5 Supply Chain Models & Their Benefits

There are several ways in which a company can run its supply chain. Formally, these are called supply chain models. A good supply chain model must match the go-to-market strategy for a successful business. For example, the supply chain model of a steel company will be very different from an e-commerce company’s as its product size, weight, ordering frequency, customer locations, gross margins, and many other factors are different.

While the steel company will ship bulk shipments to customers who may be located far away, e-commerce companies would like to be as close to the customers as possible, offering smaller, frequent shipments through their last-mile delivery options. Hence, choosing the suitable supply chain model for your business is critical.

Different types of supply chain models work with different types of businesses. Any misalignment can disrupt the supply chain, threaten the company’s industry reputation, and cause potential business loss. Let’s explore the different types of supply chain models and how they enable businesses to innovate.

Benefits of building the ‘right’ supply chain model

As discussed, supply chain models are designed to meet business needs and requirements. It plays a significant role in the success of that business and helps deliver smooth operations in the long run. However, not all supply chain models are equally capable, each with strengths and weaknesses. Finding the right match for your business will bring:

• Costs improvements
• Better profit margins
• Lesser supply/production disruptions
• Increased customer satisfaction

In short, a supply chain model can take a company’s business to new heights. But how many types of supply chain models are there? Which one is right for your business? 

The Five Types of Supply Chain Models

While many supply chain models exist, we discuss the five most prevalent ones, considering that they are designed to accommodate specific operations. A company may adopt one of these models or even take a hybrid approach that is best suited for their business. 

1. The Continuous Flow Model

The continuous flow supply chain is a traditional model. Its success relies mainly on two factors: stability and consistency.

This will ensure that materials and products are consistently delivered in conditions where supply and demand are predictable. This is commonly seen in established supply chains for recognizable brands with minimal variations in consumer demand.

The continuous flow model is centered on maximizing efficiency in high-volume environments. It is usually used by companies that can create a uniform product with minimal variation in design or specification, making it a traditional choice for producing goods. The SCM system is unique because it can keep costs low and is highly effective in the market.

This model will be perfect if your business always requires constant high-volume goods and has stable demand with limited margins, such as textiles or chemicals. However, if the business receives high demand out of the blue, this model will fail to deliver.

There can be no sudden change to the supply chain output, hence the name, continuous flow model. The other important factor is that flow is always constant without any pause. Thus, both supply chain ends must be configured to align the raw material supplies to the output rates. An excellent example of this supply chain model would be Pepsi. Pepsi’s supply chain has high volumes, limited demand variations, and a constant flow of goods with no pauses, making it suitable for a continuous flow model.

2. The Fast Supply Chain Models

The fast chain model suits companies that produce products with a short market lifecycle. It is also suitable for industries where products constantly evolve and must reach the market quickly before customer demand dies and trends fade, such as fashion. Adidas is one great example that demonstrates the use of this model well: constantly establishing new delivery systems and supply lines and creating new shoes and products to meet peak demand well in advance of trend shifts. This model focuses on end-to-end supply chain efficiency needs in fast-paced industries.

Adidas has improved its supply chain efficiency and responsiveness to market needs through technology and innovative approaches. For example, it has outsourced most of its production, using around 700 independent suppliers worldwide. This diverse global supply chain allows Adidas to react quickly to market and consumer demands. Adidas creates a flexible and resilient supply chain by segmenting suppliers into leading suppliers, subcontractors, material and other service providers, licensees, and agents.

A key innovation in Adidas’ supply chain is the SPEEDFACTORY project, which started in 2016. This initiative focuses on smart manufacturing through robotic automation, combining design and production processes for specific markets. With data analytics and 3D technology, Adidas can create shoes that fit the functional needs of consumers with a significantly shorter lead time from design to finished goods. 

SPEEDFACTORY exemplifies Adidas’s vision to transform its supply chain by bringing production closer to the market while increasing flexibility and customer engagement. Despite the digitalization and automation, SPEEDFACTORY is designed to complement rather than replace Adidas’s traditional Asian production, demonstrating a balance between innovation and established operations.

3. The Efficient Supply Chain Models

The efficient chain model reduces waste and improves supply rates. It’s mainly designed for highly competitive industries and aims to reduce the chances of additional cost penalties for the supply chain in the long run. Various processes and resources are also needed to run a supply chain model. The efficient chain model also has fewer processes and requires fewer resources to keep it running.

General Mills has adopted this model and is undergoing a change process in its supply chain with a longer-term strategic objective in place of short-term fixes. Their approach included a test-and-learn culture that shifted the value chain towards a consumer-centric, competitively – advantaged value chain. This mindset prepared them for COVID-19 and enabled them to respond quickly to changing market requirements and supply chain disruptions. They focused on safety and agility to enable fast decision-making and effective problem-solving. Additionally, General Mills invested in data analytics and machine learning partnerships and investments to enhance demand forecasting, further demonstrating its culture of learning and adaptation.

4. The Agile Model

The agile model focuses on quickly adapting to customers’ needs and requirements. It is highly responsive to any changes applied, making it perfect for businesses whose customers often need changes in the supply chain. 

Companies like ZARA focus on real-time responsiveness to market demand through their Agile Supply Chain Model. This model involves constant monitoring of market demand, agile collaboration with inventory management, close collaboration on product designs, and focus on end-to-end supply chain efficiency. The agile model enables rapid response to market changes and the production and distribution of small batches of trending products quickly.

Like ZARA, this approach is beneficial in other industries where demand is unpredictable or highly variable, and the supply chain must always be resilient and responsive.

5. The Flexible Chain Model

The flexible chain model is the ultimate model for supply chain operations. It is flexible and can adapt to many customer demands, so it’s perfect for operations during seasons of high demand. It can deliver a large volume of goods during that season but quickly change to its previous volume when the season ends.

Office Depot, for example, uses this model to accommodate seasonal demand spikes during back-to-school time. This approach allows them to anticipate and respond to these demand shifts effectively. 

Scaling Your Supply Chain Success: How SCS Elevates Supply Chain Models

As we explored the diverse supply chain models and saw the transformational work of top companies, it became easier to appreciate that the right technology support is critical to achieving operational success.

Here comes SupplyChainStar (SCS) — a partner that helps create custom supply chain strategies that meet business needs while putting businesses on a path to growth and efficiency.

SCS helps maximize supply chain operations with technology ranging from dock scheduling to real-time visibility across the supply chains. Whether adapting the Continuous Flow Model for automated production, using the Agile Model to respond quickly to market pressures, or ensuring the Efficiency Model runs optimally, SCS’s solutions help businesses succeed. 

With SCS’s intelligent solutions, companies can break through silos and optimize supply chains with data-driven insights and automation to drive superior customer experiences and operational excellence. Reach out today to understand more.