A supply chain is a group of people and businesses responsible for producing and getting a product to the consumer. The raw material producers are the first links in the chain, and the last is the van that delivers the completed item to the customer. The importance of supply chain management may be seen in the reduced costs and improved productivity that come from an optimized supply network. Companies work to enhance their supply chains to lower costs and maintain competitiveness.
The Supply Chain Models
Setting up and managing a global supply chain is a complicated process, and choosing the incorrect supply chain architecture can expose an organization to risks and interruptions, drive up costs, and even jeopardize its reputation. Thus, choosing the appropriate model for your company’s needs is a crucial responsibility.
Learn more about types of supply chain management before you incur a significant loss. But first, let’s go through some of the many supply chain models that are used around the world. Let’s look at it now.
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6 Major Types of Supply Chain Models
Continuous Flow Model
A supply chain designed for continuous, predetermined delivery of commodities is known as a continuous model. This paradigm guarantees a constant flow of resources and goods. It can only exist in a setting with stable supply and demand, often one with developed supply chains for well-known brands and little volatility in the client demand profile.
The continuous flow paradigm is centered on productivity. It provides stability in settings with high traffic. The firms that consistently provide the same product with little design variation or adjustment are best suited for this traditional model. These types of SCM are excellent for manufacturing commodities. Low product prices indicate its high level of efficacy.
Three key competencies should be used to assist supply chain integration. Electronic transactions, which are utilized to cut down on the number of transactional operations needed during the order cycle, as well as the sharing of data on sales and stocks to enhance demand management, are some of the early phases of this. Planning collaboratively with important clients aids in foreseeing demand trends at the most advanced stage. The appropriate supply chain models are response oriented when customer demand is highly unpredictable. The “agile,” “custom-configured,” and “flexible” models are among them.
The Fast Chain Model
One of the newest names in the types of logistics in supply chain management is the fast chain model. It is appropriate for companies with product lines that have brief life cycles. Businesses that produce finished goods with a brief market lifetime most frequently employ a quick model, which makes it typical for the supply of products that are seen as contemporary. This strategy is appropriate when a company releases new products often, just as a trend is starting to lose its appeal.
The competitive edge of the first adopter is highlighted by this concept. However, the marketing division and the designer are the real forces behind the fast-food company. In other words, you’ll be the first to market if you can start your trend. This concept is powered, in essence, by art.
A fashion designer, for instance, might have a particular line of designs for a season. Since the fashion line is typically based on current trends, the company must introduce it to the market to maximize profits. This model is typically regarded as the finest among the various types of supply chain management since supply chain efficiency can boost a company’s competitive edge.
The Efficient Chain Model
The efficient chain model is ideal for companies operating in highly competitive markets where maintaining a competitive edge requires high levels of efficiency in delivery logistics. This approach places a high priority on efficient inventory management and getting the most out of production workers and equipment.
In highly competitive businesses where end-to-end effectiveness is the ultimate goal, the efficient chain model is appropriate. To adequately burden or sweat machinery assets, this approach primarily relies on production predictions. The cost of raw materials and commodities has a significant role in the efficient model. Capacity problems are a problem for efficient chains in the post-pandemic era. Labor, material shortages, and delays are the main causes of this.
The highly competitive sectors are the reason why the efficient chain model was developed. The ultimate objective of this model is to maximize effectiveness. The company is supposed to develop accurate production predictions by the efficient chain model so that it can set aside the necessary equipment and raw materials.
The major flaw in this approach is how easily the supply chain network can be affected by changes to the production or sales cycle. For instance, issues like labor shortages or a lack of raw materials could result in protracted delays and extra expenses for the organization as a result of the supply delay.
The Agile Model
Businesses that deal with specialist goods, where products may need extra care in the supply chain, are well-suited for the agile model. Typically, this model is adjusted for the product it is being utilized for. The knowledge needed to move the items from point A to point B is where the agile approach is known, not so much for the level of automation or technologies involved.
Agile supply chain companies can charge more for their services. The agile approach is only lucrative up until a certain volume threshold is reached, in contrast to the efficient chain model, which thrives on enormous quantities. Following this model after that could be pricey.
For a supply chain to qualify as an agile model, it needs to have four characteristics: process alignment, virtual integration, a network base, and market sensitivity. The company must monitor changes in market demand in real-time to implement virtual integration. Sharing supply chain obligations across the organization is what process alignment is all about.
This is accomplished by maintaining a jointly managed inventory, utilizing collaborative product design, and coordinating the supply chain as a whole. Network-based implies that each participant in the supply chain contributes equally. With any changes in demand, the market responsiveness component rapidly adjusts the rate of manufacturing. Businesses that operate in markets with a lot of demand volatility will do well with this model.
The Custom-configured Model
The assembly and manufacturing phases require special setups for the custom-configured model. It combines agile and continuous flow methodologies and requires the created product to function end-to-end while also maybe requiring some additional customization. Small-batch manufacturing and prototype design are two such applications.
In comparison to more conventional models, the corporation must invest more in the custom-configured model. A custom-configured approach, which is essentially a hybrid of the agile as well as continuous flow models, is useful in situations when many product configurations are necessary. Anytime there are choices for customer customization, a custom-configured model is probably being used.
Smaller batch sizes and speedier turnaround times are possible with this higher-touch variant. The custom-configuration concept essentially combines continuous flow and agile models.
The Flexible Model
Businesses can satisfy strong demand peaks as well as protracted periods of low demand thanks to the flexible approach. Part segmentation, precise stocking algorithms, and flexible planning are the three requirements for a supply chain to qualify as a flexible model. This is made possible by introducing automation onto plant floors and diversifying suppliers.
To achieve the best of all worlds, the flexible model. It can respond to peaks in volume demand. Businesses with flexible models, on the other hand, can adapt to and withstand periods of low or no demand. This design resembles a light switch. Toggle it on or off as necessary.
The adaptable approach can swiftly adapt to a lean time with low demand and handle the demand that is high during peak season. A business needs the appropriate supply chain management system and the appropriate personnel with a solid knowledge base for operating a flexible model alongside high efficiency to run it effectively.
These are the top six supply chain models for businesses, each of which has advantages and disadvantages. Businesses must choose a model for the supply chain that will satisfy their unique requirements and assist them in avoiding any unnecessary costs.
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What Comes Next? Supply Chain Control Towers
As you can see, each type of SCM model has advantages and disadvantages. A company can fully master one supply chain model. But market forces may render those abilities obsolete. Of course, you alone can decide which model to use for your company and under what conditions. But one thing is undeniable: We must use the new instruments being introduced to the market. The supply chain control tower is one significant development in supply chain management.
A supply chain control tower is a cloud-based solution using cutting-edge technologies to proactively manage supply chains. These technologies include machine learning, artificial intelligence (AI), and the Internet of Things (IoT).
Including manufacturers, suppliers, or business partners, supply chain control towers provide end-to-end, real-time insight across an organization’s complete network. They let enterprises plan for infinite unknowable variables, control what they cannot see, and lessen disruptions as well as risks before they become problems. This visibility and immediate access to current information are crucial for supply chain agility and resilience in a world where past information can no longer reliably anticipate future and present demand.
To manage the supply chain effectively, having the appropriate people, procedures, and technology in place is crucial. It lets a business become more efficient, and it can also help it become more resilient to disturbances and less vulnerable to dangers. Companies can use their supply chains as a competitive advantage by using the appropriate model.
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Which are the six essential elements of supply chain management?
Planning, making, sourcing, returning, delivering, and enabling are the six essential SCM processes.
How does the SCM model work?
A method called supply chain modeling is used to assess and improve how money, information, and items move through a supply chain.
Why does SCM plan?
Supply chain planning makes it possible to manufacture and transport things more efficiently, from raw materials to completed goods and from suppliers to customers.