Supply Chain Modeling 101! Understanding the Different Types of Supply Chain.

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Every logistic expert started their career by learning the fundamentals of supply chain models. It is a good place to start because it gives you the basic information that you need to build on. Supply chain management is critical to every business. Understanding the models and their purposes are critical to the success of any business. Supply chain management models are broken down into 6 separate categories (though some argue there is 4) although they all have the same goals and typically rely on similar components of the supply chain. We will look at these 6 models and discuss important factors of each model.

What is a Supply Chain?

There are several definitions that define what a supply chain is but none simpler than it is a sequence of events that helps a commodity move from manufacturing to market. The supply chain contains, people, equipment, transportation modes and technology.

Every industry has a supply chain. Supply chains historically were straight line models that looked something like this:

Raw materials>>>>supplier>>>manufacturer>>>>warehouse>>>shipping>>>end user

Today thanks to the global economy the supply chain looks more like a web with the manufacturer in the middle of the web. Supply and logistics are the backbone of every business. It can affect the success of a business and unfortunately also be the downfall of a business. Without a strong supply chain management model in place a business will not thrive.

Supply chains exist in both service and manufacturing organizations.

Supply Chain Management

Supply Chain Orientation

While there are 6 models of supply chains all of them fit into either one of two categories. Either the model is focused on efficiency or it is focused on responsiveness. The reality is all supply chains have elements of both efficiency and responsiveness, but each supply chain model can have a primary focus of either.

The overall business need is ultimately the driving force behind which model is going to be best for the business. There are several things that are determinants when reviewing the types of supply chain models and which one will deliver the support a business can depend on:

  • The framework of the specific industry
  • The value proposition that the business has to offer
  • Focus of management

Each model has unique qualities that can support the overall organizations goals.

The 6 Supply Chain Models

Let’s get right too it. The 6 supply chain models are:

  • The continuous flow models
  • The fast chain models
  • The efficient chain models
  • The custom configured model
  • The agile model
  • The flexible model

Here is a synopsis of each model:

The continuous flow model for supply offers stability in high demand situations that vary very little. Manufacturers that produce the same goods repeatedly with very little fluctuation can benefit from the continuous flow model. It is ideal for commodity manufacturing and is one of the most traditional supply chain models.

The fast chain model is ideal for manufacturers that manufacture products that are trendy with short life cycles. It works well with a business that must change their products frequently and that needs to get them out fast before the trend ends. It is a flexible model.

The efficient chain model is a model that is best for businesses that are in very competitive markets and where end to end efficiency is the premium goal.

The custom configured models focus on providing custom configurations especially during assembly and production. It is a combination of the agile model and the continuous flow model, a hybrid of sorts.

The agile model is primarily a method of supply chain management that is ideal for businesses that deal in specialty order items.  It is a model that focuses on the ability of the supply chain to amp up in some cases but also be solid when there is not much movement happening.

The flexible model gives businesses the freedom to meet high demand peaks and manage long periods of low volume movement. It can be switched on and off easily.

Best Practices in Supply Chain

Supply Chains Built for Efficiency

Efficiency supply chain models include, the efficient chain model, the fast chain model and the continuous flow model. All three of these models put efficiency first and are geared toward certain industries like paper industries, cement industries, commodity producing industries and even budget fashion industries.

A supply chain model example of this group is the commodity manufacturer that is making low cost clothing and they are fighting for customers.  The market is flooded with similar manufactured products all selling to the same type of consumer. Consumers may not realize the unique value of a certain product and all they are looking at is the cost. An efficient focused supply model will help the producer have the materials they need when they need them to stay competitive and create the volume that will keep costs down thereby appealing to the consumer base. These models are based on end to end efficiency.

The supply chain process flow in this type of model is all about speed and cost cutting. The models that fall into the “efficiency” category have components built into the supply chain to ensure that things are moving quickly and with a certain rhythm.

For companies that are in highly competitive situations, it is critical to have inventory on hand to complete orders quickly.

It is an ideal model for manufacturers that do not typically veer from what they produce. They utilize the same processes and materials over and over.

Most industries that use an efficiency model do it to help save on costs or are offering low value items that are produced in very high volume.

The efficiency models can bring powerful benefits, but they can also have a few downfalls like:

  • Finding yourself with excess inventory
  • It may not be the most cost-effective model in all cases

Responsive Supply Chains

The three responsive supply chain models are the agile model, the flexible model, and the custom configured model. These models are ideal for “on demand” situations. They are ideal when there is a level of uncertainty in the product manufacturing. These three models offer the flexibility for industries that provide custom order products, trendy products and for manufacturers that often make changes in the products they produce.

The idea behind “responsive supply chains” is that they respond on demand. A good example is a manufacturer that produces products for different industries, their supply chain must be flexible to meet the needs of the specific client. This week they may be making bags for an electronic manufacturer to house components, next week they may be making plastic plugs and screws for a furniture manufacture. They must have the flexibility in their supply chain to quickly switch raw materials and other supplies.

Downsides of responsive supply chains:

  • It depends on the ability of human prediction to predict trends
  • Untrained or undertrained staff can make critical costly errors with these models

Unlike the efficiency models that are built on sameness and schedules these models require quite a bit of human interaction which of course leaves the system prone to human error.

Supply Chain

Same Goals Different Measures

From the outside looking in, it can be difficult to define which model is being used. Supply models are similar in so many ways because they all have similar goals:

  • Keep costs down
  • Reduce risk
  • Satisfy the end user
  • Enhance productivity

Of course, the way they reach those goals are an entirely different story. Every supply chain today uses supply chain IT systems to improve efficiency and responsiveness to the needs of the business. Every supply chain today is less like a chain and far more like a web. Only in rare cases is the supply chain the older straight-line model, because there are typically suppliers coming from different directions and logistics moving in different directions and it is all happening simultaneously.

Each model is similar in that it is part of a supply chain network and typically it is not one concrete supply chain model that is being followed, it is typically a hybrid of one or two of the models. Today’s market place requires supply chains that are both efficient and responsive to deliver what the modern business needs to stay competitive.

The Combination

The most productive supply chains have taken the basic models and hybridized them to meet their specific needs. They have incorporated state of the art technology and human relationships to create a model that works especially well for them. By integrating the best of both worlds, giants like McDonalds, Unilever and Amazon have been able to create the completely integrated supply chains that have elevated their business to a whole new level of success.

The basic models are good models that have served many businesses well, but to take a step above the rest, you should be thinking outside the box.

Every supply chain should be efficient and responsive to deliver the best in support, improve productivity and meet the consumers demands.