Do you intend to start a business? Are you familiar with supply chain management? We have all the information you require. Supply chain management refers to the method by which a corporation acquires raw materials and delivers products to customers.
Supply chain management is critical in any organization because it determines critical factors such as ROI, customer satisfaction, and a brand’s overall reputation.
This blog delves into the various supply chain management models, the industries they are most suited for, and their benefits and drawbacks. Continue reading to find out how helpful supply chain management can be for your business.
The 6 Supply Chain Models
The Efficiency-Focused Supply Chain Models
These models prioritize efficiency in industries such as cement, steel, paper, and consumer goods industries. It is also suitable for markets that are flooded with similar products and customers.
Companies that use the efficiency-focused models generally sell products at low prices but are produced in large quantities.
- The Continuous Flow Models
It is among the most old-fashioned model and is suitable for mature industries that have a stale foundation in the market.
This model offers stability in situations with very high demand. It is best for those companies that produce the same types of goods with little to no deviation from their productions.
The continuous flow model also relies on stable supply and demand; in that, there is a continuous flow of products and the necessary information.
- The Fast Chain Model
For industries that deal with trendy products like the fashion industry, then this is the best model for you. Products that have a short life cycle in the market are best suited for this model.
It means that the products need to be sold out as fast as possible before the trend expires. In such industries, manufacturers need to update their catalog to match whatever s trending in order to sell.
This model has 3 main capabilities. They include:
- It has a very high forecast accuracy to minimize mediation costs in the market.
- A high degree of end-to-end efficiency to facilitate reasonable prices for customers.
- It enables a short time between the concept and availability in the market.
- The Efficient Chain Model
The efficient chain model is best applied in businesses that are in highly competitive markets. It is also applicable where the main goal of the company is end to end efficiency.
If you are using this model, as a manger, you need to fully utilize company’s assets to maintain the required efficiency and reduce production cost.
For better revenues, the management also focuses on order fulfillment and inventory management.
The Responsiveness-Focused Supply Chain Models
If there is any uncertainty in manufacturing then the responsive-focused models are the right ones for you. These models are applicable to businesses that deal with on-demand goods, meaning they offer flexibility in businesses.
- The Agile Model
The agile model deals with sectors that have unpredictable demands and have made-to-order products. In this model, the supply chain has the ability to increase production whenever needed at a moment’s notice but still be able to remain relevant when there is low demand.
Also, it sometimes requires high production capacity.
- The Custom Configured Model
The custom configured model is a combination of the continuous flow model and the agile model. It focuses on the provision of custom configurations in production processes and assembly.
- The Flexible Model
The flexible model is best applied for industries with predictable demands, from high demand peaks to low workloads. This model gives businesses the freedom to meet such demands, whether it is low or high demands In the market.
Also, the production can be switched on or off anytime but still, the industry remains relevant. The flexible model has four capabilities, they are:
- It has technical strengths in product engineering and processes in the organization.
- The process flow in this model is designed to be reconfigured very quickly.
- It has a very fast rapid response.
- The model allows a stock-pile of crucial resources.
Advantages and Disadvantages of Supply Chain Management
- Increases output: supply chain management is used in order to increase output in an organization. Supply managers supervise processes and resources in the company to ensure they are used efficiently. Doing this minimizes wastage and increases production.
- Saves cost: implementing supply chain models in any business will save cost. The different models when used effectively, a company will be able to save on production costs, packaging, warehousing, to shipment.
All these expenses can be quite costly if you don’t have an effective model to help in management. Also, by saving on such expenses, the overall profits will increase due to the low-cost production.
- Problems are easily identifiable: since a supply manager is overlooking every process, it will be easy to identify any problems that may arise during and after production.
It will also be easier to know which departments are lagging the company behind and solve the problem before it costs the company a lot of money and time.
- Enhances collaboration: in every organization, there are different departments that need to work together to ensure everything is running smoothly. By implementing supply chain management, you will also focus on building proper communication channels.
This way, there will be a smooth flow of communication within each department and among the different departments.
Also, stakeholders will get information at the right time.
- Faster processes: supply chain models help in avoiding delays in production and acquiring of raw materials. The manager will be on top of things and ensure everything is acquired at the appropriate time and production runs smoothly.
- Quite costly: implementing supply chain management in a company can be quite costly. Starting the process requires huge investments in terms of money, time, and other useful resources.
All these requirements can be very expensive, especially for startups or small businesses. Established businesses are in a better position to use these models.
- It is complicated: since it involves several departments coordinating, it might be quite challenging to set up.
Sometimes employees might get confused by the new order of operations which may in turn delay production.
- Trained staff: apart from the many requirements it has, you will also need trained staff. Every company that has executed any model successfully, they have an experienced and skilled staff that understands every aspect of supply chain management.
This will also mean the company will have to incur extra expenses on hiring new staff or training the ones they got.
How Do You Start/Create a Supply Chain Model?
- Understand the Market
For any entrepreneur, understanding the market is a critical step in doing business. Depending on your niche, you need to analyze your market by researching the structure, pricing, and market indicators.
These factors will help you know how to present your products in the market and at what times. Also, you can also conduct a supplier analysis to know what other suppliers are doing and what to avoid.
- Understand the Supply and Demand
Proper management of inventory to meet the supply and demand of any market is important. Take time to understand the supply and demand of the market you wish to supply to so that you meet its needs.
By having this knowledge, you will know which products to put out at what time, and also the proper prices of each item. If you get conversant with this concept, you will be able to predict how the market will behave at different times and it will give you an edge over other companies.
- Size Your Inventory Buys
At this stage, you need to have a plan to ensure you restock your inventory to have enough for the market demand. For any successful business, you need to avoid disappointing customers by having less stock than the demand.
How will you avoid it? Simple, always order enough supplies that will fill the gap between your inventory at hand and what you expect from suppliers.
You should always order in advance so that when there are any delays from the supplier’s side, you will manage with the extra items you have.
- Track the Purchase Orders
You need to have a tracking system in your company to track orders that you have placed with the suppliers. It is important since if there are any delays or damages to the order, you will be able to manage it in time to avoid stock out.
Some tools you can use to track your orders such as Google Sheets. Also, if you are working with a 3PL agent, then you have nothing to worry about as they offer such services.
- Manage Your Inventory
There are some things that are critical in inventory management: purchasing, storing, delivering, and profiting from it. Proper management of all these steps is crucial for your business. Keeping records is important as it will guide you when you want to source more products. you will know what to include and what to leave depending on what you have in store.
- Understand Your Inventory Position
Now that you have your inventory, it is vital to understand its quantity and location. Having a warehouse makes it simple for you to do it yourself but if you need efficient work, you can contact a 3PL provider. Working with a third-party company will ease your work and ensure everything is in place.
- Fulfill Your Orders
Now that everything is sorted out, you need to fulfill your orders by delivering them to your customers. In order fulfillment, there are two things to consider; order management and delivery. Order management ensures you allocate the right amount of inventory in every aspect like a wholesale, retail store, or eCommerce store.
This way, it will be easier to process orders knowing very well if it’s enough for a customer or not. On the delivery side, there are certain things to keep in mind. One, shipping and logistics can get quite complicated and if you are not careful you will lose customers’ orders.
Such situations will get you bad reviews leading to loss of customers and also loss of money in the process. For shipping and logistics, it is best to partner with companies such as Bestfulfill.
It is a dropshipping agent who will ensure every order reaches your customer not only in time but also in good condition. You will incur extra costs, but it is worth it.
Running a successful business can be difficult because there are numerous factors to consider. One issue that should not be overlooked is supply chain management because how you manage your supply chain will either make or break your firm.
All of these aspects can be perplexing for an entrepreneur, especially a new one. Partner with a company that provides the services you need to run your business and make your life easier.
Bestfulfill works with both suppliers and retailers to ensure that their companies run smoothly. Among other things, we provide drop shipping services.
We devote our time and energy to ensuring that your inventory is handled properly from purchase to delivery. Contact us right away to begin selling profitably.
- What is Supply Chain Modelling?
Supply chain modeling is a concept used to bring order into a supply chain to facilitate the objectives of the business. Some goals include timely delivery, low-cost supply, and the ability to cope with any situation that may arise to disturb the supply order.
- What are the six supply chain models?
There are six supply chain models, they include continuous flow model, fast chain model, efficient chain model, custom configured model, agile model, and flexible model. The models are categorized into two main groups; the efficiency-focused models and the responsive-focused models.
- What are the four stages of supply chains?
The 4 stages are;
- Integration: it starts at the strategic planning phase and is crucial throughout communication, data analysis, information sharing, and storage.
- Operations: they require accuracy in the representation of inventory and production to monitor the output.
- Purchasing: an efficient supply chain software will ensure product sourcing is effective enough to take advantage of low prices and the most quality products.
- Distribution: it involves shipping, delivery, and returns. All these elements should be fully optimized in your supply chain for quality customer service.
- What are the 5 basic steps of supply chain management?
The five basic steps in supply chain management are supply planning, production planning, inventory planning, capacity planning, and distribution planning.