Know about the three flows of supply chain (2024)

• Supply chain management is the management of these three flows:

1. Material (Product) Flow
2. Information Flow
3. Financial Flow

• Material (Product) flow:

This is the flow of the physical product from the supplier to the customer.

This flow is usually uni-directional, that is, it only flows in one direction from supplier to the customer; however, in certain instances, when the customer returns the product, the flow occasionally goes in the other direction.

A typical flow of materials usually begins with the raw materials suppliers to manufacturers to warehouses and distribution to the final customer.

• Information flow

This is the flow of information from supplier to customer and from customer back to supplier. This flow is bi-directional, that is, it goes both in directions in the supply chain.

The types of information that flows between customers and suppliers are quotations, purchase orders, delivery status, invoices and,customer complaints. In order to have a successful supply chain, you must have a constant interaction between supplier and Customer.

• Financial flow

Financial flow involves the movement of money from the customer to the supplier. When the customer receives the product and verifies it, the customer pays and the money travels back to the supplier. Sometimes the finances flow in the other direction (from supplier to customer) in form of debit.

Finally, For an efficient and effective supply chain, it is important that all three flows are managed properly with minimal effort.

By understanding your supply chain and how products,information, and money flows through it ,then you will be in a good position to find several inefficiencies and figure out how to significantly improve your business.