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Hybrid Supply Chains – Finding the Balance between Flexibility and Control

by Editorial Office

Global business processes are in a constant state of flux. This means that the requirements for modern supply chains are becoming increasingly complex. In order to maintain a balance between corporate stability and security on the one side and a flexible adaptation to changing market conditions and technological developments on the other side, business leaders are increasingly turning to hybrid supply chains. The latter combine different logistics approaches to ensure efficiency, resilience and flexibility. In this article, we explain which models of hybrid supply chains are available and what advantages and challenges they entail.

Hybrid supply chains – the different business models

Hybrid supply chains are modular systems that can be adapted as required. The design can range from tightly connected, centralized networks to decentralized, sporadic collaboration with suppliers or carriers, offering varying degrees of responsiveness, efficiency and resilience.

The different models of hybrid supply chains at a glance:

The digital-physical model: This model is a modern concept that combines physical material flows and digital information flows in the supply chain. Physical supply chains are therefore mapped digitally with the objective of creating data insight and maximum transparency across the individual process flows and being able to react as quickly and flexibly as possible to potential disruptions. Efficient data management helps to collect, manage and analyze the wealth of information. The insights gained in turn form the basis for measures and adjustments to the physical processes.

The push vs. pull-based model: The push-based approach is forecast-driven – forecasts form the basis for the scope of production. In a pull system, on the other hand, production is only triggered by actual customer demand. Hybrid models for managing production and supply chain processes combine elements from both approaches in order to utilize both proactive and reactive strategies.

The lean-agile model: Another hybrid model includes Lean and Agile approaches. The lean supply chain tries to avoid waste and focuses on producing large quantities at low cost. It focuses on reliability and predictability. In contrast, the agile supply chain reacts immediately to changing market conditions or customer requirements. In this context, the focus lies on speed of response and flexibility. Hence, planning cycles are shorter and decisions can also be made in a decentralized manner. In order to remain both flexible and efficient, many companies use this hybrid supply chain model. 

The integration-outsourcing model: With vertical integration, some key components of the supply chain are taken over internally (e.g. warehousing or sales), while certain processes are outsourced. By keeping core competencies in-house and outsourcing less critical areas, a company retains full control in a hybrid model while remaining flexible.

How companies benefit from a hybrid supply chain model

By integrating different strategies through hybrid supply chains, companies can leverage the strengths of each and minimize the respective weaknesses. Although the advantages of the combined models vary depending on the approach, there are arguments that generally speak in favor of the hybrid supply chain principle:

  • Increased flexibility and adaptability: By combining different strategies, companies can react more flexibly to unforeseen events such as weather disasters, strikes, resource shortages or changes in the market.
  • Risk management and resilience: Diversifying the supply chain helps companies to reduce the risk of supply bottlenecks or disruptions and to position themselves more resiliently overall by taking advantage of possible alternatives. Wrong decisions and the negative effects of individual models are reduced.
  • Cost efficiency: By weighing up the costs of different delivery routes and partners, companies can better control costs in the supply chain. They choose the most efficient aspects of each model and avoid unforeseen increases in logistics spend.
  • Improved scaling: The inherent flexibility of hybrid models allows companies to dynamically adapt their supply chain strategy in terms of operations and capacity depending on market conditions or growth. This allows both short-term and long-term business expectations to be met.

Mastering challenges with digital solutions

Hybrid supply chains have numerous advantages, yet their implementation and management is more extensive than that of a singular model. In addition to the complexity of management, factors such as costs, communication, organization of resources, performance measurement, predicting fluctuations in demand or data protection can be challenging for companies. In order to simplify, automate and make the associated processes more transparent, business leaders are increasingly turning to the use of advanced technologies. In addition to artificial intelligence, the Internet of Things (IoT), blockchain and cloud computing, collaborative platforms are often used. They support end-to-end supply chain visibility and thus promote collaboration and exchange between different players in the supply chain.

External expertise can assist when it comes to the implementation: Logistics service providers such as Hermes International offer specialized SCM software and thus provide support in evaluating existing data. This allows companies to continuously adapt their own supply chain with an customized strategy and develop the supply chain model that suits them best.

Conclusion: Hybrid supply chains – new opportunities for companies

Hybrid supply chains are the answer to the growing complexity and dynamics in the global logistics industry. Depending on a company’s specific needs, the strategic orientation of the hybrid supply chain can make a significant contribution to reducing operational risks, minimizing costs and increasing customer satisfaction. To realize its full potential and achieve sustainable competitive advantages, it requires careful planning, continuous monitoring and the implementation of digital technologies. It is certainly more complex to manage, yet when companies integrate the best of each approach into their strategic alignment, they remain agile and can adapt to changing market conditions with high responsiveness.

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