Imagine a business as a well-oiled machine: the supply chain would be the oil that keeps it running. The supply chain involves all of the logistics of producing and selling commercial goods. It entails the entire process beginning with resource acquisition, then continuing through to product development and delivery to the vendor. It’s the process by which manufacturers secure the resources to produce products and how those products are delivered to the point of purchase. Sustained, quality management of supply chains is necessary for every company to remain competitive and for the global economy to stay healthy. To properly manage and protect supply chains, one must be aware of the six different models that can be employed.

 

The Continuous Model

A continuous model is a supply chain built for continued, scheduled delivery of goods. This model ensures a continued, steady cadence of products and resources. It only exists in an environment with supply and demand stability, typically with mature supply chains for established brands, and requires minimal variation in the customer demand profile. PepsiCo is a well-known example of a continuous supply chain model. The company’s family of drinks and foods maintains a large customer base with little to no variety in demand no matter the season or market conditions. PepsiCo has set up the logistics of its delivery system to continuously receive ingredients to produce its food and beverages, and likewise continuously restock vendors.

 

The Fast Model

A fast model is most often used by businesses that manufacture finished products with a short market lifecycle, making it the most common for the delivery of products considered to be trendy. This model applies when a business changes its products frequently, delivering them to market before a trend loses its relevance. One example is Nike. A leader in active-wear fashion, Nike frequently sets up delivery systems of new supplies and information to create and then sell new shoes and other apparel before that particular trend’s time has passed. A short time later, the company will set up a new fast supply chain for the next wave of trendy products.

 

The Efficient Model

The efficient chain model is best for businesses that are in highly competitive environments and must strive for high efficiency in their delivery logistics to retain a competitive advantage. This model prioritizes proper inventory management and maximizing output from production equipment and labor. General Mills uses an efficient chain model as it develops products relatively similar to its competitors and sells to the exact same audience as the competition. With tight competition and thin margins in the breakfast cereal market, General Mills knows that a lot of its profit will be found in reducing costs along the supply chain while ensuring vendors can keep their products in stock.

 

The Agile Model

There are four components a supply chain must have to be considered an agile model: virtual integration, process alignment, a network base and market sensitivity. Virtual integration requires the business to track market demand changes in real time. Process alignment is about sharing supply chain responsibilities across the business. This is achieved by keeping a co-managed inventory, utilizing collaborative product design and running all parts of the supply chain in sync with each other. Network-based means that an equal contribution is made by every actor in the supply chain. The market sensitivity component changes the rate of production immediately with any changes in demand. This model is a great fit for businesses that exist in markets with a high degree of demand variation. Such is the case for fashion company ZARA. ZARA exhibits agility by keeping its designers vigilant in the spotting of new trends. As soon as ZARA’s designers identify a potential trend, they immediately draw up sketches and order new materials.

 

The Custom-Configured Model

Essentially, a combination of the agile and continuous flow models, a custom-configured model is ideal in scenarios where multiple product configurations are required. Whenever there are consumer customization options, it’s likely that a custom-configured model is in use. This can be seen in a company like L.L. Bean, which invites customers to customize their backpacks before placing an order. The market for backpacks stays pretty consistent, aside from the demand spike in the late summer, but L.L. Bean has to be prepared for when one feature of customization becomes particularly more or less popular.

 

The Flexible Model

The flexible model provides businesses the ability to meet peaks of high demand as well as long periods where demand is low. There are three components a supply chain must have to be considered a flexible model: part segmentation, accurate stocking algorithms and flexible planning. This is ensured through diversifying suppliers and incorporating automation on factory floors. Staples’ paper and writing utensil products are produced and delivered via a flexible supply chain. Staples anticipates high demand during back-to-school season and stocks its stores with excess notebooks, paper, pens, pencils, rulers and other school supplies. The company also must ensure that it has some stock, albeit less, of those products year-round. This is achieved through flexibility: having multiple suppliers, many of whom are on seasonal contracts, and perfecting the stocking algorithm so that the company produces only what will be sold in the offseason.

Supply chains are the lifeblood of every business and the entire global economy. Understanding models like this is inherent to IDB’s mission of teaching and developing logistics practices, development, and technologies between the U.S. military and private businesses. In continuing that mission, IDB offers several courses on logistics and supply chains. Check out  LCELP, LOG 21, LOGTECH Advanced and LOGTECH Executive to study the cutting-edge developments in supply chain development, management, and leadership.

About IDB

The Institute for Defense and Business (IDB) delivers educational programs and research to teach, challenge and inspire leaders who work with and within the defense enterprise to achieve next-level results for their organization. IDB features curriculum in Logistics, Supply Chain and Life Cycle Management, Complex Industrial Leadership, Strategic Studies, Global Business and Defense Studies, Continuous Process Improvement, and Stabilization and Economic Reconstruction. Visit www.IDB.org or contact us on our website for more information.

 


 

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High-quality management of supply chains is necessary for a company to remain competitive and for the global economy to stay healthy. To properly manage and protect supply chains, one must be aware of these six supply chain models to choose the type best suited to your organization’s operations. #supplychain #management #IDB

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High-quality management of supply chains is necessary for a company to remain competitive and for the global economy to stay healthy. To properly manage and protect supply chains, one must be aware of these six supply chain models to choose the type best suited to your organization’s operations. #supplychain #management #IDB