Supply chain models, explained
The supply chain, as we all know, is a complete system responsible for creating goods and services and delivering finished products and services to end users or consumers. In the process, it makes use of various inputs (e.g., raw materials, capital, labor, land). There is obviously no single route to success when it comes to handling the flow of goods and services in the supply chain. For the same reason, there are several types of supply chain management models doing the rounds. Because what’s good for the goose is not necessarily good for the gander!
Basically, a supply chain model serves the purpose of monitoring and sizing up the flow of goods, data (that flows to and from various parties in the supply chain), and money within a supply chain. Using such inputs to bring the supply chain to perfection is the natural next step in supply chain modeling. These types of supply chain management models help in identifying potential improvements, bottlenecks, and opportunities for cost savings. Historical and current data on sales, inventory, production, operations, suppliers, and transportation feed into the supply chain model. Product quality, and customer demand represent some of the other inputs. A digital representation of the supply chain is generated and this “mimics” the impact of various supply-side developments and, further, captures their effect on supply networks. Supply chain models thus open up the possibility to identify opportunities for cost savings and make it possible to do more with less in inventory and vendor management, transportation, and production.
Here are the most popular supply chain models
By enabling inventory delivery within agreed-upon timeframes and the creation of high-quality products, supply chain models build stronger customer experiences, in turn, energizing business growth. Let’s look at three popular types of supply chain management models.
Continuous flow model
This figures among the traditional types of supply chain management models. The continuous flow model is expressly designed to ensure a regular, even, and unbroken flow of products through the supply network with minimal disruption. This model is suitable for production environments that see large-scale throughputs on a continuous basis. This supply chain model works efficiently and smoothly for businesses that produce the same products with little variation since demand for these products is stable, high, and predictable for the most part. Because it outputs products of a uniform nature, this model eliminates the need to drastically change production lines or update tools, equipment, and processes (retooling).
The continuous flow approach is suited for commodity manufacturing (e.g., chemicals, steel, paper) as well as automotive, electronics, and food processing industries.
Fast chain model
Trends in clothing, accessories, jewelry, electronics, home appliances, and hi-tech come and go, so products in these markets tend to have short life cycles. The fast chain model is ideal for manufacturers in these sectors who need to design, prototype, test, and release products fast enough in tune with rapidly shifting consumer preferences. Among the major proponents of the fast chain model are players in fast-fashion retail. These firms have made good business out of mass-producing clothing styled after the latest catwalk trends. Many of these fashion goods hit retail stands just weeks after a fashion show!
Efficient chain model
This supply chain model aims to maximize efficiency and minimize activities that do not add any value to the final product. This model lays emphasis on more efficient and accurate demand forecasting, ensuring sufficient buffer against stockouts and overstocking, and reordering products at the right time. So, that was about the different types of supply chain management models.
How SpendEdge can help you?
At SpendEdge, we assist you in narrowing down the potential supplier base by defining business outcomes clearly. We help you further in sifting through a pool of suppliers to effectively understand the available options and streamline your search. Our supplier discovery exercise returns only those vendors that meet all or most of your requirements. We help you identify criteria that are crucial to achieving supplier performance objectives and gauge supplier capabilities based on these very criteria. We also provide detailed information on supplier performance in granular KPI terms.
We sort suppliers into quadrants based on operational and functional capabilities and rank them to identify the best-fit suppliers. You can rely on our expertise in types of supply chain management models and gain invaluable insights on cost management and contract negotiation efforts. By so doing, you can negotiate the most favorable terms with best possible pool of suppliers. This includes skillful negotiation of rates, payment terms, and other contractual elements.
Supply chain restorative practices lift operating efficiencies at a chemical business
Our client is a chemicals business based in North America with a fairly broad product line that includes anti-corrosive paints, ball pen ink, cement paints, paraffin, and detergent powders. Profits and sales continue to grow at the company, and things are looking up, overall. However, significant inefficiencies persist in the supply chain, and this is having a dampening effect on operational efficiency.
Supply chain stoppages, albeit occasional, are still causing an uptick in production costs and revenue leakages while slowly thinning margins. For instance, delayed product delivery to end users frequently led to lost sales as well as increased shipping, storage, and labor costs. Squeezed raw material supplies and logistics logjams were leading to inventory shortages. The landscape in which the client operates is a dynamically evolving and highly regulated one. To keep making appreciable profits and stay ahead in the race, the company needed to urgently straighten out the inefficiencies in its supply environment. Realizing the need to buff out its supply chain without losing time, the business chose to work with our experts who are now increasingly making their presence felt in the procurement and supply chain circuit. Among other things, our experts have an in-depth understanding of the different types of supply chain management models.
Our experts took a very structured route to gleaning and analyzing data on the client’s supply base. The suppliers were gauged on the basis of key criteria such as regulation-friendliness, compliance strategy, quality, technology acumen, and production throughputs. Their comfort level with various types of supply chain management models was also taken into consideration. The potential risks associated with each supplier, including financial, operational, and regulatory risks, were also factored in. The patterns and relationships our experts surfaced from the tsunami of supplier data served as points of reference for shortlisting robust suppliers. On the back of our expert guidance, the client was able to generate better outcomes with suppliers in the negotiation room. The client is facing far fewer supply disruptions and supply-side inefficiencies are down to a minimum, thanks to our yeomen efforts. Our supply chain rejuvenation journey with the client is far from over. We continue to provide ongoing support on the legal, regulatory, and technology front.
Author’s Details
Ankur Rishi
Vice President
