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Transportation and the Supply Chain

Another system that calls for recognizing tradeoffs and interrelationships among actions and costs is the supply chain. A supply chain is the network of companies that work together to provide a good or service for end users and consumers. Most companies operate within supply chains, relying on outside parties such as suppliers and customers to help them reach the end-user market.4 In other words, most companies do not entirely own their supply chains.5

Supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, or customers. Supply chain management integrates supply-and-demand management within and across companies.6 Managing a supply chain, then, means managing the business relationships among the focal company and its outside supply chain partners, including customers and suppliers.7

As Figure 1-2 illustrates, transportation represents the physical connection among the companies in the supply chain. The locations in a supply chain network are called nodes, and the connections are referred to as links. When one entity sells product to another, transportation provides the delivery. An outbound delivery for a supplying company is the inbound delivery for its customer. When one level in the supply chain experiences delays and problems, it impacts the abilities of downstream members of the supply chain to serve their customers. For this reason, the larger economy is affected when transportation disruptions occur. Potential sources for disruptions include equipment failures, natural disasters and inclement weather, work stoppages, and government intervention. The next section reviews the role of transportation in the larger economy.

Figure 1-2

Figure 1-2 Links and nodes in a supply chain.

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