). Here is a bit more about each critical function of the supply chain:
Planning and Strategic Design
Supply chain planning involves forecasting demand, managing inventory levels, and optimising resource allocation. Effective planning ensures businesses have the right products available at the right time while minimising excess stock and associated costs.
Strategic decisions in this phase impact everything from warehouse locations to transport partnerships. Australian businesses must particularly consider our unique geography when planning supply chains, as distance and delivery times significantly affect inventory requirements.
Sourcing and Procurement
Sourcing involves selecting and managing supplier relationships within the supply chain. This includes evaluating supplier capabilities, negotiating contracts, and monitoring performance. For Australian businesses, sourcing decisions often involve balancing local suppliers against international options, considering factors like cost, reliability, and lead times.
Manufacturing and Operations
The manufacturing function transforms raw materials into finished products within the supply chain. This might involve simple assembly or complex manufacturing processes, depending on the business model. Operations management ensures efficient production scheduling and quality control.
Logistics
Logistics manages the movement, storage, and warehousing of goods, coordinating the flow of materials, information, and resources through the supply chain. This includes transportation planning, route optimisation, carrier selection, and ensuring efficient movement of products between supply chain stages.
Distribution
Distribution in the supply chain involves the strategic placement and movement of finished products to end customers. This includes warehouse management, inventory positioning, order processing, and delivery coordination. For Australian businesses, effective supply chain distribution often requires a mix of transport modes and strategic warehouse locations to service our widespread population centres.
Returns and Reverse Logistics
Returns management, or reverse logistics, handles products moving backwards through the supply chain. This includes customer returns, repairs, recycling, and disposal of goods. An efficient returns process is crucial for customer satisfaction and can significantly impact a business’s bottom line.
Special requirements like quarantine restrictions and Australian Consumer Law make returns management particularly important for businesses operating in Australia. A well-designed returns process needs to balance customer service with cost efficiency.
Logistics, Freight And The Supply Chain
The terms “logistics” , “freight”, and “supply chain” are very closely correlated, and oftentimes overlap in their functions. For these reasons, the terms are often used interchangeably (and sometimes incorrectly). It’s important to understand the nuances between these phrases, and tie it all together.
Supply Chain
The term Supply Chain refers all elements of getting a product to the end consumer. It starts with sourcing/procurement, and continues beyond the distribution all the way to returns, and customer relations management (CRM).
Logistics
The term Logistics refers to the subset of the supply chain that’s related specifically to the movement, storage and distribution of the product. When conducted by a 3rd party specialist, it can also be called 3rd party logistics, or 3PL for short. It encompasses a large majority of the supply chain, but not all of it. For example, sourcing & procurement are part of the supply chain, but not logisistcs.
Freight
The term Freight refers to the function of logistics that is related specifically to the transport of goods. It can be used to refer to the goods that are being transported (i.e. “Today I am transporting freight from Sydney to Brisbane”), and the act of transportation (i.e. “Freight is a crucial component of logistics”). In the context of second example, “Freight” could be used interchangeably with “Freight Transport”, and “Transport”. All three mean the same thing – the transport of bulk goods.
So essentially, all three terms are related to getting products to where they need to go. The term Supply Chain encompasses everything, whereas the term Logistics encompasses pretty much everything except for the procurement, and manufacturing of goods. In simple terms, the supply chain is “getting it, then getting it there”, whereas logistics is just “getting it there”. Freight is a more granular term, used to refer to the logistical function of transport.
Supply Chain Management
The term supply chain management refers to the comprehensive process of coordinating and optimising the complex network of activities involved in producing and distributing products. It encompasses everything from raw material sourcing to final product delivery, integrating multiple business functions to create a seamless, efficient system. At its core, supply chain management aims to maximise customer value and achieve sustainable competitive advantage by aligning all stages of production, procurement, and logistics.
The discipline bridges critical business functions, ensuring that materials, information, and finances flow smoothly between suppliers, manufacturers, distributors, and customers. In today’s global marketplace, effective supply chain management is not just about moving goods, but about creating strategic networks that can quickly adapt to market changes, technological innovations, and customer demands.
Types of Supply Chain Models
There are four primary supply chain models, each designed to optimise different business goals and operational needs. Selecting the right model can improve efficiency, meet consumer demand, and drive business success.
Continuous-Flow Model
The continuous-flow model prioritises stability and efficiency by maintaining a constant production rhythm and streamlining operations. It is particularly suited for industries with consistent demand and high-volume production, such as pharmaceuticals or automotive manufacturing. This model emphasises standardised processes and tight quality control, ensuring uninterrupted workflows and minimising inventory imbalances.
Fast Model
The fast model prioritises speed by optimising responsiveness to rapidly shifting consumer demands. Industries such as fashion or consumer electronics benefit from this model, as it focuses on minimising production and delivery timelines to capitalise on short product life cycles. By using just-in-time inventory strategies and flexible production setups, businesses employing the fast model can quickly adjust to trends, keeping products relevant and customers engaged.
Efficient Model
The efficient model is designed to reduce costs while meeting high-demand scenarios by leveraging meticulous inventory planning and advanced resource allocation. Often used in competitive industries like packaged foods or construction materials, this model relies on pre-scheduled procurement and production to maximise throughput. The efficient model minimises waste and ensures that production equipment and labour resources are fully utilised, delivering consistent quality at lower costs.
Custom-Configured Model
The custom-configured model prioritises flexibility and precision to meet unique customer or product requirements. This approach is commonly used for products like custom furniture, medical prosthetics, or configurable electronics. By integrating tailored processes in production and delivery, organisations ensure that each item meets individual specifications. While this model demands higher investment and slower production times, it enables businesses to deliver highly specialised solutions that foster customer loyalty and satisfaction.
Understanding how each supply chain model operates allows businesses to tailor their strategies to specific market demands. Whether leveraging the speed of the fast model or the adaptability of the custom-configured model, a well-chosen supply chain strategy enhances competitiveness and operational excellence.
Australian Supply Chain Challenges
Australia’s supply chain landscape is shaped by unique factors that bring both opportunities and challenges. While businesses encounter hurdles in logistics, labour, and supply dynamics, many are innovating and adapting to maintain resilience and efficiency.
Geographic
Australia’s vast landmass and dispersed population centres create logistical complexities, particularly when delivering goods to rural and remote areas. Transporting goods across such long distances can increase costs and lead to delays. However, continued investment in transport infrastructure and regional connectivity is steadily improving the flow of goods across the country.
Labour Shortages
The supply chain sector faces a shortage of skilled workers, particularly in logistics and transport roles. This challenge stems from an aging workforce and increased competition for talent across industries. Businesses are responding with upskilling initiatives and greater use of automation to address workforce gaps, boosting efficiency and sustainability. The Australian Industry Group’s 2023 CEO Survey highlights that nearly half of businesses have been impacted by workforce shortages in their supply chain operations.
Dependence on Imports
Australia’s reliance on imported goods, including key items like fuel, fertilisers, and raw materials, creates vulnerabilities in the supply chain. Global trade fluctuations or disruptions can affect availability and costs. To counter this, businesses are focusing on expanding local manufacturing capabilities and diversifying supply sources, reducing dependency on international markets.
Environmental Factors
Australia’s susceptibility to extreme weather events, such as floods and bushfires, can disrupt supply chains by damaging infrastructure or delaying transport. Many businesses are implementing proactive measures, such as risk management strategies and resilient infrastructure investments, to mitigate the impacts of these natural challenges.
Building a Better Supply Chain
Navigating the challenges of Australia’s supply chain landscape requires businesses to focus on strategic management and continuous improvement. With geographical complexities, labour constraints, and evolving market demands, building a better supply chain means not only addressing these challenges but leveraging them as opportunities to innovate and thrive. Here are the core elements to consider:
Partner Selection
Selecting the right partners is the foundation of an effective supply chain. Businesses should prioritise partners with proven expertise, robust technological capabilities, and deep local knowledge. In Australia, where supply chain success often hinges on regional networks and infrastructure, working with partners who understand the nuances of the local market is essential.
Strategic partnerships also allow businesses to focus on their core competencies while benefiting from their partners’ strengths. Whether through shared logistics platforms or co-managed inventory systems, strong partnerships drive collaboration and efficiency.
Proactive Risk Management
Australian businesses must approach risk management with a blend of preparation and adaptability. This includes diversifying supplier relationships, maintaining safety stock, and developing contingency plans for potential disruptions, such as transport delays or supplier shortages.
Investing in predictive analytics can also help businesses identify risks early, enabling faster responses to potential disruptions and reducing their impact. Resilient supply chains aren’t just reactive—they are built to anticipate and adapt.
Streamlined Information Flow
The backbone of an efficient supply chain is the seamless flow of accurate and timely information. From inventory levels to demand forecasts and potential bottlenecks, sharing data across all stakeholders ensures smooth operations and faster decision-making.
Advanced tools such as cloud-based supply chain platforms enable real-time visibility and collaboration, keeping all parties aligned and informed. When businesses prioritise transparency and communication, the physical flow of goods becomes significantly more efficient.
Leveraging Technology
Technology is revolutionising supply chain operations in Australia, offering solutions like real-time tracking, automated warehouse management, and AI-driven demand forecasting. These tools not only optimise efficiency but also help businesses stay agile in responding to market changes.
Adopting technology is no longer optional—it’s a competitive necessity. Businesses that integrate digital tools into their operations are better positioned to reduce costs, improve accuracy, and gain an edge in the market.
Commitment to Continuous Improvement
Supply chains are not static—they evolve alongside a business’s growth and market dynamics. Regularly reviewing and optimising supply chain processes ensures they remain efficient and resilient.
Continuous improvement may involve redesigning workflows, embracing emerging technologies, or re-evaluating partnerships to better meet operational goals. The most successful supply chains treat optimisation as an ongoing journey, not a one-time project.
Building a better supply chain is about more than overcoming challenges—it’s about creating a system that’s resilient, adaptable, and positioned for long-term success. By focusing on collaboration, technology, and continuous improvement, Australian businesses can transform their supply chains into a competitive advantage.
The Bottom Line
Your supply chain is a crucial business function that affects everything from costs to customer satisfaction. For Australian businesses, having a well-managed supply chain is especially important given our unique geographic and market conditions.
Working with experienced logistics partners can help optimise your supply chain operations. At Freight Assist Australia, we’ve been helping businesses streamline their supply chains with transport nationwide, interstate freight, and 3pl warehousing services. Let us show you why we’ve been Australia’s first choice in supply chain solutions since 2012.