What are the Types of Supply Chain Management?

Summary: Under the sustainable supply chain management, organizations create strategies to minimize the impact of their procedures on the environment. Other types include Lean, Agile, Digital, Risk, Outsourcing, and Customer Centric. Let’s learn about each of them in detail!

Supply chain management is an important aspect of controlling how a product is created and delivered to end customers. Any miscommunication or delay in supply chain stages can impact on the timely delivery of goods and also lead to financial losses. So, it is important to implement the right supply chain model that ensures timely delivery of goods and helps increase your profit margins.

There are different types of supply chain management models that you can consider for managing your supply chain like Lean, Agile, Sustainable, Digital, etc. Let’s learn more about these types in the article below!

What is Supply Chain Management?

Supply chain management refers to management of all the processes starting from procurement of raw materials till the final product is delivered to customers.

The organization keeps a control on goods and services throughout the production, development, and distribution of products in supply chain management. The main purpose of this management is to meet the product demand and maximize customer experience.

Types of Supply Chain Management

• Lean Supply Chain Management
• Agile Chain Management
• Sustainable
• Digital
• Risk Management
• Outsourced
• Customer-Centric

There are several types of supply chain management that you can choose for your business based on your requirements and purposes. Here is the enumeration of various types of supply chain that you can consider for your business:

1. Lean Supply Chain Management

The lean supply chain management focuses on delivering products to customers efficiently with minimum wastage. Under this approach, anything that does not add value to products and customers is removed from the supply chain procedure.

When the Lean model is implemented, organizations find ways to remove wastage and take steps that add value to their services and products.

Benefits of Lean Supply Chain Management

• Helps in cutting down procedure costs
• Enables businesses to improve operational efficiency
• Eliminates the resources wastage
• Helps in improving the products quality

Example: Mahindra, an automobile manufacturer, uses the Just-in-Time inventory method to eliminate product wastage and enhance operational efficiency.

2. Agile Chain Management

This type of model is suitable for organizations that deal with trending and variable products. Under the agile model, businesses rapidly respond to consumer’s demands and preferences.

Businesses first see how much demand there is for a specific product, then start their production accordingly. It relies more on the current product demand rather than predictions or forecasting.

Benefits of Agile Supply Chain Management

• Makes it easier for businesses to adapt to market changes
• Prepares organizations for adverse circumstances
• Promotes rapid decision making
• Enables them to meet the customer demand

Example: Clothing retailer Zara focuses on runway clothing, designs its clothes accordingly, and delivers them to stores at the fastest possible time.

3. Sustainable

In the sustainable supply chain management model, companies consider the environmental impacts of their procedures like sourcing, storage, and product delivery on the environment.

The main purpose of this model is to reduce environmental impact from energy usage, water consumption, and waste production, and create a positive impact on people and communities.

Benefits of Sustainable Supply Chain Management

• Helps in minimizing environmental impact
• Assists in enhancing the organization’s image and reputation
• Helps in retaining and roping in new customers
• Enables you to find sustainable ways to manage supply chain

Example: McDonald, a leading fast-food outlet, globally uses recycled paper bags, boxes, and glasses to serve food instead of plastic bags to mitigate environmental impact.

Suggested Read: Top Logistics and Supply Chain Management Software List

4. Digital

With the digital supply chain model, businesses use digital technologies like software to manage their supply chain, optimize procedures, and forecast product demand.

It provides real-time visibility into every stage of supply chain management. Further, with software-backed collaboration, you can coordinate with members of different departments in real time.

Benefits of Digital Supply Chain Management

• Businesses can analyze data to identify process inefficiencies
• Enables them to automate supply chain workflows
• Helps them to automatically track and maintain inventory levels
• Enhances the supply chain planning via real time data

Example: An e-commerce platform like Amazon uses digital supply chain for managing operations. Through software, they can optimize inventory levels, forecast product demand, and collaborate with suppliers in real-time.

5. Risk Management

The risk management-based supply chain model focuses on finding, accessing, and eliminating the risks involved in a supply chain. The risks that are accessed come under a broad category of economic, political, ethical, and environmental.

After assessing these risks, the company implements strategies to improve operational efficiency, enhance customer service, and reduce costs.

Benefits of Risk Management Supply Chain

• Makes it easier to detect vulnerabilities at the earliest
• Helps in meeting regulations and security standards
• Improves customer satisfaction
• Prepares you to maintain unforeseen circumstances
• Helps in avoiding financial losses in the long run

Example: Any Pharmaceutical company adopts a risk management approach to identify possible hazards and ensure that products are produced with industry-specific regulations.

6. Outsourced

Within this approach, organizations hire third party logistics to manage and optimize the operations of supply chain management. Businesses often hand over the storage and ecommerce fulfillment to 3PLs (Third-Party Logistics) to save time and money and also improve operational efficiency.

Benefits of Outsourced Supply Chain Management

• Helps in reducing the overall operational costs
• Enables you to deliver products faster and enhance customer experience
• Provides access to experienced 3PLs service providers to increase profits
• Offers flexibility to quickly adapt to market changes

Example: Nike, a leading footwear brand, outsource its manufacturing processes majorly to Philippines for efficiently producing and delivering products.

6. Customer-Centric

Under this model, businesses concentrate on optimizing supply chain operations to meet customer demand and improve their experience.

It focuses more on increasing demand for products and making changes in supply chain procedures to deliver products on time to customers. Timely delivery improves the customer experience and increases the lifecycle value of your customers.

Benefits of Customer-Centric Supply Chain Management

• Enables you to optimize fleet routes for timely product delivery
• Helps in maintaining optimum supply of goods to meet customer demands
• Assists in creating products with features that customers want
• Helps in reducing churn rate

Example: L’Oréal incorporates customer preferences in their products and adjusts its portfolio for providing personalized products to customers globally.

What are the Functions of Supply Chain Management?

Supply chain management comprises the Purchasing, Logistics, Resource Management, and Information Workflow functions to procure, produce and deliver goods to consumers on time. Here is a detailed enumeration of these functions:

• Purchasing: One of the important functions of supply chain management is the purchase of raw materials from suppliers. Organizations have to coordinate with different delivery companies to procure materials on time.
• Logistics: Under this, an organization coordinates and manages all tasks for planning, purchasing, production, warehousing, and transportation for timely delivery of products. It streamlines the communication between various departments for timely production and shipment of goods to end customers.
• Resource Management: Within this function, businesses ensure that optimum resources are allocated to the procedures in an optimal manner. This ensures that resources like workforce, money, technology, and materials have been used judiciously to deliver maximum output.
• Information Workflow: Under this, businesses create a centralized system to share and receive logistics-related information from different departments. With real-time communication, businesses can ensure that all departments are on track. It will also prevent any type of miscommunication in any supply chain procedure.

Suggested Read: Role and Benefits of ERP in Supply Chain Management

How Does Supply Chain Management Work?

Supply chain management works in the following steps:

Step 1: Analyze the consumer needs and demands to formulate a plan for production

Step 2: Procure raw materials from suppliers

Step 3: Allocate resources for different procedures to start production

Step 4: Perform quality checks when the product is produced completely

Step 5: Identify customer requirements and select the right method to distribute goods.

Step 6: Lastly, the products are delivered to customers through the supplier.

Types of Risk in Supply Chain Management

Identifying and mitigating risks are important to avoid any loss in the long term. Here are some of the risks that you might need to assess and address for a smooth supply chain operation.

• Financial risks: These risks include budget overruns, supplier bankruptcies, currency exchange changes, additional funding risks, volatile marketing conditions, etc.
• Legal risks: These include patent infringement, contractual obligations infringement, compliance and regulatory issues, etc.
• Environmental Risk: They comprise hazardous working conditions, natural disasters, and impact on air, water, and soil.
• Manufacturing Risks: These cover the fluctuations in prices of raw materials, raw materials shortages, distribution disruptions, etc.
• Political Risks: Such risks are the unrest in society, instability in government policies, tax regime changes, etc.

Conclusion

Implementing the right supply chain model can significantly help organizations to improve operational efficiency, enhance product quality, and optimize inventory levels.

It is essential for you to carefully consider your business requirements to choose the best supply chain model that complements your goals. However, you can also implement multiple models simultaneously to optimize the supply chain procedures.

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