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Define Supply Chain

The Supply Chain is the network that is created between many different companies to get goods and services to the consumer.  It starts with raw materials that are then taken by the supplier and sold to the manufacturing company. The manufacturing company sells the goods or services to the distributor who then sells it to their customer usually a retailer. The retailer then finally sells the goods or services to the consumer aka the public. It includes every company that is involved in producing a final product from the parts, assembling it, delivering it, and selling it. Supply chain management is vital to every company with the main goal of trying to keep costs low and still be able to make a profit (Investopedia.com). 

Define Supply and Demand Model

The supply and demand model analyzes a competitive market for a single good or service. The supply usually depicts the manufacturers’ output rising as the price increases. Because of the rising marginal costs, market prices increase to motivate the increased output. (Chegg)

As the price rises, the consumer will look for a cheaper good or service and the purchasing power of the consumers’ income will fall. If the quantity needed exceeds the quantity available, the shortage will allow the manufacturers’ to increase the price of the good or service. On the other hand, when the available quantity is more than what is needed, the surplus will require the manufacturers’ to reduce the price of the good or service.

Equilibrium occurs when the quantity needed and the quantity manufactured is equal.

Describe Similarities

The supply chain and supply and demand model are very similar. The supply chain is “controlling the materials, entities, and processes that are involved in producing and delivering goods and services. Traditional Supply Chain Management is driven by planning and communication--planning future demand based on current and past demand, and working continuously to ensure that all stakeholders, whether it’s an actual manufacturing company or its suppliers” and the demand is based on customer’s needs. The customers wants is what drives the supply chain. The demand is “the customer is at the center of all work, and dictates how the supply chain operates. A demand-driven network involves everything that customers want” the supply chain and the supply and demand model both work together to provide the customers wants but it also makes sure that the products are a profit to the company and their stakeholders. Investopedia (2014) defines supply chain as a, “network created amongst different companies producing, handling and/or distributing a specific product. Specifically, the supply chain encompasses the steps it takes to get a good or service from the supplier to the customer.”

The supply chain, and the supply and demand model both work to maintain quantity of services and goods sold buy businesses but also to keep business stakeholders collecting a profit in their stocks while meeting customer’s needs.

Describe Differences

The supply chain and the supply and demand model are both related by their similarities, but each model is very different. According to Supply Chain Management, the supply chain deals with all parties involved in receiving and fulfilling a customer request, including the following (Chopra & Meindl, 2004):

· Manufacturers

· Suppliers

· Transporters

· Warehouses

· Retailers

· Customers

On the other hand, the supply and demand model determines the current prices of items in the market and only deals with the consumers and suppliers. The model illustrates the relationship between the consumers and the producers. Producers are the people who supply the item at the current price while the people who demand a specific quantity of an item at that price are the consumers (Beggs, 2014).

Examples

An example of supply and demand would be the scenario when the Sony PlayStation 4 was first released. When it became available there was a high demand for it and many buyers sought after it. Since there was a limited supply certain individuals bought them and then sold them online for double or triple the money they paid for them.

An example of how the supply chain is used could be drawn from this same scenario. “One of the most fundamental processes in the high-technology supply chain is the exchange of purchase-order request and response messages,” (Microsoft). The shopper would put in a purchase order initially. The seller at that point would acknowledge the purchase order. Once the order was filled and shipped the seller would send confirmation to the buyer.

Resources:

Microsoft. Sample Supply Chain Scenario. Information retrieved from http://msdn.microsoft.com/en-us/library/bb950139(v=bts.10).aspx

www.investopedia.com

Chopra, S., & Meindl, P. (2004). Supply Chain Management (2nd ed.). Upper Saddle River, NJ: Prentice Hall.