Businesses cannot undermine the importance of supply chain management. It is true that establishing and operating a global supply chain is highly complex. Using an inappropriate supply chain model might lead to business disruptions and risks, causing potential damage to the business and increasing costs simultaneously.
Therefore it is imperative for businesses to understand the different supply chain models and their purposes. There are primarily 6 types of supply chains. Read on to know more about these supply chains for proper sales and operation planning.
Becoming a proficient logistic professional requires learning and understanding the fundamentals of supply chain models. If you are interested in making a career in the supply chain industry, enrolling on an IIT supply chain management course will be of great help.
Table of Contents
- 1 What Is Supply Chain?
- 2 6 Types of Supply Chains
What Is Supply Chain?
Before we go on to discuss the 6 types of supply chain models, let us understand what a supply chain is in the first place. A supply chain is the sequence of activities for a commodity right from its manufacturing to reaching the market. A supply chain is inclusive of manpower, various equipment, different modes of transportation and technology.
6 Types of Supply Chains
The majority of businesses adopt the 6 types of supply chain models as per their business requirements and operations. The models are further grouped into two categories namely supply chain models oriented to efficiency and supply chain models oriented to responsiveness.
Let us discuss the models in detail now.
Supply chain models oriented to efficiency
There are many industries like paper, steel, cement, general commodity manufacturers, low-cost fashion, etc. where the value proposition is oriented to various metrics like low cost, total cost and even relevance of raw material asset utilisation. In these industries, there is a high priority on end-to-end efficiency.
There are 3 supply chain models, which come under this category. They are as follows:
‘Continuous’ flow model
This model is perfect for industries with high-demand stability. The manufacturing process in this model targets generating a regular flow of information and product. This model is most suitable for industries where there are minimal variations in customer demands.
Because of the competitive positioning of this model, it provides a continuous replenishment system. This assures low inventory and high service levels at customers’ facilities.
This supply chain model is highly suitable for businesses manufacturing trendy items with short lifecycles. Consumers keep an eye on updates from the manufacturer regarding their latest product portfolios.
Companies adopting this supply chain model usually focus on minimising the span between idea generation and launching the product in the market. Their attempt is to maximise the forecast accuracy levels for reducing the market mediation expenses.
‘Efficient’ supply chain model
This supply chain model is for industries, which belong to highly competitive markets like the cement and steel industries. The main motto of this model is maximising end-to-end efficiency along with increased rates of asset utilisation for reducing costs.
With this supply chain model, the business expects to provide accurate production forecasts for preparing raw materials and machinery accordingly. The competition is almost completely based on cost.
Supply chain models oriented to responsiveness
There are many industries which are marked for high demand uncertainty. Here the market mediation expenses are the top priority. In such businesses, there is the employment of supply chain models which are oriented to responsiveness. The three models are as follows:
‘Agile’ supply chain model
There are many companies which manufacture products as per customer specifications. This model is ideal for companies with unpredictable demand. In this model, there is the use of a make-to-order decoupling point. This means that the product will only be manufactured after getting purchase orders from the customer.
For guaranteeing agility in the supply chain, the primary focus should be on the capability of producing products in excess capabilities and in the smallest possible batches.
This supply chain model is perfect for products where there is a requirement for potentially unlimited or multiple product configurations. This model has a high correlation between total cost and asset cost.
Product configuration takes place during the assembly process where the assembling is done as per the specifications of the customer. This supply chain model has a unique combination of the different processes of the agile supply chain model and the continuous-flow supply chain model.
‘Flexible’ supply chain model
The flexible supply chain model is ideal for industries which have two distinct phases of product demands. There is a time when there is a high demand for the products, which is followed by long extended periods of low demand.
This model is highly adaptable with the ability to reconfigure internal manufacturing processes for meeting specific customer requirements or solving problems of customers. For the success of this supply chain model, the management must concentrate on flexibility and other capabilities for developing a quickly reconfigurable process flow.
Summing It Up
Each of these supply chain models comes with its own share of pros and cons. Interestingly, all the models might not be suitable for all businesses. Businesses need to identify the most suitable supply chain model for their supply chain management.
With the right model in place, businesses can improve their efficiency, make better sales and operation planning along with mitigating exposure to various kinds of risks and disruptions. Businesses can get a competitive advantage in their supply chain with the choice of the right supply chain models. If supply chain and logistics interest you, you can take up Imarticus Learning’s Professional Certification in Supply Chain Management & Analytics by IIT Roorkee.
This IIT supply chain management course is designed in collaboration with industry leaders and CEC, IIT Roorkee. The aim is to provide candidates with cutting-edge experience for making an entry into the supply chain and operations industry. The course includes live instructor-led sessions and online discussions along with projects and exercises, assessments and assignments, a Capstone project and most importantly due career support.
On successful completion of the course, you can make a great career as a Supply Planning Analyst, Supply and Operations Planner, Procurement Specialist, Logistics Manager, Quality Assurance Manager and so on. Visit Imarticus Learning for information on more such courses.