Topic 1.8 · Supply Chains

Supply Chains

Artisan vs. mass production, how supply chains for goods and services work, choosing suppliers, and aligning the supply chain with competitive strategy.

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Learning objectives

1.8.ADescribe factors businesses consider when developing a production process.
1.8.BDevelop or describe a supply chain plan for a product.
1.8.CExplain how a business’s competitive advantage strategy influences supply chain decisions.

Objective statements © College Board, quoted from the Course and Exam Description.

Choosing a production process

	Artisan production	Mass production
Relies on	Skilled labor, attention to detail	Technology, assembly lines, machinery
Output	Smaller quantities, often customized	Large quantities, standardized
Example	Hand-built guitars	Factory-made smartphones

Businesses choose a process based on customer priorities (quality, price, customization), their core competencies, and the competitive landscape.

How a supply chain works

For goods: raw materials and component parts → transported to manufacturing facilities → made into finished goods by workers and equipment → stored in warehouses → sent to distribution centers or retail stores → delivered to customers.

For services: the business acquires the employees, resources and delivery systems needed to provide the service in person or virtually. A tutoring company's “supply chain” is its tutors, curriculum and video platform.

Supply chains can be local, regional or global.

Choosing suppliers

Businesses weigh cost, quality, efficiency, convenience and risk. Risks include natural disasters, political instability, resource shortages, production errors and supplier reputation. Any of these can delay delivery or raise costs, which threatens competitive advantage and profit.

Key terms

Supply chain: The network of individuals and businesses involved at every stage, from acquiring raw materials to delivering to the final customer.
Artisan production: A production process that relies on skilled labor and attention to detail, usually producing smaller quantities.
Mass production: A production process using technology, assembly lines and machinery to produce large quantities.
Component parts: Manufactured inputs (such as computer chips) that are assembled into a finished good.
Exclusive agreement: A contract that, for example, prevents a supplier from selling to rivals or a retailer from carrying rival products, which creates a barrier to entry.
Scaling: Building higher-capacity or more efficient operations so revenue grows faster than costs.

Want to track your progress?

Competitive strategy	Supply-chain approach
Low prices	Mass production; cheaper resources; efficient processes; scaling up so revenue grows faster than costs
High quality	High-quality resources and production methods (artisan or mass production)
Barriers to entry	Exclusive or restrictive agreements with suppliers or distributors