In the supply chain, the commodity and services generally flow downstream from the origin to customer point of consumption.
There is also a backward flow of materials, mainly related to product returns. For some people, product flow is the only flow, or at least the primary flow that gives rise to all other flows in the supply chain.
If this was true then in the strict sense of the word - none of the services companies would have any supply chain.
why supply chain management skills are significantly deficient?
The fact that many services companies believe this to be the case is the reason why their supply chain management skills - both on the demand management side, as well as the supply management side are significantly deficient.
Many people, mainly logisticians, focus primarily on the product flow as the sole flow in supply chain management. There are many reasons why they are mistaken.
We disagree with the people who claim that product flow is the most important flow of the supply chain. We believe that distinction belongs to the cash flow.
Product flow is just the most visible flow in the supply chain management. That is the reason why naïve and new comers think of it as the most important or the only flow.
The Significant Flows In The Supply Chain:
- Product Flow
- Financial/Cash Flow
- Information Flow
- Value Flow
- Risk Flow
Everybody knows, and can roughly visualize, the product flow. That is why it is easy to call product flow the most influential flow of the supply chain.
It can be justifiably claimed that both - the cash flow, and the information flow - are more, if not equally, influential in supply chains.
Does all the preceding discussion mean that product flow is insignificant, or uninfluential?
No, that could not be true. It is just as significant and influential as all the other flows of a good supply chain management protocol.
How companies make money in supply chains?
We have seen a lot of companies lose a lot of money by getting their product flow wrong.
But, getting the product flow right is not going to make you a lot of money on its own.
The companies that make money in supply chains, generally get product flow right AND two of the other five flows better than anyone else.
This is just a rule of thumb from operating in supply chain field for ages.