If you are just starting your business, you’ll need to make a lot of big decisions. One of these will most likely be in reference to your supply chain management. Don’t rush into this decision just yet, and take time to do your research to see which one can greatly benefit your organization and your customers. There are a great deal of varieties in supply chain models and finding the right fits will most likely ensure that you have satisfied clients. By understanding the importance of the supply chain and recognizing that in it you’ll be involving a process that includes money, products and information, you’ll begin to find the best solutions for each one of these elements. This will be especially important if you’re a new company because you’ll be able to get things on the right track from the beginning. A solid supply chain will help your organization avoid inconveniences in all stages of your business, increase customer satisfaction and reduce unnecessary costs due to glitches in the production or delivery process. If you are starting an online business, then it’s just as important to see how the supply chain works for online business, which you can read more about on the David Kiger blog.
Although the supply chain has changed greatly over the years, there are still at least 4 elements that remain the backbone of the supply chain, which are: the industry framework, a unique value proposal, a managerial focus, and internal processes. The
The industry framework is basically any and all communication and interaction between economic factors, suppliers, customers and technological advances. Any one of these or a combination of them will affect the supply chain and the competition in the sector, independent of the industry. The industry framework can easily be directly affected by demand variation or demand profile, market mediation costs, the relevance of the relationship between total costs and costs of assets, and finally the product lifecycle.
Another element is the unique value proposal which is the process of figuring out what makes you and your products or services a good option for your potential customers. A company must organize the characteristics that make them unique and take advantage of them to get into the customer’s scope.
The managerial focus will also shape the supply chain by establishing the relationship between the processes of the supply chain and the company’s competitive positioning. By setting up the correct relationship between these two factors, your organization will ensure that the execution of the supply chain and the business’s unique value proposal are aligned and working together.
Finally, internal procedures will be the last element that greatly affects the supply chain management of any company because these will determine many of the aforementioned elements. Organizations need to determine their decoupling point, which is the moment when the product begins to be customized, and their asset utilization.
The supply chain can be categorized into two different types of models: efficiency and responsiveness. Each one of these has three supply chain models that each focus on a specific set of characteristics that allow companies in each industry to create effective supply chains. In the efficiency category, you’ll find the efficient, fast and continuous-flow models. The efficient model will be a good fit for companies that have a great deal of competition in the market and have customers who don’t really differentiate the products. There are different things these companies can include in their supply chain, but for them to be successful keep in mind the importance of maintaining high rates of asset utilization along with high overall equipment efficiency (OEE), and guarantee accuracy in forecasts. The fast model is more for those who create products that are quick fads in the market. The benefit in customers’ minds will be the company’s ability to stay up to date. These companies need to continuously renew their portfolio, which is accomplished by having a short period of time between the generation of an idea and the market, having high levels of market forecast and maintaining end-to-end efficiency. The continuous-flow model is for those companies that are mature enough to have stability in their supply and demand.
In the responsiveness category, there are the agile, custom-configures and flexible models. The agile model is perfect for companies that have customized mass production and should focus on keeping excess capacity and manufacture products with the least possible amount of batches. In the custom-configures model, you’ll find companies that set themselves apart by offering customized end products. This company will need a “configurable to order” decoupling point that makes the supply chain agile. Finally, the flexible model is for companies that have unexpected demand and have to be prepared to adjust their workload to the demand. They should have a supply chain that can be adjusted easily, have technical strengths especially in product engineering and process, have a rapid-response capability and always have crucial material in stock.
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