What Are Supply Chain Models?
Introduction to Supply Chain Models
There are many different types of supply chain models that businesses can use to improve their operations. The most common supply chain models are the bullwhip effect, the Beer Game, and the newsvendor model.
The bullwhip effect is a phenomenon that occurs when demand for a product suddenly increases or decreases. This can cause businesses to over- or under-estimate future demand, which can lead to inventory issues.
The Beer Game is a simulation that helps businesses understand how disruptions in the supply chain can impact operations. The game is played by four players who represent different parts of the supply chain: the retailer, wholesaler, distributor, and factory.
The newsvendor model is a mathematical model that helps businesses make decisions about inventory levels. The model takes into account factors such as demand uncertainty and cost of holding inventory.
Different types of Supply Chain Models
There are four common types of supply chain models: Make-to-Stock (MTS), Make-to-Order (MTO), Assemble-to-Order (ATO), and Engineer-to-Order (ETO).
Make to Stock:
The Make to Stock model is the simplest and most common type of supply chain. In this model, products are manufactured or sourced in advance and stored in inventory until they are needed. This type of manufacturing is often used for fast moving consumer goods or other items with a relatively stable demand.
Make to Order:
In a Make to Order supply chain, products are not manufactured or sourced until an order is placed. This type of manufacturing is often used for customized products or items with a volatile demand.
Assemble to Order:
The Assemble to Order model is similar to the Make to Order model, but with one key difference. In an Assemble to Order supply chain, components and raw materials are sourced and stored in inventory until an order is placed. Then, the product is assembled based on the customer’s specifications. This type of manufacturing is often used for products that have many options or configurations, such as computers or cars.
Engineer to Order:
The Engineer to Order model is the most complex type of supply chain. In this model, products are designed and engineered based on customer specifications, then manufactured once the order is placed. This type of
Advantages and disadvantages of Supply Chain Models
Supply chain models are used to optimize the flow of materials, information, and funds across the supply chain. There are many different types of supply chain models, each with its own advantages and disadvantages.
The most common type of supply chain model is the linear programming model. This model is used to optimize the use of resources within a company. It takes into account the constraints of each stage in the production process, as well as the company’s objectives. The linear programming model is very effective at optimizing production, but it can be difficult to implement and may not always produce accurate results.
Another type of supply chain model is the Inventory management model. This model focuses on minimizing inventory levels and maximizing customer service levels. It is often used in conjunction with other models, such as the linear programming model, to create a more comprehensive optimization strategy. The inventory management model can be difficult to implement and may not always produce accurate results.
The third type of supply chain model is the Transportation management system. This system helps companies plan their transportation needs and optimize their shipping routes. It takes into account factors such as traffic patterns, weather conditions, and delivery deadlines. The transportation management system can be difficult to implement and may not always produce accurate results.
How to choose the right Supply Chain Model for your business
There is no one-size-fits-all answer to the question of how to choose the right supply chain model for your business. The best approach is to first understand the different types of models that are available, and then evaluate which one will work best for your company based on a number of factors.
The three most common types of supply chain models are make-to-stock (MTS), make-to-order (MTO), and mixed-model. MTS is the simplest model, where products are manufactured in advance and stocked in warehouses until they are needed. MTO is more complex, as products are only manufactured after an order has been placed. This can lead to longer lead times and higher inventory costs, but can be necessary if products are highly customized or require a lot of assembly. Mixed-model is a hybrid of MTS and MTO, where some products are made in advance and others only after an order has been placed.
There are a number of factors that you should consider when choosing a supply chain model, including:
– The nature of your product: Is it perishable? Customizable? Time-sensitive?
– The level of customer service you need to provide: Are orders time-sensitive? Do customers require assistance with product selection?
– Your manufacturing capabilities: Can you produce products quickly enough to meet customer demand? Are you able to customize products?
– Your financial resources: Can you afford to stock inventory in
Conclusion
In conclusion, supply chain models provide businesses with useful tools to identify inefficiencies and develop strategies for improvement. By understanding the various types of supply chain models available, organizations can make informed decisions on which type best meets their needs and achieves their business objectives. With the right combination of data analysis, modeling resources and strategic planning, companies can use these models to maximize efficiency and reduce costs throughout their entire operation.