Understanding the Most Common Supply Chain Models
Logistics is essentially the management and maintenance of supply chains. Therefore, in order to have a good working knowledge of how best to move products from raw materials to end consumers, you need to have a basic understanding of the fundamentals first. And at the center of those fundamental bits of knowledge is the understanding of how supply chain models work.
Supply chain management is critical to every business, large or small, and it is generally broken down into six different models. These six models all have some of the same basic tenets, goals, and rely on similar components of the supply chain. Understanding the differences in each can help to determine which method is the best model for your particular business and how each of them can be best managed. Some of these models may require the help of a 3PL such as Redwood Logistics to reach full optimization. To find out how partnering with a 3PL could be beneficial to your business, schedule your free consultation with our team today.
Lastly, these six supply chain models each fall into one of two categories. Those models that are primarily focused on efficiency, and those that are primarily focused on responsiveness. All models have some elements of each, but have one or the other as their main focus.
The Efficiency-Focused Supply Chain Models
The Efficient Chain Model
The efficient chain model is best for businesses that are in very competitive markets, and where E2E efficiency is the highest priority. This model is usually employed by commoditized businesses where production is based on expected sales for the length of the production cycle, and competition is almost solely based on price. The key objective of this model is often met by high rates of asset utilization in order to lower costs.
The Fast Chain Model
The fast chain model is most often used by businesses that manufacture finished products and deal mainly with extremely trendy products that have a short lifecycle. This model works best with businesses that must change their products frequently and get them to market quickly before a trend is no longer relevant.
Consumers of these types of products are mostly concerned with how quickly a business updates their product options to keep up with the latest fashion trends. You may have heard of the term “fast-fashion,” when talking about large companies that are particularly well-known for employing this method, regardless of whether they are in the fashion industry.
The focus of this model is to shorten the time from idea to market and maximize the level of forecast accuracy to reduce market mediation costs.
The Continuous Flow Model
The continuous flow model is one of the most traditional supply chain models. This model is ideal for commodity manufacturing and companies that produce the same goods constantly with little to no fluctuations and high demand stability. It’s best-suited to mature industries.
In order to be competitive, this model offers a continuous replenishment system that ensures high levels of service and low inventory kept on-site for end customers.
The Responsiveness-Focused Supply Chain Models
The Agile Model
The agile model is ideal for businesses that deal in specialty order items. This model allows for flexibility, a key component in responsiveness focused supply chain models. It’s mostly employed by companies in industries with unpredictable demand.
This model utilizes a “made-to-order” method that allows for the manufacturing of items after receiving the order from a customer rather than complete pre-production. For this model to work best, there must be the ability to allow for both extra capacity in the event of large orders and the ability to complete purchase orders in the smallest batches possible.
The Flexible Model
The flexible supply chain model is best for industries that typically experience peaks of extremely high demand followed by extended periods of low demand. This model is characterized by high levels of adaptability, the capability to reconfigure internal manufacturing processes to meet customer needs, and the ability to switch on and off easily.
Businesses that deal in products associated with particular holidays or other seasonal items benefit from the flexible model.
The Custom Configured Model
As indicated by its name, the custom-configured model is focused on providing custom configurations, particularly during assembly and production. It is essentially a combination of the agile and continuous flow models, and ideal in scenarios where multiple product configurations are required.
This model features a high degree of correlation between an asset and total cost. The custom configuration model incorporates the continuous flow model in processes where the product is built before configuration, and the agile model is utilized for downstream processes. An example of this model could be a furniture company that allows for certain customizable options, such as varying hardware or furniture leg styles.
Although at first glance it may be difficult to determine which model of the supply chain is being used in a particular business due to the similarities, the variance in methods allows for the model that best suits the needs of a particular industry to be employed. After determining the consistency of demand, customization and configuration of the product, the stability of the industry, and frequency of demand peaks and valleys, you can be assured there is a supply chain model that will best fit your business. Schedule your free consultation today and let our experts help you determine what supply chain model or addition would help your business succeed.