A supply chain is the end-to-end network of organizations, people, activities, information, and resources involved in moving a product from raw material sourcing through manufacturing, distribution, and final delivery to the end customer. Every business that makes or sells physical goods operates within one or more supply chains.
Key Stages of a Supply Chain
- Sourcing: Procurement of raw materials or components from suppliers.
- Manufacturing: Transformation of inputs into finished goods.
- Warehousing: Storage of inventory at distribution centers or fulfillment centers.
- Transportation: Movement of goods between each stage — inbound freight, inter-facility transfers, and outbound parcel or LTL shipments.
- Last Mile Delivery: The final leg from a local facility to the end customer’s door — often the most expensive and complex segment.
Supply Chain vs. Logistics
Logistics refers specifically to the planning and execution of the physical movement and storage of goods. Supply chain management is broader — it encompasses supplier relationships, demand forecasting, procurement strategy, manufacturing coordination, and logistics. Shipping cost optimization is a logistics function, but it affects and is affected by decisions made throughout the supply chain.
Shipping Costs and Supply Chain Design
Transportation typically represents 5-10% of revenue for product companies, making carrier contract optimization one of the highest-ROI supply chain levers. Decisions about warehouse locations, carrier mix, service levels, and packaging directly affect both shipping costs and customer experience. Companies that treat shipping as a strategic supply chain variable — rather than a fixed cost — consistently achieve lower per-unit shipping expenses.
Supply Chain Disruption and Resilience
Events such as carrier capacity constraints, port congestion, fuel surcharge spikes, and peak season volume surges all flow through the supply chain into shipping costs. Building resilient supply chains typically involves multi-carrier strategies, flexible carrier agreements, and real-time visibility tools that flag exceptions before they become costly delays.