6 Types of Supply Chain Models Explained
- Companies use different models to organize and manage their supply chains.
- Selecting the model that best suits a company’s business process can help control costs and reduce risk.
- Each model has pros and cons, making it crucial to choose the right one.
Establishing and running a global supply chain is a complex activity, and using the wrong supply chain model can expose an enterprise to risks and disruptions, increasing costs and potentially damaging the brand. Selecting the right model for your business requirements is thus a critical task.
Here are six types of supply chain models that can drive supply chain management for a business:
1. Continuous Flow
This is one of the most traditional models on the list. The continuous flow model is the best choice for industries and businesses that operate with stability. Stability is essential for this model because it is required on both ends, i.e. at the manufacturer and the buyer.
This model is well-suited for businesses that produce a uniform set of goods and can expect a stable level of demand from the market. As the name suggests, goods are in continuous flow in this model, and it is based on the stability of supply and demand in the market. The systems in this type of supply chain management method are aligned so that a continuous flow of goods can be ensured.
2. Fast chain
The fast chain model is one of the new names in supply chain strategies. It is suitable for businesses that have product lines with short life cycles. For instance, a fashion designer might have a specific line of designs in a season. The business needs to take the fashion line to the market to maximize returns, as it is usually based on current trends. As supply chain efficiency can increase a business’s competitive edge, this model is usually considered the best among the several types of supply chain integration.
3. Efficient Chain
The efficient chain model has been crafted for hyper-competitive industries. Under this model, the end goal is to maximize efficiency. Following the efficient chain model, the organization is expected to create proper production forecasts so that it can prepare machinery and raw materials accordingly.
The biggest drawback of this model is that a disruption in the production or sales cycle can create a lot of ripple effects across the supply chain network.
For instance, challenges like labor shortages or raw material shortages could cause long delays, and the organization may have to bear additional costs due to the delay in supply.
The agile model is well-suited for businesses dealing with specialty items where products may require extra care in the supply chain. This model is usually fine-tuned for the product that it is being used for. The agile model is known for the expertise it requires to transport the goods from point A to point B and not so much for the automation or technology involved.
Supply chain companies that follow the agile model can charge a premium price for their services. Compared to the efficient chain model that thrives on high volumes, the agile model is only profitable till a threshold of volume is met. After that, it may prove costly to follow this model.
The custom-configured model needs custom setups in the assembly and production stages. It is a mix of agile and continuous flow methods where the product that is being manufactured may require some extra customization, but it needs to operate on an end-to-end basis. It is usually used for prototype design and manufacturing of small batches. The custom-configured model requires additional investment from the company as compared to more traditional models.
The flexible model can handle high demand during peak season and quickly adjust to a lean period with low demand. To run a flexible model efficiently, a business requires the right supply chain management software and the right people with the knowledge base to operate a flexible model with high efficiency.
These are the top six different supply chain models for enterprises, and they all come with their own pros and cons. It is essential for businesses to identify a suitable model for their supply chains that will meet their specific needs while helping them to avoid any additional costs.
Having the right supply chain model in place is as important as having the right people, processes and technology to manage the supply chain. It enables an enterprise to improve efficiency and can help it build resilience to disruptions and mitigate exposure to various risks. With the right model, companies can turn their supply chains into a competitive advantage.