A simplistic representation of a supply chain involves a sequence of five stages, from suppliers to the final customer. Each of these stages has its own cycle, which is a sequence of operations and transactions taking place between two stages.
- A customer order cycle takes place when orders are processed, prepared, and shipped. For retail, the customer is often picking orders from the store inventory (shelves), which represents the point of final demand. In a pull logistics system, customer order cycles are particularly important since they are the driver of further cycles upstream of the supply chain.
- The replenishment cycle concerns the steps involved to re-supply outlets from distribution centers and wholesalers. Each outlet places orders to distributors based on its own fluctuation of demand. It involves inventory that has already been manufactured and stored in different locations and parts of the supply chain.
- The manufacturing cycle concerns the scheduling of production in light of the demand from distributors.
- The procurement cycle involves the scheduling of the components required in the manufacturing of a good.
The frequency of the cycles varies, which is reflected in their respective inventory levels. Usually, retailers have significant fluctuations in their inventory levels since stores only carry a limited amount of inventory (on shelves and in the limited back store area). Once the inventory reaches a critical level, a new inventory is ordered from the distributor, which triggers a replenishment cycle. Since distributors have a higher level of inventory, the replenishment cycle tends to fluctuate less. This is even more so for manufacturers since they tend to have a relatively stable output due to the fixed capabilities of their equipment, labor, and tools. Still, flexible manufacturing systems are able to accommodate higher fluctuations.