Overview of different supply chain management models

What is a supply chain?

Most simply, it’s a sequence of events that helps a commodity move from manufacturing to market. Elements contained in a supply chain include people, equipment, transportation modes, and technology.

Every industry that manufactures something has a supply chain. There was a time when supply chain execution always proceeded in a simple straight line:

Raw materials >> Supplier >> Manufacturer >> Warehouse >> Shipping >> End-user

Now it’s more realistic to view the supply chain as a network of interactions, with the manufacturer at the center of the action. Without a robust supply chain management model, it will be difficult for a business to succeed and thrive.

There are six supply chain models. While both efficiency and responsiveness are key to all models, we generally visualize each one as focusing primarily on one aspect or the other.

Supply chains focused on efficiency

Supply chain models built for efficiency focus on speed and cost-cutting. These models work well for companies:

  • In highly competitive situations, where they must complete orders quickly.
  • Making products that don’t have unique value (commodity items), as customers are looking for the lowest cost and have many options.
  • Using the same processes and materials repeatedly, rarely deviating in what they produce.

Along with the benefits, efficiency models have potential downsides, such as winding up with excess inventory.

Supply chain models focused on efficiency:

  • Continuous flow: Relies on stable supply and demand, typically for a mature product with a customer demand profile with little variability.
  • Fast: Often works best for products with a short lifecycle, especially those that need to be updated quickly based on the latest trends.
  • Efficient: Best suited for industries with intense market competition. Customers may not perceive significant differences in value; they shop based on price. Success relies heavily on accurate forecasting to align product availability with orders.

Responsive supply chains

Responsive supply chains are more suited toward highly unpredictable or “on demand” situations, as they allow more flexibility to make changes on short notice.

These models work well for companies:

  • Providing custom ordering of their products.
  • That make product changes on the fly, based on market trends or other input.
  • Producing products for several different clients or industries, requiring flexibility in managing supplies and raw materials.

Along with the benefits, responsive models have a potential downside in that they often depend on the ability to predict trends or needs accurately. In addition, there may be more likelihood of costly errors, as changes are made to the process more often.

Supply chain models focused on responsiveness:

  • Agile: Most beneficial for companies that manufacture products to unique specs for each customer or deliver on a “made-to-order” basis.
  • Custom-configured: Works well for products customizable under a limited combination of options, such as cars. There may be sub-processes that are managed under an efficiency-focused model, and then the final configuration is done using an agile supply chain model.
  • Flexible: Often necessary for companies that must meet a demand process full of peaks and valleys. This model requires adaptability, extra capacity of critical resources, and a process flow that can be quickly reconfigurable.

Improving supply chain performance is a collaborative process

The basic models have served many businesses well. However, businesses wanting to remain competitive realize they need to adopt – and possibly adapt – the supply chain model that best helps them meet their delivery and cost goals.

Thurman Co. is uniquely positioned to assist organizations in various aspects of Supplier Management, including assessing and improving their supply chain management process.

We help businesses manage projects to significantly impact their success and growth. When you’re ready to put your project in the hands of a trusted professional organization, contact us to learn more about working together.

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