What is the goal of a Global Supply Chain Network

Design?
The key objectives of a global supply chain design are to optimize inventory, working
capital and logistics costs. It also increases visibility, identifies opportunities for cost
savings and reduces potential risks.
Supply network design reinforces the supply chain by mapping and modeling
processes and optimizing them to ensure that products or services are delivered on
time and in a cost-effective manner.

What is the Importance of Supply Chain Network

Design?
Analysts in a GEP white paper on the importance of supply chain network
design said that 80% of supply chain costs are determined at the designing phase of
the product and supply chain network. Thus, failure to consider network design can
cost the enterprise dearly and be counterproductive in the longer term.
Simply mapping a global supply chain network, its flows, timelines, current costs and
revenues generated can generate a bunch of troubling yet important questions, such
as:
 Why are the enterprises’ only suppliers based overseas?
 Why are there so many warehouses, and why in those locations?
 Why is there so much dead stock? Why has more inventory been ordered?
 Why are freight and trucking costs so high?
 Is the current network design efficient?
 Is the supply chain design aligned with the enterprises' sustainability goals?

What Are the Benefits of Supply Chain Network

Design?
Supply chain network design or SCM network design helps enterprises simulate and
visualize their supply chains to optimize them. Optimization of supply chains reduces
overall costs and enhances service, speed-to-market, flexibility and risk mitigation.
Here are the key benefits:
 Discerning parts for streamlining and potential cost savings
 Reduction in purchase costs and inventory
 Working capital reduction
 Reduction in freight costs
 Route optimization for reducing transit time and fuel costs
 Reduction in network fixed costs (facilities, equipment) and supply chain
variable costs (labor, handling, 3PL costs)
 Optimization of service levels and delivery dates for customer satisfaction
 Process and cost visibility across the supply chain network
 Providing performance visibility of the complete supply chain network by
comparing its capabilities/costs against set benchmarks
What Factors Are Considered While Designing a
Supply Chain Network Model?
To start with, enterprises must establish a benchmark, and to do so, the following
components must be considered:
 Define the objectives as aligned with the enterprises' objectives and the
supply chain design model parameters, such as capacity issues, inventory
replenishment lead times, customer needs, location of facilities and sources
and so on.
 Collate the required data, such as forecasts and future trends.
 Use network optimization tools and necessary data for building a “living”
model, incorporating the defined parameters and data collected.
 Validate the model with historical "what if" scenarios and compare the
outcome with known results.
 Finalize the supply chain network design and implement it.

How Many Types of Supply Chain Network Design

Are There?
Enterprises deciding to assess their supply chain network design must zero in on the
type of SCM network design to be adopted.
The three types of supply chain network design are:

Strategic Network Design:

Here, the designing of the network — location of the facilities and sources,
production and warehouse capacities, market strategies — must be aligned with the
objectives of the business.

Tactical Network Design:

Here, different ways to optimize the existing network are explored for implementing
short-term planning decisions.

Identifying Risks and Their Mitigation:

Here, risks are identified by asking “what if” questions. A plan of action (PoA) for
managing each identified risk is then made.
Also Read: Complete Supply Chain Management Guide

Should Supply Network Design Be Considered a

Core Process?
A supply network design is a dynamic process due to the ever-changing conditions
of the environment, markets, customers, suppliers and raw materials, including
weather. Thus, a supply chain model designed earlier will no longer be valid today.
It is an iterative process that continues to refine the model and ensures a more
consistent output. Regularly updating the supply chain model with the current
realities and parameters will provide accurate results over time.
Many top global companies consider supply chain design a critical function and a
core process, regularly rationalizing their models as required.

Ways to Make Supply Chain Network Design as a

Core Business Process
 Ensure a permanent network design center operated by a cross-functional
team with the necessary skill sets and experience.
 Plan the frequency and the critical issues that should flag the remodeling of
the supply chain design and establish these rules.
 Appoint a trusted consultant having in-depth knowledge and vast experience
in supply chain network design.
 Reach out for help when needed — approach other professionals or supply
chain design forums for help when needed.

Understanding Supply Chain

Models
There are four main supply chain models in use today: the continuous-flow
model, fast model, efficient model, and custom-configured model. Each
model plays a specific role in managing and optimizing the flow of a
business’s products or services. Supply chain management in general aims
to keep costs low, inventory levels stable, and delays minimized, and each
model approaches these goals in a different way.

Understanding and implementing the right supply chain model can have a
considerable impact on an organization’s bottom line. For example, a
designer clothes manufacturer using a continuous-flow model might not be
as effective as one using a fast model, as fashion trends come and go
quickly. Both company and consumer benefit the most from the supply
chain model that meets their unique specifications.

The Importance of Supply Chain

Models
The overall efficiency and cost of a supply chain largely hinge on the type
of model employed. Many moving parts make up a supply chain, including
initial planning and budgeting, acquisition and storage of raw materials,
manufacturing of goods, shipping and delivery, and the final sale of finished
products. Each of the four supply chain models are designed to optimize
these stages depending on the types of products made and their intended
market.

A particularly slow turnaround time in the supply chain may hurt the
organization’s financial well-being. Similarly, low-quality products or
services might cause customers to take their business elsewhere. That’s
why proper supply chain strategy is an important first step to identify which
model will best serve the entire chain.

The Continuous-Flow Model

Many industries call for constant use and replenishment of specific
products or services. These industries include pharmaceuticals, automotive
manufacturing, food service, and more. Businesses and organizations
involved in these types of supply chains typically adopt the continuous-flow
model for maximum efficiency.

Perhaps the most traditional of the supply chain models, the continuous-
flow model works well for organizations with high-volume production lines
and mostly uniform goods. This model aims to keep each stage of the
supply chain moving at a balanced, streamlined pace. Supply chain
managers using the continuous-flow model typically emphasize high
efficiency, standardization of operations, and quality control. Continuous-
flow supply chains pair well with a stable demand for the products and
services involved.

The Fast Model

Fast models are useful for businesses that, while still engaging in all the
standard phases of the supply chain, need to keep up with shifting
consumer demand. These businesses manufacture finished products that
tend to have a short market life cycle. Fashion brands, electronics
companies, and other consumer goods organizations benefit from the fast
model since their products may be perceived as trendy and experience
quick turnaround periods.

But it’s not always about trendiness. Many other businesses use the fast
model if they focus on speed and responsiveness. Fast model strategies
usually seek to maximize returns, minimize delivery times, and keep
customers happy with their purchases. Product quality isn’t necessarily
ignored, but it tends not to be the highest priority in this model.

The Efficient Model

Competitive industries stick to the efficient model so that their products and
services can reach the market as quickly as possible, especially when
demand is forecasted to be high. Since efficiency is their main goal,
organizations using this model make sure to prepare raw materials and
manufacturing processes well in advance to avoid delays.

Supply chain managers who operate under the efficient model keep a keen
eye on inventory management and strive to get the most output from
production equipment and labor. Additionally, these managers work to
balance low costs with good product quality. The types of organizations
that use the efficient model vary widely and may include anything from
breakfast cereal manufacturers to asphalt companies.

The Custom-Configured Model

Some organizations deal with very specific types of products or have a
customer base with unique needs. These organizations fare well with a
custom-configured supply chain model. As its name implies, the custom-
configured model is designed for customized scenarios in material
acquisition, production assembly, and delivery of finished goods. This
includes prototype products or products with multiple configurations. A
prosthetics manufacturer, for instance, might use the custom-configured
model to create and ship their products to hospitals or specialty care
clinics.

More flexibility and, in some cases, more investment may be required

under this model. Speed is not as important as careful, methodical
management of the supply chain, often with specific customer input.
Common examples of organizations that use the custom-configured model
include furniture stores, computer manufacturers, and makers of musical
instruments.
Supply Chain Models
Establishing and running a global supply chain is a complex activity, and using the
wrong supply chain model can expose an enterprise to risks and disruptions,
increasing costs and potentially damaging the brand. Selecting the right model for
your business requirements is thus a critical task.
Here are six types of supply chain models that can drive supply chain management
for a business:

1. Continuous Flow
This is one of the most traditional models on the list. The continuous flow model is
the best choice for industries and businesses that operate with stability. Stability is
essential for this model because it is required on both ends, i.e. at the manufacturer
and the buyer.
This model is well-suited for businesses that produce a uniform set of goods and can
expect a stable level of demand from the market. As the name suggests, goods are
in continuous flow in this model, and it is based on the stability of supply and
demand in the market. The systems in this type of supply chain management
method are aligned so that a continuous flow of goods can be ensured.

2. Fast chain
The fast chain model is one of the new names in supply chain strategies. It is
suitable for businesses that have product lines with short life cycles. For instance, a
fashion designer might have a specific line of designs in a season. The business
needs to take the fashion line to the market to maximize returns, as it is usually
based on current trends. As supply chain efficiency can increase a business’s
competitive edge, this model is usually considered the best among the several types
of supply chain integration.

3. Efficient Chain
The efficient chain model has been crafted for hyper-competitive industries. Under
this model, the end goal is to maximize efficiency. Following the efficient chain
model, the organization is expected to create proper production forecasts so that it
can prepare machinery and raw materials accordingly.
The biggest drawback of this model is that a disruption in the production or sales
cycle can create a lot of ripple effects across the supply chain network.
For instance, challenges like labor shortages or raw material shortages could cause
long delays, and the organization may have to bear additional costs due to the delay
in supply.

4. Agile
The agile model is well-suited for businesses dealing with specialty items where
products may require extra care in the supply chain. This model is usually fine-tuned
for the product that it is being used for. The agile model is known for the expertise it
requires to transport the goods from point A to point B and not so much for the
automation or technology involved.
Supply chain companies that follow the agile model can charge a premium price for
their services. Compared to the efficient chain model that thrives on high volumes,
the agile model is only profitable till a threshold of volume is met. After that, it may
prove costly to follow this model.

5. Custom-configured
The custom-configured model needs custom setups in the assembly and production
stages. It is a mix of agile and continuous flow methods where the product that is
being manufactured may require some extra customization, but it needs to operate
on an end-to-end basis. It is usually used for prototype design and manufacturing of
small batches. The custom-configured model requires additional investment from the
company as compared to more traditional models.

6. Flexible
The flexible model can handle high demand during peak season and quickly adjust
to a lean period with low demand. To run a flexible model efficiently, a business
requires the right supply chain management software and the right people with the
knowledge base to operate a flexible model with high efficiency.
These are the top six different supply chain models for enterprises, and they all
come with their own pros and cons. It is essential for businesses to identify a suitable
model for their supply chains that will meet their specific needs while helping them to
avoid any additional costs.
Having the right supply chain model in place is as important as having the right
people, processes and technology to manage the supply chain. It enables an
enterprise to improve efficiency and can help it build resilience to disruptions and
mitigate exposure to various risks. With the right model, companies can turn their
supply chains into a competitive advantage.