The Right Supply Chain

In: Business and Management

Submitted By tejasgodbole
Words 1042
Pages 5
The first step in devising an effective supply chain is to consider the nature of demand for your product. For this many aspects are important: Product life cycle, demand predictability, product variety etc. But any product can be broadly classified into as either a Functional Product or an Innovative Product based on their demand patterns. Root cause for ineffectiveness of any supply chain is the mismatch between the type of product and the type of supply chain. Functional Products are generally staples or those generally bought from the grocery stores or retail outlets. They have stable demands are price variations do not affect the demand drastically. Such products have long life cycles but they invite competition and usually have low profit margins. To have better margins companies introduce innovations in their products like those in fashion, technology etc. The newness of the products may make the demand for these products to be unpredictable. These products also have shorter life cycles, usually a few months as the competitors may erode the advantage by imitating it or coming up with another innovation. These factors further increase the unpredictability of demand for innovations. Also incorrect estimate of demand may hamper the supply chain. For example the demand for IBM ThinkPad was underestimated by the managers as it was an innovation during its launch and hence it was in short supply in the beginning. Due to the above differences both types of products require a different supply chain. A supply chain performs two different types of functions: 1) A physical function and 2) A market mediation function. The physical function deals with production for goods, movement of raw materials etc while the market mediation function ensures that the variety of products reaching the marketplace match those that the consumers want to buy. Each of…...

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