Supply chain structure and tiering

The concept of a supply chain suggests a series of processes linked together to form a chain. A typical Tesco supply chain is formed from five such links. 

If we look more closely at what happens in practice, the term supply chain is somewhat misleading in that the chain represents a simple series of links between a basic commodity (milk in this case) and a final product (cheese). Thus 

The supply chain can be seen in this diagram as a number of processes that extend across organisational boundaries. The focal firm is embedded within the chain, and its operational processes ( inside ) must coordinate with others that are part of the same chain. Materials flow from left (upstream, or buy side ) to right (downstream, or supply side ). If everything is as orderly as it seems, then only the end-customer (to the extreme right of the chain) is free to place orders when he or she likes after that, the system takes over. 

The supply chain is tiered in that supply side and demand side can be organised into groups of partners with which we deal. Thus if we place an assembler such as the Ford plant at Valencia as the focal firm, buy side comprises tier 1 suppliers of major parts and subassemblies who deliver directly to Ford, while tier 2 suppliers deliver to the tier Is, etc. On the sell side. Ford supplies to the national sales companies as tier 1 customers, who in turn supply to main dealers as tier 2, and so on. 

Other terms that are used to describe aspects of managing the supply chain are  

---