Your current method of procuring materials, manufacturing and delivering products to customers is not working — because you have outgrown it. Business growth is exciting, but it can also make new business leaders uneasy, as it often necessitates major changes to strategies and processes — especially changes to the supply chain.
One of the most critical tools for business success, your supply chain needs to run smoothly from beginning to end. Depending on your current business strategies and structures, you might build your supply chain in any manner of ways. Here are a few popular supply chain models to inspire you as your business grows.
The Continuous Model
As the name suggests, the continuous supply chain model is built for continuous delivery of resources and products. Businesses that rely upon a steady cadence of goods can utilize this model to create a schedule that meets their needs. However, the continuous model only functions well when both supply and demand are quite stable; often, this is only achieved by established brands that have little variation in customer profile and that have been able to cultivate a mature supply chain.
Most of the largest and best-known brands utilize the continuous model. For example, PepsiCo enjoys regular demand for its family of drinks and foods, regardless of the season or market conditions. Thus, its delivery system can continuously receive ingredients, produce products and restock vendors without worrying about changes to demand.
The Fast Model
The fast model works best for organizations that manufacture or sell products with brief market lifecycles. Items that are highly impacted by cultural trends are unlikely to be relevant to customers if they remain stuck in shipping for too long, so businesses need to utilize the fast model to expedite their delivery and swiftly take advantage of high demand. The fast model allows an organization to change its products frequently to keep up with shifting trends.
The clothing industry is particularly susceptible to trends, with demand shifting every couple months. Thus, brands like Nike, which is a leader in activewear fashion, have systems for transitioning to new supply chains to capitalize on trends before they have passed. When the next trend wave emerges, Nike will rapidly develop and move onto a new fast supply chain.
The Efficient Model
Companies that are in highly competitive environments need supply chains that are highly efficient. The efficient supply chain model is essential for providing a strong competitive advantage by maximizing output from production equipment and labor. Thus, companies can benefit from reduced costs, allowing them to maintain razor-thin margins while enjoying proper inventory to address demand.
General Mills is a cereal producer that creates similar products and markets to an identical audience as their competition. For General Mills, profit is found in reducing costs and ensuring vendors are kept in stock, which is why the efficient model is essential to their success.
The Agile Model
An agile supply chain model is identified from four crucial components:
- Virtual integration, or tracking market demand changes in real time.
- Process alignment, or sharing supply chain responsibilities across the business through co-managed inventory, collaborative product design and synchronized supply chain elements.
- A Network base, or equal contribution from every member of the supply chain.
- Market sensitivity, or the ability to change production rates in response to changes in demand.
An agile model is another supply chain model that works well for organizations highly dependent on shifting cultural trends. Another clothing industry leader, ZARA, utilizes the agile model by monitoring the culture closely for new clothing trends and developing options to fit those trends by leveraging their supply chain.
The Custom-configured Model
Many organizations require a custom supply chain design that mixes and matches key elements from other models. The custom-configured model does this to some degree, combining the agile and continuous flow models to serve companies that need to navigate multiple product configurations.
Companies like L.L. Bean invite customers to customize essential products, like backpacks, with colors, monograms and other decorative elements when placing an order. Though the demand for such staple items may remain stable, the demand for custom features can fluctuate, so L.L. Bean must use some agility in its supply chain.
Your business is growing, and how it is growing could determine which supply chain model you choose. These and other models are helpful guides for developing a strong supply chain that will deliver exactly the products you and your customers need and want.