23:09
Faizan
Business supply chains are the networks of companies, employees, resources and information that are used to procure raw materials, transform these materials into finished products and distribute the product to the end consumer. Supply chain management is the implementation of policies, methodologies or initiatives aimed at increasing efficiency of the supply chain and the quality of the end product.
Significance
Supply chain management encompasses multiple business units and can become increasingly complex if the correct system model is not implemented. Businesses are responsible for not only their own business decisions and ethics, but also any other organization's values involved in their supply chain; therefore, the supply chain model that is implemented must take into account the values of all members of the supply chain.
Benefits
Supply chain management has the ability to save companies money through the efficient use of resources which includes the following: minimizing inventory, alleviating bottlenecks in the supply chain and logistics optimization (see Reference 1). If a company can eliminate bottlenecks within its own operations and with suppliers, it has an opportunity to reduce inventory warehousing costs because it can order, receive and produce products quicker and more consistently. To optimize logistics, supply chain management needs to strategically locate manufacturing and distribution centers to reduce transportation costs. The system model implemented can be the difference between delivering these benefits or not.
Types
There are three main types of system models used in supply chain management: network design, rough cut and simulation based.
Network design models are most commonly used because they provide a comprehensive foundation for large-scale supply chain initiatives. Network design models establish the network of organizations involved and focus on strategic decisions such as inventory control, location, transportation and production methods.
Rough-cut system models provide broad guidelines and policies for supply chain decisions. This model also focuses primarily on internal operations while only adding necessary supply chain characteristics, rather than considering the supply chain network as a whole, inseparable entity.
The simulation-based model considers strategic and operational decisions but focuses on analyzing existing supply chains rather than starting and developing a new supply chain. (See Reference 2.)
Considerations
When deciding what system model to implement, management must consider and understand the structure type of its supply chain. The four structure types are pipeline, late customization, diverging and converging. Network design models are better for pipeline structures because of the supply chain's reliance on mass production stages and a single, standardized product. The rough-cut model is better for diverging supply chain structures because they manufacture many different products with a lot of customization. Late customization and converging structures can benefit from both network design and rough-cut models. Late customization structures are a combination of pipeline and diverging structures because of the limited customization allowed. Converging supply chain structures consist of multiple operational stages that are combined only in the end to produce the final product. (See Reference.)
Warning
Rough-cut system models are easier to implement but have the potential to endanger the reputation of a business; companies need to take the extra steps of the network design system to become aware of all other organizations' operations and values within the supply chain to avoid negative perceptions from consumers relating to real or perceived conflicting values within the supply chain.
Significance
Supply chain management encompasses multiple business units and can become increasingly complex if the correct system model is not implemented. Businesses are responsible for not only their own business decisions and ethics, but also any other organization's values involved in their supply chain; therefore, the supply chain model that is implemented must take into account the values of all members of the supply chain.
Benefits
Supply chain management has the ability to save companies money through the efficient use of resources which includes the following: minimizing inventory, alleviating bottlenecks in the supply chain and logistics optimization (see Reference 1). If a company can eliminate bottlenecks within its own operations and with suppliers, it has an opportunity to reduce inventory warehousing costs because it can order, receive and produce products quicker and more consistently. To optimize logistics, supply chain management needs to strategically locate manufacturing and distribution centers to reduce transportation costs. The system model implemented can be the difference between delivering these benefits or not.
Types
There are three main types of system models used in supply chain management: network design, rough cut and simulation based.
Network design models are most commonly used because they provide a comprehensive foundation for large-scale supply chain initiatives. Network design models establish the network of organizations involved and focus on strategic decisions such as inventory control, location, transportation and production methods.
Rough-cut system models provide broad guidelines and policies for supply chain decisions. This model also focuses primarily on internal operations while only adding necessary supply chain characteristics, rather than considering the supply chain network as a whole, inseparable entity.
The simulation-based model considers strategic and operational decisions but focuses on analyzing existing supply chains rather than starting and developing a new supply chain. (See Reference 2.)
Considerations
When deciding what system model to implement, management must consider and understand the structure type of its supply chain. The four structure types are pipeline, late customization, diverging and converging. Network design models are better for pipeline structures because of the supply chain's reliance on mass production stages and a single, standardized product. The rough-cut model is better for diverging supply chain structures because they manufacture many different products with a lot of customization. Late customization and converging structures can benefit from both network design and rough-cut models. Late customization structures are a combination of pipeline and diverging structures because of the limited customization allowed. Converging supply chain structures consist of multiple operational stages that are combined only in the end to produce the final product. (See Reference.)
Warning
Rough-cut system models are easier to implement but have the potential to endanger the reputation of a business; companies need to take the extra steps of the network design system to become aware of all other organizations' operations and values within the supply chain to avoid negative perceptions from consumers relating to real or perceived conflicting values within the supply chain.
Posted in: Products & Brands
