COVID-19 is rightly termed as the “wake-up call” for all industries – but for supply chains, it was a typical fight-or-flight situation. This year, it turns out that the resulting disruptions of the linear supply chain have hugely impacted its future. As a result, many supply chains are placing great value on deprecating traditional methods and migrating to more interconnected and transparent systems.
What’s a better way?
Change in “the way it is always done” is difficult to solve for any industry or system. After all, if you are deeply used to a system that has been instrumental for generations, switching to a new method is often nerve-wracking and inconvenient. The days of the linear model are numbered as it exposes only disparate parts of the chain to any outages or exceptions. And those extra lines are not discovered until very late, sometimes it is too late.
To improve the efficiency, sustainability, and transparency of the supply chain, two main models have been proposed and implemented: the network model and the circular model. Both models emphasize the supply chain as an interconnected system, rather than a “chain.”
The network model creates a system that is more resilient, more efficient, and more environmentally friendly than the linear supply chain model:
Elasticity: When there is a problem with the linear model, it’s a siloed scenario. In most of the cases, the problematic aspect resides within a specific part of the supply chain. Everyone may not even know that the interruption occurred. Whereas the network model allows all parts of the supply chain to identify and classify these problems, turning potentially catastrophic problems into more manageable problems.
Efficient: If all parts of the supply chain communicate effectively with each other, inefficiencies can be detected and corrected. This leads to a reduction in time-bound commitments and an increase in long-term profits. One way for the supply chain to start implementing more effective methods is to use cloud technology. Storing accessible information in the cloud and making it available to all stakeholders is the future direction of development, and many companies in the supply chain have seen the value of using this technology.
Environmental protection: Through the network model, all entities involved in the supply chain can communicate more effectively on issues such as how much packaging materials are needed and other factors that affect environmental sustainability. The network model also enables the company to reduce its total transportation costs and environmental impact, because due to increased visibility across the supply chain, there are fewer delays in shipments and fewer wasted transportation materials.
Looking at the supply chain in this unique way, we can see that everyone has a vested interest in the product, and the era of focusing on just one part of the business on the “assembly line” is gone. The model can also enable companies to use the JIT inventory storage method more effectively, because through the greater supply chain transparency provided by the network model, they will be able to better predict potential problems in production or supply.
The circulation model is another way of looking at the future of the supply chain. In a linear model, this process can easily be visualized as a one-way flow – materials are fed at one end of the chain, turned into products in the middle of the chain, and then delivered to consumers at the other. From there, these products were used until they were no longer feasible and then discarded.
In a highway analogy, the circular model is closer to a roundabout – traffic enters the centre circle, and now everyone can see how vehicles exit, enter, and re-enter the roundabout to get to where they need to go. The recycling model aims to improve sustainability by reusing any part of the waste product that can be put back into the system. As many supply chains begin to see the value of switching to network and circular supply chain models, the future supply chain will no longer be seen as a chain, but as an interconnected network.