Supply chains is one of the most complicated structures, and their best practices can vary from industry to industry, so knowing the most appropriate supply chain model for your business is critical. There are six common supply chain models to choose from but all of them largely focus on two main areas – responsiveness and efficiency.
The most appropriate model for your business can be selected taking into account your goals and limitations and evaluating the value proposition of each model. Answering the following questions will help you in the evaluation process, as mentioned above.
- What is your company’s industry framework?
- What is the value proposition that your business has to offer?
- What is the main focus area of your management?
Relevant response-oriented supply chain models are preferred when customer demand is highly unpredictable. These models are subject to overlap in different areas, and must be designed by the supply chain manager to fit the unique supply chain.
Why Is Supply Chain Modeling So Important?
Supply chain modeling is a conscious attempt to bring order in the complexity of supply chains to achieve certain business goals. Supply Chain Modeling deals with some questions such as:
- What do you produce?
- Define the market.
- Siting production plants.
- Finding the best suppliers.
- Locations of suppliers and factories.
- Inventory and Shipping Management.
- Distribution of finished products.
- Warehouse Management Strategies.
The ultimate goal of the supply chain should be to offer satisfactory customer service because a satisfied customer is more likely to be loyal to your brand. To achieve this, the company will not only need the right supply chain model, but also someone to manage it effectively and efficiently.
- Your model has to be fit for the required purpose and robust.
- Your model must have the necessary internal visibility to identify problems and correct them when needed.
- Your model must be continually evaluated and interrogated to discover the best solution for each important decision.
Supply chain modeling provides the tools needed to manage supply lines for a business to:
- Inventory control
- Reducing costs
- Increasing Efficiency
- Meeting customer demand
- responding to demand
All successful businesses must realize that as their business grows, their technology investments, supply chain strategies, and decision-making models must evolve to incorporate this growth.
6 Types of Supply Chain Models
Continuous Flow Model
Continuous Flow Model is one of the most traditional supply chain models and is best suited for mature industries that operate with a certain degree of stability. It provides stability in high demand situations. Manufacturers who produce the same goods repeatedly, and own a customer demand profile with little variation can take advantage of this model.
This model is based on the stability of supply and demand. Its operations are scheduled in such a way as to ensure a continuous flow of information and products.
This model of supply chain (Agile Model) is best suited for industries that deal with unpredictable demand and products that are made to order.
This model focuses on the ability of the supply chain to increase production at any given moment, but can remain static when demand is low. It requires increased production capacity, and the processes are designed for the smallest possible batches of products.
Fast Chain Model
This supply chain model is best suited for industries that manufacture a trendy product and have a short life cycle, such as fashion items. In addition, these companies also need to get them out quickly before the trend ends. This model offers a certain amount of flexibility.
For the mentioned industry, business value propositions are evaluated by how quickly and efficiently they update their product catalog according to the latest trends.
The 3 main capabilities of this model are:
- In a short time, from concept to market.
- Highest forecast accuracy to reduce market mediation cost.
- Comprehensive efficiency to ensure affordable costs for customers.
This model is best suited for industries that do not have unanticipated or relatively predictable peak demand and long periods of low workload.
The flexible model provides companies the freedom to meet high demand peaks and manage long periods of low volume workload. Production can be started On or Off easily.
The 4 main capabilities of this model are:
- Stockpile of critical resources.
- Rapid response capability.
- Technical strengths in both process and product engineering.
- The process flow is designed so that it can be quickly reconfigured.
Custom Configured Model
As the name implies, the primary focus of this model is to provide customized configurations, especially for assembly and production operations. It is a hybrid of the agile model and the continuous flow model.
Let’s understand this with an example of the automobile manufacturing process. Operations involving complex sub-assemblies such as assembling gears in a transmission box are usually complex and extremely time-consuming due to the complex interconnection of small parts. But associating these multiple sub-assemblies into a final product is as easy as plug and play.
Just like that, in cases where the final assembly is simpler compared to the initial assembly and other downstream processes, the final assembly is managed according to an efficient or continuous flow supply chain model. Then complex sub-assembly configurations and subsequent downstream operations operate in an agile model.
Efficient Chain Model
This model is best suited for companies operating in highly competitive markets where pricing plays a large role and businesses fight for the same group of customers. Markets, where customers may not notice significant differences in the value proposals of various competitors and end-to-end efficiency, are the distinct target.
To achieve this, management must maximize the use of machinery and other assets at its disposal to maintain overall high efficiency of the equipment and resultant cost reduction.
Inventory management and order fulfillment are key areas of focus for business profitability.
Now, you can get your Supply Chain Management Program from Optimus Institute which is ideal for those who seek a simple and efficient way to enhance their key leadership skills.
This Program is designed for all Supply Chain Employees who is holding or seeking a managerial position and wants to transform his relationship with his team, ready to stand out as a top leader in their industry.
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