5 Supply Chain Models for Growing Businesses
Your current method of sourcing materials, manufacturing, and delivering products to customers isn’t working because you’ve outgrown it. Business growth is exciting, but it can also make new business leaders uncomfortable, as it often requires major changes in strategies and processes, especially in the supply chain.
One of the most critical tools for business success, your supply chain must run smoothly from start to finish. Depending on your current business strategies and structures, you can build your supply chain in different ways. Here are some popular supply chain models to inspire you as your business grows.
The continuous model
As the name suggests, the continuous supply chain model is designed for the continuous delivery of resources and products. Businesses that depend on a regular cadence of goods can use this template to create a schedule that meets their needs. However, the continuous model only works well when supply and demand are fairly stable; often this is only achieved by established brands that have little variation in customer profile and have been able to cultivate a mature supply chain.
Most of the larger and better known brands use the continuous model. For example, PepsiCo enjoys steady demand for its food and beverage family, regardless of season or market conditions. So its delivery system can continuously receive ingredients, produce products, and restock vendors without worrying about changing demand.
The fast model
The fast model works best for organizations that manufacture or sell products with short life cycles to market. Items heavily impacted by cultural trends are unlikely to be relevant to customers if they remain stuck in shipping for too long. Companies should therefore use the fast model to speed up their delivery and quickly take advantage of high demand. The rapid model allows an organization to change its products frequently to keep up with changing trends.
The clothing industry is particularly sensitive to trends, with demand changing every two months. So brands like activewear fashion leader Nike have systems in place to transition into new supply chains to capitalize on trends before they’ve passed. When the next wave of trend emerges, Nike will develop rapidly and shift to a new fast supply chain.
The effective model
Businesses operating in highly competitive environments need highly efficient supply chains. The effective supply chain model is essential to provide a strong competitive advantage in maximize the output of production equipment and labor. As a result, businesses can benefit from reduced costs, allowing them to maintain razor-thin margins while still having adequate inventory to meet demand.
General Mills is a grain producer that creates similar products and markets to the same audience as its competitors. For General Mills, the profit lies in reducing costs and ensuring suppliers stay in stock, which is why the efficient model is critical to their success.
The nimble model
An agile supply chain model is identified from four crucial components:
- Virtual integration or monitoring market demand changes in real time.
- Aligning processes or sharing supply chain responsibilities across the enterprise through co-managed inventory, collaborative product design, and synchronized supply chain elements.
- A network base, or an equal contribution from every member of the supply chain.
- Market sensitivity or the ability to alter production rates in response to changes in demand.
An agile model is another supply chain model that works well for organizations that are heavily dependent on changing cultural trends. Another apparel industry leader, ZARA, uses the agile model by closely monitoring the culture for new clothing trends and developing options to adapt to 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 extent, combining the agile and continuous flow models to serve businesses that need to navigate multiple product configurations.
Companies like LL Bean are inviting customers to personalize essentials, like backpacks, with colors, monograms and other decorative elements when ordering. While demand for these basic items may remain stable, demand for custom features may fluctuate, so LL Bean needs to be nimble in its supply chain.
Your business is growing and its evolution could determine the supply chain model you choose. These templates and others are helpful guides to developing a strong supply chain that will provide exactly the products you and your customers need and want.