Unit 2 Supply Chain Structure

Supply chain structure refers to pattern in which

Meaning of Supply Chain Structure:
constituents parets arte arranged together. The characteristics of a supply chain
network that exercise a strategic influence on competitive forces are referred to
as structural factors . These factors include sharing of preofit across the supply
chain network. Supply chain diagram examples describe all the steps involved in
the whole process of procuring raw materials to the delivery of products to the
consumers. The supply chain typically begins with the vendors or suppliers going on
to manufacturing, distribution, and delivery to consumers. There are many sub-
processes involved in these big steps. Also, the supply chain varies from business to
business. Another variant of the supply chain diagram is the services supply chain,
where there are no raw materials and transportation has a very different meaning.

Let us review supply chain diagram examples ranging from generic to the supply
chains of giants in the industry to understand how these models support the
businesses.

Pharmaceutical Supply Chain Diagram

Example 1: Pharmaceutical Supply Chain Diagram

A pharmaceutical supply chain diagram covers the complete production cycle,

starting from procurement of raw materials, transforming them into products, and
then delivering products outside the company. An important consideration in this
supply chain is quality control and temperature maintenance because the products
deal with human health and life. You can draw a pharmaceutical supply chain
diagram for within the production and also for the outward delivery of products.
Supply chain diagram or structure clarifies about the role of each entities involved
in supplying products from producing point to consuming point.

Factors affecting supply chain structure

The structure of a supply chain can be influenced by several factors, including:

1. Market Demand: The volume and nature of customer demand can dictate the structure
needed to efficiently meet those demands.
 2. Product Characteristics: Factors like perishability, fragility, and complexity influence
how products are sourced, stored, and transported through the supply chain.
3. Technology and Innovation: Advances in technology, such as automation, AI, and
blockchain, can reshape supply chain structures by improving efficiency, transparency,
and coordination.
4. Cost Considerations: Factors such as labor costs, transportation costs, and inventory
holding costs impact decisions about supply chain structure.
5. Regulatory Environment: Compliance with laws and regulations regarding sourcing,
production, and transportation can influence supply chain design.
6. Globalization: Operating in a global market requires supply chains to consider factors
like international trade policies, tariffs, and cultural differences.

Efficiency Vs Responsiveness

Efficiency in the context of supply chain management refers to maximizing output while
minimizing input, thereby achieving optimal use of resources to meet customer demand. This
involves minimizing costs at various stages of the supply chain, such as sourcing, production,
transportation, and distribution. Strategies like lean manufacturing, reducing waste, and
optimizing inventory levels contribute to cost efficiency. Efficiency also pertains to reducing
lead times and cycle times within the supply chain processes. This ensures products reach
customers faster, improving responsiveness and customer satisfaction. Efficient supply chains
use resources such as labor, materials, and energy effectively. Techniques like resource
scheduling, capacity planning, and efficient routing of transportation contributes to this
aspect.Maintaining consistent product quality and reliability throughout the supply chain
enhances efficiency by reducing defects, returns, and disruptions. While traditionally associated
more with responsiveness, an efficient supply chain also possesses the flexibility to adapt quickly
to changes in demand, supply disruptions, or market conditions without compromising overall
efficiency.

Efficient supply chains rely on accurate and timely information sharing across all stakeholders.
This ensures better coordination, reduced lead times, and improved decision-making.Efficiency
in supply chain management is essential for achieving competitive advantage through lower
costs, improved service levels, and increased profitability. It requires continuous monitoring,
analysis, and optimization of processes and resources to align with business objectives and
customer expectations effectively.

Responsiveness in supply chain refers to the ability of a supply chain to quickly and effectively
react to changes in demand, supply disruptions, and other market conditions. A responsive
supply chain can adjust its operations, inventory levels, and logistics to meet customer needs and
expectations without significant delays. Key elements of a responsive supply chain include:

1. Flexibility: The ability to adapt production schedules, shift resources, and change
delivery routes quickly in response to changing conditions.
2. Speed: The capacity to deliver products quickly, often requiring efficient transportation
and streamlined processes.
 3. Visibility: Real-time monitoring of the supply chain, allowing for rapid identification and
response to issues.
4. Collaboration: Effective communication and cooperation among all stakeholders,
including suppliers, manufacturers, and retailers, to ensure smooth operations.
5. Technology Integration: Utilizing advanced technologies such as IoT, AI, and data
analytics to enhance decision-making and improve response times.

A responsive supply chain helps companies maintain high customer satisfaction, reduce costs
associated with overstocking or stockouts, and improve overall efficiency and competitiveness.
To maintain balance between efficiency and responsiveness is main objective of supply chain.

Pull Based Supply Chain

A pull-based supply chain is a model where production and distribution are driven by actual
customer demand rather than forecasts or predictions. In this system, products are manufactured
and delivered only in response to specific customer orders. This approach contrasts with a push-
based supply chain, where products are produced based on forecasts and pushed through the
supply chain to the end customer. Benefits of a pull-based supply chain include improved
efficiency, reduced waste, and enhanced alignment with customer needs. However, it also
requires robust information systems, strong supplier relationships, and effective coordination to
ensure timely fulfillment of orders.

Major characteristics of a pull-based supply chain are:

 Demand-Driven: Production and inventory replenishment are triggered by actual

customer orders, reducing the risk of overproduction and excess inventory.
 Inventory Management: Lower inventory levels are maintained since products are not
produced until there is a confirmed demand, reducing holding costs.
 Flexibility and Responsiveness: The supply chain can quickly respond to changes in
customer preferences and market conditions, improving customer satisfaction.
 Lean Operations: Emphasis is placed on eliminating waste and optimizing processes,
often aligning with lean manufacturing principles.
 Just-in-Time (JIT): A common practice in pull-based supply chains where materials
and products are delivered just in time for production or sale, minimizing inventory
levels.
 Push Based Supply Chain

A push-based supply chain is a model where production and distribution decisions are based on
forecasts and predictions of customer demand. In this system, products are manufactured in
anticipation of future demand and then pushed through the supply chain to the end customer.
This approach contrasts with a pull-based supply chain, where production is driven by actual
customer orders. Some benefits of push based supply chain are:

Economies of Scale: Large-scale production and purchasing can reduce per-unit costs.

Availability: Products are readily available for customers, potentially reducing wait times.

Simplicity: Easier to manage and plan in stable, predictable markets.

Some characteristics of a push-based supply chain include:

1. Forecast-Driven: Production and inventory replenishment are based on demand forecasts,

which are predictions of future customer demand based on historical data, market trends, and
other factors.
2. Higher Inventory Levels: To ensure products are available when customers want them, higher
levels of inventory are maintained at various points in the supply chain, including raw materials,
work-in-progress, and finished goods.
3. Economies of Scale: Larger production batches and bulk purchasing of materials can lead to cost
savings, but also increase the risk of overproduction.
4. Longer Lead Times: Due to the reliance on forecasts and the need to move large volumes of
inventory through the supply chain, lead times can be longer compared to pull-based systems.
5. Less Flexibility: The focus on forecast accuracy means the supply chain is less responsive to
sudden changes in customer demand, leading to potential issues like stock outs or excess
inventory.

Examples of Push-Based Strategies

 Seasonal Products: Manufacturing large quantities of seasonal items (e.g., holiday decorations)
based on anticipated demand.
 Promotional Campaigns: Producing and distributing products ahead of major marketing
campaigns to ensure availability.

A push-based supply chain can be effective in environments where demand is relatively stable
and predictable, but it requires accurate forecasting and efficient inventory management to avoid
the pitfalls of excess inventory and stockouts.
Commodity and cost centric supply chain

A commodity and cost-centric supply chain focuses primarily on minimizing costs and
maximizing efficiency, often applied to the production and distribution of commodity products.
Commodity products are typically standardized, widely available, and interchangeable with
similar products from other suppliers, making price a significant competitive factor.

Examples of Commodity and Cost-Centric Supply Chains

 Consumer Packaged Goods (CPG): Many CPG companies, such as those producing household
cleaning products or basic food items, operate cost-centric supply chains.
 Raw Materials and Minerals: Industries dealing in raw materials like steel, aluminum, and other
minerals often focus on cost and efficiency.

Some characteristics of commodity and cost centric supply chain are:

 Fast-Moving Consumer Goods (FMCG): Products that are sold quickly and at relatively low cost,
like toiletries, over-the-counter drugs, and perishables, typically follow this model.
 Cost Minimization: The primary goal is to minimize costs at every stage of the supply chain,
from procurement of raw materials to manufacturing, distribution, and delivery.
 High Volume Production: Emphasis on producing large quantities to achieve economies of scale
and reduce per-unit costs.
 Supplier Focus: Strong focus on selecting suppliers based on their ability to provide materials at
the lowest cost.
 Efficiency and Lean Practices: Implementation of lean manufacturing and other efficiency-
enhancing practices to reduce waste and streamline operations.
 Inventory Management: Tight control of inventory levels to minimize holding costs and avoid
excess stock.

Strategies

 Bulk Purchasing: Buying raw materials and components in large quantities to take advantage of
volume discounts.
 Outsourcing and Offshoring: Leveraging lower labor costs in different regions by outsourcing
production or offshoring operations.
 Automation: Using automated systems and robotics to increase production efficiency and
reduce labor costs.
 Process Optimization: Continuously improving processes to eliminate waste and increase
productivity.

Supply Chain for Emergencies

A supply chain for emergencies and calamities is designed to provide rapid and efficient delivery
of critical supplies and services in response to disasters, such as natural calamities, health crises,
and other emergencies. This type of supply chain must be highly resilient, flexible, and capable
of functioning under extreme conditions. Some strategies to maintain supply during emergency
are,

 Diversified Sourcing: Using multiple suppliers and sourcing locations to reduce risk.
 Partnerships and Collaboration: Engaging with various organizations, including local authorities,
international agencies, and private companies, to enhance resource availability and response
capability.
 Technology Integration: Using advanced technologies such as satellite communication, GIS, and
IoT for real-time tracking and coordination.
 Flexible Transportation Networks: Establishing multiple transportation options, including air,
sea, and land routes, to ensure delivery despite potential infrastructure damage.

Benefits

 Timely Response: Quick delivery of essential supplies can save lives and reduce suffering.
 Resource Optimization: Efficient use of resources ensures that aid reaches the maximum
number of people in need.
 Reduced Impact: Mitigates the adverse effects of disasters on affected communities.
 Enhanced Preparedness: Builds a foundation for better preparedness and resilience for future
emergencies.

Examples

1. Humanitarian Aid: Organizations like the Red Cross, United Nations, and various NGOs operate
emergency supply chains to deliver aid in response to natural disasters, conflicts, and health
emergencies.
2. Government Response: National and local governments often have disaster response units that
manage supply chains for emergencies, such as FEMA in the United States.
3. Corporate Partnerships: Companies like UPS and DHL often collaborate with humanitarian
organizations to provide logistics support during emergencies.

In summary, a supply chain for emergencies and calamities is a critical component of disaster
response efforts, designed to deliver essential supplies and services quickly and efficiently under
challenging conditions. Effective management and coordination of such supply chains can
significantly mitigate the impact of disasters on affected populations.