Supply Chain Management Models in Modern Business

Organizational efficiency and staying one step ahead of the competition are made possible through supply chain management. It is now an essential component of providing high-quality items at reasonable pricing for modern enterprises.

Supply chain management is a subject taught in colleges of business and universities today. The management and optimization of a company's supply chain may be the responsibility of whole departments in large organizations.

However, small and medium-sized businesses often have fewer resources and expertise available to them for improving the effectiveness of their supply chains. Therefore, the purpose of this book is to assist companies who want to learn more about supply chain management and make use of some of the more widely available tools, processes, and technology.

Supply Chain Management

The flow of goods and services from raw materials to the final consumer is managed by interconnected organizations and systems through the application of supply chain management. Many distinct businesses may be a part of a supply chain, and supply chain management refers to how each business controls the movement of supplies to and from other businesses as well as its own internal performance.

The field of supply chain management encompasses a wide range of tasks including order management, inventory management, product lifecycle management, procurement, and more.

6 Reasons Supply Chain Management is Important for Business

1.Lowers Operating Expenses

Supply chain management that is effective identifies expensive operations that don't add value to the finished product. This lowers operating costs for a business by allowing it to reduce or eliminate certain activities.

Less expensive production

Manufacturers rely on effective supply chains to get raw materials to assembly lines as cheaply and quickly as possible to prevent shortages that would cause production to slacken or stop.

Reduced holding expenses

To save inventory costs in their warehouses, retailers, distributors, and wholesalers rely on supply chains to deliver goods promptly. This is particularly true for goods with a limited shelf life, like fresh food, or goods that age quickly, like laptops or cell phones.

2.Increases Effectiveness

Waste is the enemy of operational efficiency, whether it be squandered time, effort, or raw materials. A sound supply chain management plan accounts for wastage and seeks to reduce it by putting an emphasis on operations that create value.

3. Boosts Revenue

Strong and effective supply networks typically result in higher revenue and profit levels. More competitive pricing, higher profit margins, and activities like marketing are all made possible by lower costs.

4. Enhances Material and Product Flow

The more quickly products are delivered to consumers, the more effectively the product flow operates. Bullwhip effects are less severe and there is less of a lag between demand and supply inefficient product flows, which makes accurate forecasting easier.

5. Enhances Information Flow

Information sharing along the entire supply chain is made possible by an effective supply chain. By doing this, bottlenecks are eliminated and organizations get a complete picture of the supply chain, enabling them to make wise decisions. Additionally, real-time data keeps all participants alert so they can react fast to changes.

6. Increases Client Satisfaction

Happy clients get what they want, when they want it, and for the lowest possible cost. An improved supply chain can increase consumer happiness and loyalty, which will result in more future purchases. Transparency in the supply chain is a topic that consumers value more and more.

Types of Supply Chain Management

Supply chain management is a challenging task. What are small and expanding firms to do when large corporations can devote an entire team to supply chain optimization?

Managing supplier and customer connections on their own requires business managers in SMEs to multitask and perform supply chain management duties.

Positively, supply chains for smaller companies are less intricate. They can adapt to change considerably more quickly than huge corporations and can select the supply chain management strategy that best suits their needs.

Here are seven prevalent models for supply chain management. Selecting the approach that best suits your company can be aided by being aware of the variations between each model.

Efficiency-Focused Supply Chain Models

In highly competitive industries where demand is predictable, products are comparable, and consumers seek cheap prices, these supply chain model types perform effectively. Manufacturing of chemicals, paper, and other basic items are a few examples of such enterprises.

Model for Continuous Flow

One of the oldest supply chain strategies is the continuous flow model. It's perfect for producers of commodity items, such as those who produce the same products frequently with little variation. In the continuous flow model, optimization is a result of close supply chain coordination and avoiding demand fluctuations.

The continuous flow approach is very well suited to just-in-time manufacturing.

Quick Chain Model

This flexible business model is ideal for companies who constantly change their product offerings and need to move inventory fast, as well as for makers of popular goods with short life cycles. Businesses should concentrate on promoting new products, which depends on three factors: rapid idea-to-market transition, precise forecasting of demand levels, and end-to-end efficiency to keep costs low.

Efficient Chain Model

Businesses in highly competitive marketplaces and those aiming for end-to-end efficiency can benefit greatly from the efficient supply chain concept. Because production is based on anticipated sales and competition is based on pricing, commodity industries utilize this approach. With this strategy, companies put a priority on perfect order fulfillment, depend on accurate forecasting to ensure product availability, and maximize efficiency to cut costs.

Responsiveness-Focused Models

In industries where customer demand is unpredictable, businesses opt for a responsive model.

1. The agile model

Businesses that produce specialty orders are best suited for the agile style of supply chain management. Make-to-order manufacturers only produce an item after receiving a customer's order. Businesses must be able to produce in excess and create products and manufacturing processes that can be produced in the smallest feasible batches if they want to be nimble.

2. The custom-configured model

The emphasis of the custom-configured model is on offering customized customizations, particularly during assembly and production. It is perfect for companies, like automakers, whose products come in a variety of configurations. Product configurations are often carried out during assembly when various product elements are put together in accordance with the requirements of the customer.

The continuous flow and agile approaches are combined in this model. The continuous flow model is used to manage the activities that come before product configuration, and the agile supply chain model is used to handle downstream processes and product configuration.

3. The flexible model

For firms that experience large demand peaks and protracted periods of low workload, the flexible model is most suited. This concept allows companies to satisfy unique client requests or find solutions to issues by reconfiguring internal manufacturing processes. Businesses need to concentrate on having additional key resource capacity, quick answers, strong technical ability in engineering and procedures, and a flexible process flow that is easily changeable.

4. SCOR model

The Supply Chain Council and 70 top industrial businesses worked together to build the SCOR model. This strategy aims to standardize procedures and produce a measurable method of monitoring outcomes. This entails evaluating procedures and objectives, quantifying performance, and contrasting business performance with benchmark information.

Closing Remarks!

The process by which firms identify, evaluate, and mitigate risks in their whole supply chain is known as supply chain risk management. Supply chain vulnerabilities and unforeseen disruptions can affect a company's finances and reputation.

Supply chain risk management can range from straightforward, such as a brewer making sure they have a backup supply of hops in case one region's crop fails, to sophisticated, such as a comprehensive examination of vulnerabilities by a multinational organization.

Updated on: 03-Apr-2023


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