Types of Supply Chain Management: 6 Models to Know

by Vector | Jul 7, 2021 2:50:17 PM

Types-of-Supply-Chain-Management---6-Models-to-Know[1]In the current market environment, supply chain management has become both an art and a science.

We hear that saying a lot, don't we? The art and science of this thing, or that. We've heard it enough that it doesn't pack as much punch anymore.

But the global supply chain is facing a host of unique and interconnected challenges. Up and down the supply chain, the same boxes are getting checked right now:

  • High transportation costs
  • Port delays
  • Container shortages
  • Long lead times on raw materials
  • Difficulty attracting—and retaining—high-quality employees
  • The squeeze on capacity
  • Inflated prices

How should we react? Sometimes when facing a big challenge, it's helpful to take a step back and return to first principles.

So let's do that today. Let's briefly review the six classic types of supply chain management models. Sometimes revisiting the basic framework can reveal a solution.

Revisiting First Principles

After we touch base on our first principles, we'll note some next-generation tech tools and solutions coming to supply chain management. But first, let's bear in mind the artistry and scientific thought that goes into this type of management.

After all, we're hunting for answers, right? The goal is to understand and identify the correct path forward. Hopefully, the information we'll cover today creates new connections or inspires at least one new idea. Perhaps you'll read something today that you decide to experiment with further.

See? We're already thinking like artists and scientists!

So grab your watercolors or a bunsen burner. Let's dive in.

Supply Chain Management: An Art and a Science

There is an art to science, and a science in art; the two are not enemies, but different aspects of the whole.” —Isaac Asimov

For starters, let's begin with some simple definitions.

  • Art can be defined as expressing or applying human creative skill and imagination.
  • Science can be defined as the study of the structure and behavior of the physical and natural world through observation and experiment.

Supply chain professionals are certainly using observation and experiment to navigate the daily onslaught of choppy waters! And I'm sure you can conjure up many examples where your creative skill saved the day.

These days, it's pretty rough out there in the supply chain world. Regardless of which patch of logistics you call home, the post-pandemic reboot is probably crunching your numbers to some extent.

But when the job gets tough, you may want to make sure you have the right tools for that job. Which of the six classic models of supply chain management can provide the tools for you? Let's take a look.

The Six Models of Supply Chain Management

The six common models are:

  1. Continuous flow
  2. Fast chain
  3. Efficient chain
  4. Agile
  5. Custom-configured
  6. Flexible

An important distinction to make is that each model will focus on achieving one of two larger ideal goals:

  • Efficiency
  • Responsiveness

That said, the reality is that each type of supply chain management philosophy includes elements of both efficiency and responsiveness. And that makes sense if you think about it. If your supply chain is extremely efficient, it won't be able to respond to disruption. On the other hand, if the supply chain does nothing but respond to individual or small requests, it won't be very efficient at turning out much volume.

As such, let's take a deeper look a the pros and cons of each model.

The Continuous Flow Model

The continuous flow model is built around efficiency. It offers stability in high-volume environments. This classic model is best suited for manufacturers who produce the same product repeatedly, with little design fluctuation or alteration.

This model is ideal for commodity manufacturing. Its high level of efficiency is reflected in low product prices. For manufacturers, margins are based on raw material prices. That sounds like science to me.

The Fast Chain Model

The fast chain model is built for responsiveness. It's ideal for manufacturers who change their product line frequently. This model is the best suited for trendy products with short life spans. In this example, the manufacturer that can flood the market before the trend cycle ends is the manufacturer that wins.

This model emphasizes the competitive advantage of the first adopter. But the true driver of the fast chain is the designer—and the marketing department. Put another way, if you can create your own trend, you'll be the first to market. In short, this model is driven by art.

The Efficient Chain Model

The efficient chain model is for hypercompetitive industries where end-to-end efficiency is the ultimate goal. This model relies heavily on production forecasting in order to properly burden and sweat machinery assets.

The efficient model also relies heavily on commodity and raw material prices. In the post-pandemic world, efficient chains are struggling with capacity issues. Drivers for this are labor shortages, material shortages, and delays.

The bottom line is this. When you miss a forecast, it can create a ripple effect. This can result in lengthy lead times and inflated prices for manufacturers up and down the supply chain. And that's when you hear a lot of artful language.

The Agile Model

The agile model is ideal for manufacturers that deal in specialty items. This model is finely tuned for small batches of product. That requires less automation and more expertise. And that additional value-add in turn allows businesses using this model to command higher prices.

Agile-model businesses can ramp up volume. But past a certain volume threshold, they typically prove uncompetitive. Compared with efficient-chain-model businesses, at higher volumes agile businesses get blown out of the water from a pricing standpoint.

The Custom-Configured Model

The custom-configuration model focuses on providing custom setups during production and assembly. Most often, this setup time occurs at the beginning of a lengthier production and assembly run process. For example, certain prototype or limited-production builds fall into custom-configured manufacturing.

This is a higher-touch model that can include quicker turnaround times and small batches of products. In essence, the custom-configuration model is combination of the agile and continuous flow models.

The Flexible Model

The flexible model tries to be the best of all worlds. It can react to high volume demands during a peak season. On the other hand, flexible model businesses can manage and absorb stretches of low or no demand. This model is like a light switch. Flip it on or off as needed.

To pull off the flexible supply chain model, a business requires the right tool (or automated machinery) for the job. This model also requires a broad supplier network or personnel who have a broad knowledge base.

What Comes Next? Supply Chain Control Towers

As you've seen, there are pros and cons to each type of supply chain management model. A business can completely master one supply chain model. Regardless, market forces might make those capabilities obsolete. Of course, only you know what model is right for your business, and in what circumstances.

But one thing is clearly universal: There are new tools coming to market, and we must use them. For example, one big advance in supply chain management is the supply chain control tower.

No, it isn't a physical control tower—but it can perform air traffic control for your entire supply chain. In short, control towers are part of the cloud adoption and overall digitization of supply chain management. Learn more about supply chain control towers here.

To summarize, the technological tools provide the science. We then provide the creative application. Supply chain management truly is an art and a science!

This post was written by Brian Deines. Brian believes that every day is a referendum on a brand’s relevance, and he’s excited to bring that kind of thinking to the world of modern manufacturing and logistics. He deploys a full-stack of business development, sales, and marketing tools built through years of work in the logistics, packaging, and tier-1 part supply industries serving a customer base comprised of Fortune 1000 OEMs.

Subscribe Now

Additional Reading