Supply Chain 101: 6 Chain Models You Need to Know
Logistics Industry February 8, 2022
An efficient supply chain is essential to achieving customer satisfaction. A supply chain model is a series of steps that determine the flow of your organization, from production to delivery. But here’s the catch – you need the right supply chain model for your business. To help you understand which model works best for you, McKenna has gathered a list of 6 different models you need to know about.
Why do supply chain models matter?
The benefit of having an organized and efficient supply chain model is it allows you to detect any weaknesses within your logistics process, areas of improvement, and where to install prevention plans in case of emergencies.
It’s natural for your business to alter your supply chain model throughout its lifetime to help meet growing and changing demands. Ultimately, the appropriate supply chain model will help you reach your business objectives. Typically, this means reducing costs and achieving both timeliness and adequate profit margins.
Here are the 6 supply chain models you need to know:
1. The continuous-flow model
The continuous-flow model, as you can guess, is exactly what it sounds like. The goal of this model is to maintain a constant flow of products and information. This supply chain model aims to replenish a required amount of inventory to fulfill customer needs.
This model is effective for organizations that are not challenged with constant volatility. Typically, the continuous-flow model is preferred in mature companies where there is less worry over variation in demand. Adopting this model allows you to build a more consistent state of reliability; however, it limits you to pre-scheduling orders.
2. The agile model
This supply chain model is most effective for organizations that deal with a lot of uncertainty. As a result, this model is adopted by organizations that manufacture products with unique specifications. In contrast to the continuous-flow model, the agile model revolves around supplying based on orders as opposed to pre-scheduling.
The agile model involves a “make-to-order” decoupling point, where the product is produced when orders are received to prevent the production of products that will have no sales. This model does require excess capacity to be successful.
3. The fast chain model
This supply chain model is ideal for companies that produce trendy products with short life cycles. The fast chain model is optimal for an organization striving to reduce the time required to change the product and send it out to the market.
The key objective when using this model is to be quick and efficient while achieving the highest forecast accuracy to reduce market mediation costs.
4. The efficient chain model
This supply chain model is often adopted by companies in highly competitive markets such as commoditized businesses (for example, steel and cement industries). With this model, the nature of competitiveness remains, as your goal is to acquire the best rates in a short timeline. In this model, the focus is on end-to-end efficiency – production is scheduled based on sale peaks for the length of the production cycle.
5. The custom configured model
The custom configured model combines the best of both the agile and the continuous-flow models. As the name suggests, this model is perfect for companies with multiple product configurations or SKUs. While providing a level of customization, this customization is pulled from a set of combinations. For example, imagine having various car parts. You can create a finite number of customized vehicles with these parts. The emphasis is on finite because you are limited to the configurations possible with your set amount of parts.
The continuous-flow is used for everything prior to configuring, for example, to schedule predetermined pieces and material. The final product configuration and downstream processes are done using the agile supply chain.
6. The flexible model
The flexible supply chain model is optimal for organizations that experience extremes in demand – peaks of high demand and sudden drops in demand. Although this model accepts the challenge of extremes, often these peaks can be forecasted. This is common with products or services that are seasonal and serve primarily for holidays.
The model allows companies to turn the flow of their supply chain on and off quickly, easily reconfigure logistics, and respond rapidly to changes.
McKenna Logistics can match you with the best supply chain model
As you can probably tell, there are a lot of factors that need to be considered prior to selecting the appropriate supply chain model that will work for the type of business you operate.
Outsourcing your logistics to a third-party logistics provider like McKenna will relieve the hassle and pain of adopting an inefficient supply chain model.
McKenna Logistics offers customized logistics and shipping solutions, optimizing your efficiency and saving your business money. Check out McKenna’s approach to logistics.