Understanding the supply chain - basics, sections and optimization

At the beginning of the year, the Supply Chain Act, also known as the Supply Chain Due Diligence Act, came into force. It regulates corporate responsibility for human rights compliance in global supply chains. In practice, this means that manufacturers and supply chain managers must continually adapt their supply chains to ensure that they meet the legal requirements.

This presents companies with numerous challenges, but at the same time also offers them opportunities. Because:

Constant monitoring of the supply chain also exposes where they can make it more efficient and competitive.

The fulfillment of the new legal requirements provides manufacturers and supply chain managers with a new perspective on the phases of their entire supply chain. It quickly becomes clear that manufacturers can also use the new obligations arising from the Supply Chain Act to improve the existing Processes of their supply chain and optimize them at key points.

What opportunities does technological progress offer them?

We go on to show which advanced technologies manufacturers are using to make their supply chains legally compliant with the help of Artificial Intelligence (AI) in such a way that they gain an edge over the competition and, through Automation save considerable costs in the long run.

What is a supply chain? 

Supply chain definition

A supply chain is a sequence of interconnected steps necessary to create and deliver a product or service to the customer from start to finish. These steps include the procurement of raw materials, production, storage, transportation and delivery to the end user.

In today's globalized world, supply chains are often international, spanning different companies and locations. In this context, efficient supply chains are crucial for the success of companies today, as they get the right products to the right place at the right time. The Digitization and the use of AI have revolutionized supply chains by enabling real-time data and Big Data analytics. This helps companies

  • optimize their inventories,
  • Plan deliveries precisely and
  • Avoiding bottlenecks.

In practice, a well-organized supply chain contributes not only to customer satisfaction, but also to reducing costs and increasing competitiveness.

6 sections of a supply chain with optimization examples

At its core, a supply chain is divided into 6 sections:

digitalization of the supply chain with konfuzio

1. procurement of raw materials

In a first step, companies procure the materials they need through suppliers. For example, a shoe manufacturer buys leather from Italy, rubber from Malaysia and fabrics from China in order to have all the necessary materials for shoe production. The manufacturer carefully selects these materials to ensure they meet quality standards. To always order the right amount of raw materials from the right suppliers, more and more manufacturers rely on the following optimizations:

Automated supplier evaluation with AI

Companies are using AI tools to automatically evaluate suppliers. These tools analyze not only historical data, but also external factors such as political stability and weather conditions. Based on these analyses, companies are able to select suppliers that not only offer high-quality materials, but also ensure a reliable supply chain.

Predictive analytics for inventory management

Through the use of predictive analytics and Machine Learning companies accurately predict the demand for raw materials. To do this, the technology analyzes historical sales data, market trends and seasonal fluctuations to produce accurate forecasts. Based on this, companies can better plan their procurement and thus avoid overstocking or shortages.

2. production

In the production phase, companies transform the raw materials into the final product. Let's stay with the example of the shoe manufacturer: This uses machines and manual labor to produce the shoes. In the process, each shoe goes through various manufacturing stages, including cutting, sewing, sole attachment and quality control. Manufacturing requires precise planning to produce the right amount of shoes to meet demand. To make production more efficient, manufacturers rely on these two measures, among others:

Robot assisted manufacturing

In modern production facilities, robots work hand in hand with human workers. The robots perform repetitive tasks efficiently, which not only increases production speed but also relieves human workers of monotonous tasks. This leads to increased efficiency and product quality.

AI-based quality control

AI systems continuously analyze images and data during the production process to monitor the quality of manufactured products. The systems detect deviations from quality standards immediately and reject defective products in real time. This helps to reduce waste and ensure high quality of the end products.

3. storage and warehouse management

Companies store finished products temporarily. Here, well-organized warehouse management is crucial to monitor inventory levels and thus ensure that enough products are available when orders are received. The footwear manufacturer therefore organizes the storage of its shoes so that it can sell pairs in different sizes to retailers or directly to customers at any time. To make this possible, advanced manufacturers rely on automated warehouse robots and AI for inventory optimization.

Automated warehouse robots

Modern warehouses use autonomous robots to monitor stock levels and sort products. The robots not only optimize the available storage space, but also speed up the entire picking process. They can transport products accurately and quickly to the dispatch areas, which shortens delivery times.

Artificial intelligence for inventory optimization

AI algorithms analyze a wealth of data, including historical sales data, weather conditions, and even social media, to optimize inventory levels. This Algorithms recognize complex patterns and provide accurate recommendations for order quantities based on them. This enables companies to reduce inventory costs while ensuring that they always have enough products in stock.

4. distribution and transport

Manufacturers transport their products from warehouses to retailers or directly to customers. This takes place via different means of transport such as trucks, container ships or cargo planes. The shoe manufacturer stacks the shoe boxes on pallets and packs them for safe transportation to avoid damage during transport. To make distribution and transportation as efficient as possible, companies rely on Predicitive Maintenance for their transportation fleets. And:

In the near future, autonomous delivery vehicles will also be on the roads

at the start, especially in the USA

Predictive maintenance for transport fleets

By integrating IoT sensors into transport vehicles, companies monitor the condition of their fleet in real time. Predictive analytics uses this data to forecast potential failures or maintenance needs. This enables planned maintenance, prevents unplanned downtime, and ensures continuous vehicle availability.

Autonomous delivery vehicles

Transport companies will soon be using autonomous vehicles to deliver goods safely and efficiently to their destinations. To do this, the vehicles are equipped with sensors and AI Systems equipped that enable them to assess traffic conditions and choose alternative routes to avoid delays. This results in faster and more reliable delivery.

5. after-sales service and customer support

After the sale, companies offer customer service. This usually includes warranty services, repairs and returns of defective products. So customers contact the shoe manufacturer's customer service department, for example, if their shoes have defects or they need help with the product. They then return the shoes to the manufacturer or selling retailer for repair or return. To handle customer service as efficiently as possible, companies can optimize it with chatbots and predictive analytics:

Chatbots and AI-supported customer care

Companies are deploying advanced chatbots and AI-driven customer service platforms that work with natural language processing work. These systems understand complex customer queries and respond to them promptly. They provide round-the-clock support and solve problems efficiently, resulting in higher customer satisfaction.

Predictive analytics for product returns

By analyzing big data, companies are identifying patterns in product returns. In doing so, AI systems identify products that are likely to have defects early on, even before customers report them. This enables companies to act proactively by eliminating quality defects before they develop into major problems.

6. disposal and recycling

At the end of their life, shoes must be disposed of or recycled. An environmentally conscious shoe manufacturer therefore has programs for recycling old shoes. It then uses the recycled materials to make new products, which reduces the company's environmental footprint. To make this process as efficient as possible, companies can rely on these two measures.

Robotic recycling systems

Modern recycling plants use robots to automate the recycling process. These robots identify and sort different materials, which speeds up the recycling process. 

Blockchain for sustainable global supply chains

Companies are using blockchain technology to track the origin and path of materials. This is especially important in recycling. By giving each piece of material a transparent and immutable history, companies ensure that recycled materials are actually reused. This supports not only environmental goals, but also customer confidence in the sustainability of products.


The Supply Chain Act brings both new obligations and opportunities for manufacturers and supply chain managers. The digital transformation and modern technologies, especially the use of artificial intelligence (AI), offer opportunities for efficient supply chain optimization and automation of individual process steps.

Manufacturers who want to make their entire supply chain legally compliant and competitive should Contact Konfuzio. Konfuzio offers a wide range of customizable AI solutions - also for your optimization project.

Advanced technologies not only enable compliance with regulatory requirements, but also sustainable and cost-efficient supply chain optimization.

Do you have any questions? Write us a message. Our experts will get back to you promptly.

    Maximilian Schneider Avatar

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