The supplies produced by your factories can be carried by starship to new planets to be used to build new factories, mines and defense outposts. On a planet, you can also sell supply units for one MegaCredit each.
Alchemy ships can use supplies to make minerals and fuel.
Supplies are also used to repair damaged ships. Five KT supplies will repair 1% of damage to a starship (automatically).
In addition, excess colonists on a planet or planetoid may consume supplies in order to survive in case of overpopulation.