WHAT IS THE RIGHT SUPPLY CHAIN FOR YOUR PRODUCT?

ARTICLE REVIEW – 1

REHAN JALIAWALA – ID#1293315

WHAT IS THE RIGHT SUPPLY CHAIN FOR YOUR YOUR PRODUCT? BY: MARSHALL L. FISHER

The article, “What is the right supply chain for your product?” talks about two fundamental classifications of products based on their demands, namely functional and innovative, the importance of an appropriate classification of the product and the associated most effective supply chain models for the two product types. The physically efficient process of supply chain is best suited for functional products and the market-responsive process of supply chain is more effective for innovative products. The article also uotes and dwells on some real world e!amples of both companies that have mismatched their product and the supply chain model as well as companies that have had success by using the appropriate model.

"unctional products have a predictable demand. Their life cycle is normally more than # years. The contribution margin$ for such products is usually between %& and #'&. The product variety is low and there is normally an average margin of error in forecast of about ('& when production is being committed. The lead time for a made-to-order functional product is somewhere between ) months and ( year.

*nnovative products usually have an unpredictable demand. The contribution margin$ for innovative products varies between #'& and )'&. The product life cycle is short, about + months to a year. ormally innovative products offer a large variety of products. The average margin of error in forecast at the time of production ranges between  '& and (''&. The lead time for a made-to-order innovative product can be between ( day and # weeks.

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ARTICLE REVIEW – 1

REHAN JALIAWALA – ID#1293315

The physically efficient process serves to fulfill predictable demands efficiently and at the lowest possible cost. This method of managing the supply chain keeps the manufacturing focus towards high utiliation, generates high turn-over of inventory, while minimiing inventory at all levels of the chain, minimie leadtimes to the point where additional cost is not incurred, find suppliers on the basis of cost and uality and normally design products that have a ma!imum performance and a minimum cost.

The market-responsive process responds uickly to changes in forecasted demands in order to minimie stock outs, forced markdowns and obsolete inventory. This supply chain model deploys e!cess buffer capacity while planning production, it ensures significant buffer stock of raw materials and finished goods is available on hand, it aims at minimiing lead-times by heavily investing in new and advanced technologies and suppliers are selected based on their speed, fle!ibility and uality. /roduct designs are modular to postpone product differentiation for as long as possible.

The ideal supply chain strategy is dependent on the nature of product demand. "or functional products, the efficient supply chain is highly effective. 0n the other hand, for an innovative product, the responsive supply chain is very effective. Though in essence the pairing of product and the respective ideal supply chain model seems simple, problems arise when products shift from one category into another either intentionally or unintentionally. 1 continuous assessment of product demand is essential to clearly and correctly identify classification of product and to adopt a model for the supply chain that gives the ma!imum utility for the o rganiation.

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