A supply chain is a complex logistics system that consists of facilities that convert raw materials into finished products and distribute them to end consumers or end customers, while supply chain management deals with the flow of goods in distribution channels within the supply chain in the most efficient manner.

In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable. Supply chains link value chains. Suppliers in a supply chain are often ranked by "tier", with first-tier suppliers (also called "direct suppliers") supplying directly to the client, second-tier suppliers supplying to the first tier, and so on.

The phrase "supply chain" may have been first published in a 1905 article in The Independent which briefly mentions the difficulty of "keeping a supply chain with India unbroken" during the British expedition to Tibet.

A typical supply chain can be divided into two stages namely, production and distribution stages. In the production stage, components and semi-finished parts are produced in manufacturing centres. The components are then put together in an assembly plant. The distribution stage consists of central and regional distribution centres that transport products to end-consumers. Mentzer et al. suggest that at least three entities are required for there to be a "supply chain".

At the end of the supply chain, materials and finished products only flow there because of the customer behaviour at the end of the chain; academics Alan Harrison and Janet Godsell argue that "supply chain processes should be coordinated in order to focus on end customer buying behaviour", and look for "customer responsiveness" as an indicator confirming that materials are able to flow "through a sequence of supply chain processes in order to meet end customer buying behaviour".

Many of the exchanges encountered in the supply chain take place between varied companies that seek to maximize their revenue within their sphere of interest but may have little or no knowledge or interest in the remaining players in the supply chain. More recently, the loosely coupled, self-organizing network of businesses who cooperate in providing product and service offerings has been called the extended enterprise, and the use of the term "chain" and the linear structure it appears to represent have been criticized as "harder to relate to the way supply networks really operate. A chain is actually a complex and dynamic supply and demand network.

As part of their efforts to demonstrate ethical practices, many large companies and global brands are integrating codes of conduct and guidelines into their corporate cultures and management systems. Through these, corporations are making demands on their suppliers (facilities, farms, subcontracted services such as cleaning, canteen, security etc.) and verifying, through social audits, that they are complying with the required standard. A lack of transparency in the supply chain can bar consumers from knowledge of where their purchases originated and facilitate socially irresponsible practices. In 2018, the Loyola University Chicago's Supply and Value Chain Center found in a survey that 53% of supply chain professionals considered ethics to be "extremely" important to their organization.

In some cases, the operation of multiple tiers within a supply chain may give rise to additional costs, due the "profit layering", where each tier's operators add a profit margin to their costs. For example, in 2015 the UK's Ministry of Justice recognised that its lift maintenance and refurbishment contracts were let to a main contractor who then sub-contracted the work to a specialist lift contractor. The ministry avoided the cost impact of this arrangement by contracting for lift work directly with the specialist contractors.