Six Supply Chain Models You Need to Know

The way you manage your global supply chain connection has a direct bearing on your business performance in terms of the product and transportation cost, working capital requirements, service perception by customers, speed to market, and other factors that influence your competitiveness in the marketplace.

An organization’s supply chain strategy is shaped by four key elements, including:

• The industry framework
• Your unique value proposition
• Internal supply chain management processes
• Managerial focus

 Key Takeaways

• Efficiency-focused supply chain modeling is best suited to industries that exist in highly competitive markets with several producers, and customers who may not readily appreciate their different value propositions. These are usually commoditized businesses where production is scheduled based on expected sales for the length of the production cycle and competition is almost solely based on price. The steel and cement industries fall under this category.
• In industries that are characterized by high demand uncertainty and where market mediation costs is the top priority, supply chain models that are oriented to responsiveness are usually employed.
• Many organizations tend to prefer their supply chains to have the capabilities of the six supply chain models. In practice, however, it’s more intuitive to develop parallel supply chains within the same organization with each model focused on serving a particular market segment or niche.

There are six main supply chain models that almost all businesses adopt. These can be grouped into main categories:

• Supply chain models that are oriented to efficiency
• Supply chain models that are oriented to responsiveness

Supply Chain Models Oriented to Efficiency

In industries where the value proposition is oriented to metrics such as high relevance of raw material asset utilization, low cost, and total cost, the end-to-end efficiency is given high priority. Examples of such industries include steel, cement, paper, low-cost fashion, and commodity manufacturing in general. Three supply chain models fall under this category:

The ”efficient” supply chain model

Efficiency-focused supply chain modeling is best suited to industries that exist in highly competitive markets with several producers, and customers who may not readily appreciate their different value propositions. These are usually commoditized businesses where production is scheduled based on expected sales for the length of the production cycle and competition is almost solely based on price. The steel and cement industries fall under this category.

The key objective of the efficient supply chain model is that managers should focus on maximizing end-to-end efficiency including high rates of asset utilization in a bid to lower costs.

The ”fast” supply chain model

This supply chain model is best suited for companies that manufacture trendy products with short lifecycles. Consumers are mostly concerned with how fast the manufacturer updates their product portfolios to keep up with fashion trends.

Companies that adopt the fast supply chain model focus on shortening the time from idea to market and maximizing the levels of forecast accuracy so as to reduce market mediation cost.

The ”continuous-flow” model

This model is ideal for industries with high-demand stability. The manufacturing processes in a continuous-flow model are designed to generate a regular cadence of product and information flow. This supply chain model is suited for mature industries with little variation in the customer demand profile.

Competitive positioning for this model involves offering a continuous-replenishment system that ensures high service levels and low inventory levels at customers’ facilities.

Supply chains oriented to responsiveness

In industries that are characterized by high demand uncertainty and where market mediation costs is the top priority, supply chain models that are oriented to responsiveness are usually employed. These include:

The “agile” supply chain model

The agile supply chain model is ideal for companies that manufacture products under unique specifications by their customers. This model is mostly used in industries characterized by unpredictable demand. The model uses a make-to-order decoupling point that involves manufacturing an item after receiving customers’ purchase orders.

To ensure agility in the supply chain, managers focus on having the ability for excess capacity and designing manufacturing processes that are capable of the smallest possible batches.

The “custom-configured” model

This model is ideal where products with multiple and potentially unlimited product configurations are required. It features a high degree of correlation between asset cost and the total cost. Product configurations is usually accomplished during the assembly process where different product parts are assembled according to a customer’s specifications.

The custom-configured model combines the continuous-flow supply chain model and an agile supply chain where the processes before configuration of the product are managed under the continuous-flow model while downstream processes operate as an agile supply chain.

The “flexible” supply chain model

This supply chain model is best suited for industries that are characterized by high demand peaks followed by extended periods of low demand. This model is characterized by high adaptability with the capability to reconfigure internal manufacturing processes so as to meet specific customer needs or solve customer problems.

For this supply chain model to be successful, the management should focus on ensuring ample flexibility with an emphasis on rapid response capability, having an extra capacity of critical resources, possessing adequate technical strengths, and developing a process flow that is quickly reconfigurable.

Multiple supply chains or multifaceted supply chains?

Many organizations tend to prefer their supply chains to have the capabilities of the six supply chain models. In practice, however, it’s more intuitive to develop parallel supply chains within the same organization with each model focused on serving a particular market segment or niche.

The Power of Digital Connections in Your Supply Chain/Logistics

In the not-too-distant past, digital supply chain visibility and collaboration solutions routinely meant on-premise software solutions that operated in insulated company stacks. But, such solutions presented inherent challenges due to their limited visibility and difficulty when trying to disseminate your data to all your trading partners quickly and cost-effectively. A Supply Chain Operating Network, or SCON, that involves a B2B infrastructure leveraging cloud technology addresses this problem.

Built right into Magaya Supply Chain, our flagship cloud-based logistics software, is the Magaya Network, a comprehensive business-to-business collaboration infrastructure that accelerates processes by allowing you to share digital documents with agents and partners in a secure online space. Magaya Network is a highly collaborative business tool that can increase your productivity by connecting you to your customers, supply chain partners, and destination agents. It enables real-time tracking and B2B communications that form the backbone of the Magaya Community. The true beauty of the Magaya Network is the fact that your connection is automatically built into the software and you don’t need to install any new products on your side. All Magaya-licensed users are able to access the Magaya Network.

It does not matter the type of supply chain strategy that you have deployed in your business. The Magaya Network will give you a unique competitive advantage, helping you to seamlessly connect with other trading partners on our Network. 

Start Today! Is your sales team working outside of Magaya? Email us to schedule a demonstration today or just leave your email below. See how your company can get started working with Magaya in order to save time and have your supply chain completely integrated.