An export administrator, Beth Dorrell, notes, "A commodity raw material from Africa can be refined in Asia, then shipped to South America to be incorporated into a component of a final product that is produced in the Middle East and then sold around

Question

the world." In light of this statement, describe supply chain, value chain, and logistics. List and briefly describe the most important distribution activities.

Answer 1

As the statement describes, it has become very easy to have raw product in one country which can be transported to several countries for processing or finishing, and then sold all over the world. IKEA, the global furniture manufacturer, purchases wood and other raw material inputs from a network of suppliers located in several countries. The wood is then transported to the factories, which add value to the inputs by transforming them into furniture kits that are then shipped on to IKEA's store. The stores are downstream in IKEA's value chain. Thus, there is a continuous global involvement from raw materials, to factories, retail distribution and finally to consumers. The most important distribution activities are order processing, warehousing, inventory management, and transportation. Order processing includes order entry, handling, and delivery. Proper inventory management ensures that a company neither runs out of manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stocks at any time. Warehouses are used to store goods until they are sold. Finally, transportation plays a big role in the movement of products. The transportation can be by rail, trucks, air, or ships.