Are You Using the Right Supply Chain Model?

Today, just about every company that ships products is focusing on supply chain optimization. Logistics operations seemed to work silently and invisibly in the background before the global pandemic emerged in 2020. But well-publicized product shortages brought the supply chain to front and center — and it’s stayed there ever since. From executives and shareholders to consumers, everyone today recognizes the importance of the supply chain.  

But how exactly does a supply chain work on a day-to-day basis? The answer is, “It depends.” While there are always buzzwords and catch phrases that gain and lose popularity, there are six primary types of supply chain models.  

It’s important to understand these six models and their differentiating factors because they reflect different goals. If your supply chain model doesn’t support your top-level strategic objectives, like rapid delivery or profitable customization, then you’re destined to fail in reaching those targets. 

As a Modern 4PL, Redwood has a unique understanding of these models, as well as the objectives they serve. Let’s take a quick look at these six supply chain configurations, what they can do for your business, and their inherent risks. 

The continuous flow model is one of the most traditional supply chain models, and it’s common in mature industries. This model is ideal for commodity manufacturing, like paper products. It’s best for companies that produce the same goods constantly, with few fluctuations and high demand stability. The top priorities are low costs and high asset utilization. This model is based on continuous replenishment, with high levels of service and low levels of inventory kept on-site for end customers. This is a “just in time” model, and its primary drawback is that it responds poorly to demand variability. 

The efficient supply chain model is well-suited to mature industries with relatively stable demand patterns and a high level of price-based competition, like automobiles and electronics. The key objective of this model is cost control, based on high rates of asset utilization and operational efficiencies across procurement, production, distribution, and logistics. Economies of scale, consolidation, process standardization, and automation are priorities. The danger of this “lean” model? It can be tough to balance efficiency with high service if demand spikes suddenly. 

The fast chain model is most often used by businesses that manufacture trendy products that have a short lifecycle — such as fast-fashion apparel and consumer electronics. This model works best for businesses that must change their products frequently and get them to market quickly. Priorities include short lead times, high forecast accuracy, and real-time data sharing. The drawbacks are errors naturally associated with fast-paced planning and execution, which can result in overstocks or out-of-stocks.  

As indicated by its name, the custom-configured model is focused on providing product personalization during assembly and production. It focuses on build-to-order and mass customization and is ideal for meeting specific customer requirements. Relevant industries include aerospace, automotive, industrial equipment, furniture, and consumer goods. Rapid prototyping, flexible manufacturing, postponement, and real-time data-sharing are essential. Risks for custom-configured supply chains include long lead times and limited scalability.  

The agile supply chain model utilizes a make-to-order method that allows for the manufacturing of items after an order is received from a customer. This model drives a highly flexible, dynamic supply chain that quickly reconfigures itself. It’s characterized by small-batch production and frequently relies on advanced technology like automation and robotics to accomplish that efficiently and profitably. The agile model is well-suited to fashion and consumer electronics. The drawback of this model is that it’s very difficult to accommodate larger-than-expected order volumes. 

The flexible supply chain model is best for industries that typically experience extreme peaks and valleys of demand. Flexible supply chains have high levels of adaptability, the ability to easily reconfigure production flows, and the capability to switch on and off. Seasonal products are best suited to this model. The biggest risk associated with this model is high operating costs.  

Which Model Is Right for Your Business? 

In general, the first three models are focused on efficiency, while the last three are focused on responsiveness. In today’s hyper-competitive, omnichannel world, all businesses are forced to focus on both competencies to some degree. It’s hard to narrow the choices down based only on that distinction. 

So, which supply chain model should you choose — and what are the implications for your logistics operations? That depends on the consistency of your demand, the customization of your products, the nature of your industry, your manufacturing, and logistics costs, your lead times and other factors. It’s a complex question, with a lot at stake.  

Instead of creating in-house expertise, or hiring a big-name consulting firm, why not rely on the supply chain experts at Redwood to help? In our decades of work with hundreds of supply chain teams, we’ve encountered just about every situation. Not only can Redwood help you choose the supply chain model best suited to your needs and objectives, but we can also optimize your end-to-end supply chain to maximize the results of that model.  

Your ideal supply chain model is out there. Contact Redwood to help identify it.