What is a supply chain?

What is a supply chain? A brief run-down of what you need to know from a corporate governance and ESG perspective. 

From sourcing raw materials to manufacturing, distribution, and final delivery, supply chains form the backbone of modern commerce. This guide explains what a supply chain is, why it matters, how modern supply chains operate, and the board’s role in managing them effectively.

A supply chain encompasses all the steps required to transform raw materials into finished products and deliver them to end-users. It includes procurement, production, inventory management, transportation, and customer service. Each link in this chain must function smoothly to ensure products reach customers efficiently and cost-effectively.

Supply chains are crucial because they directly impact a company’s profitability, competitiveness, and resilience. A well-optimised supply chain can reduce costs, improve delivery times, and enhance customer satisfaction. Conversely, disruptions in the supply chain—such as delays, shortages, or geopolitical events—can lead to significant losses, reputational damage, and operational risks.

Modern supply chains are increasingly digital, interconnected, and data-driven. Advanced technologies like artificial intelligence (AI), blockchain, and the Internet of Things (IoT) are transforming traditional supply chains into smarter, more agile systems. 

This increases flexibility, but the complexity of it all can become difficult for anyone without proper training and first-hand experience. 

Sustainability and ESG have also become a defining feature of modern supply chains due to stakeholder pressure, especially in places like Europe. 

Here, companies are prioritising eco-friendly practices, ethical sourcing, and waste reduction to meet regulatory standards and stakeholder expectations. At the same time, globalisation has made supply chains more complex, requiring stronger risk management frameworks and collaboration with international partners.

Boards are critical in overseeing supply chain strategies and ensuring they align with broader organisational goals. Directors must evaluate supply chain risks, approve investments in technology, and promote sustainability initiatives to future-proof operations. They are also responsible for ensuring compliance with regulations and ethical standards, reducing vulnerabilities that could lead to legal or reputational issues.

Additionally, boards provide oversight on crisis preparedness. Whether dealing with geopolitical tensions, natural disasters, or cyberattacks, directors must ensure the organisation has contingency plans in place. This governance role involves fostering transparency, supporting innovation, and holding management accountable for supply chain resilience and performance.

Supply chains are the lifeblood of modern businesses, enabling efficient production and delivery while shaping profitability and sustainability. As supply chains continue to evolve, businesses must adopt modern technologies, prioritise sustainability, and manage risks effectively. Boards, in particular, have a vital role in steering supply chain strategies and ensuring resilience in a rapidly changing global landscape.