Supply is a very crucial component in day to day running of many present businesses. This is because many companies transact with a lot of other organizations in order to deliver final products to their consumers. Since supply chain forms part of the core business of a company, it becomes relevant to ensure that it is well managed to avoid any confusions and time wastage in the delivery of its products. The quick and timely product movement from production to consumer increases the company competitiveness (Jespersen & Skjott-Larsen, 2005).
According to Jespersen & Skjott-Larsen (2005), the supply chain has three major components. These components form the basis of a strong supply chain for a company. Firstly, there should be a well organized network structure from the point of production to the final consumer. This component is very crucial to avoid confusion and delay of products from one point to another. A company should know all required players in its chain to ensure smooth product movement.
Another component of supply is the business process involved in the connection of the various players. The link should be done in an efficient manner to ensure that efficiency is achieved. For instance, the production should be linked well to warehousing which is in turn linked to transport and so on. This ensures that all the departments involved do only their own work efficiently. This component will ensure that information flow is on the right sequence and there will be automatically generated system that ensures products flow without a hitch (Jespersen & Skjott-Larsen, 2005)
In addition, the management of these processes is another component of supply chain which cannot be ignored. The fact that we have the players and a good connection between them does not mean that an excellent supply chain will be achieved. According to Jespersen & Skjott-Larsen (2005), there should be a sound management of these components to complete a successful supply chain process. These are the people who ensure that each player in the chain performs its duty in the supply process and deliver the product to the next player in good condition and on time.
On the other hand, the financial supply is the movement of cash or investment from one firm to another in the process of accomplishing other chains which include supply chain (Cavinato, Flynn & Kauffman, 2006). Therefore the financial and supply chains work hand in hand in ensuring a smooth supply chain. This is because failure of payments from one player to another will definitely affect the flow of goods. Thus we can say that financial and supply chains are mutually related. For instance, failure of a distributor to deliver cash to the firm producing the product will force the stoppage of future deliveries to the distributor and results in failure of supply chain.
The concept of value chain is different from supply chain because value chain means that a product passes from one player to another and value is added at each level. Therefore at each level the product is an improvement from the previous level in terms of quality and even its suitability for the final consumer. However, as for supply chain, there is no limit as to whether value is added or not but rather movement of product from one level of the chain to the next. Thus the two chains differ in that value chain is specific to value addition whereas supply chain is general.S
Supply chain management is a management concept that enables a firm to understand, coordinate and manage operations within its supply process (Jespersen & Skjott-Larsen, 2005). The whole supply chain management will give enough information which is very relevant for financial supply chain. This is because the financial chain cannot work on its own but rather works in a way to complete other supply chain. Thus we can conclude that the relationship is mutual between supply and financial chains. The combination of these two chains is very important for the purposes of enterprise resource planning (ERP). This is because an efficient supply chain gives relevant information so that relevant human resources are planned. On the other hand, a financial chain gives information on required finances for proper planning. Thus the efficient collaboration of the two chains will lead to successful design and implementation of ERP for any business.
There has been development towards outsourcing product supply chain where another independent firm is tasked to manage all the supply chain process leaving the company to concentrate on its core business. Although it is a good step, there are risks associated to low quality service delivery as compared to own supply management. The same process of outsourcing has been applied to financial supply chains where independent financial firms are hired. The risk associated with this process is that of financial information being leaked and may be used by outsiders to the disadvantage of the company.