Implementation of Fisher's Model in the Supply Chain Management

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Introduction

Market globalization, intensifying competition and an increasing emphasis on

customer orientation are regularly cited as catalyzing the surge in interest in supply chain

management. Against this backdrop, effective supply chain management is treated as key

to building a sustainable competitive edge through improved inter and intra-firm

relationships (Seuring et al 2003). A range of benefits has been attributed to supply chain

management, including reduced costs, increased market share and sales, and solid

customer relations (Langabeer 2007).

There is one paper which presents a major contribution to the field of supply chain

management and this is Fisher’s What is the right supply chain for your product?

published in the Harvard Business Review in 1997. The influence of this paper on the

supply chain literature can also be seen by the number of subsequent papers that built

upon it.

This report will focus mainly on the applicability of Fisher’s model to New Zealand

environment. In adopting such a direction, the report has three specific objectives: (i) to

provide an overview of Fisher’s model; (ii) to critique it from the empirical and practical

points; and (iii) to discuss it applicability to New Zealand industry, particularly in public

health services.

An overview of Fisher’s model.

Over the long time it has been a well known fact that the process of getting right

product to the right place at the right time at the right price remains a challenging and

often elusive goal. Companies are struggling to improve not only their manufacturing

operations but also their supply chain operations, recognizing the increasing importance

of finding the best process and supply chain for their products.

Marshall Fisher, professor of operations and information management at Wharton and

co-director of the Fishman-Davidson Center for Service and Operations Management,

has suggested in the above mentioned paper that an effective supply chain has to be

designed with respect to the product that is going to be supplied through the chain.

Products can be either functional or innovative, depending primarily on its demand

characteristics in terms of life cycle length, demand predictability, product variety, and

market standards for lead times and service. Supply chains on the other hand can be

either market responsive or physically efficient depending on its design in terms of

resource strategy, inventory strategy, and overall objectives.

Fisher (1997) then has developed a matrix model to correlate relevant products and

ideal supply chains suitable for these products. Products that are innovative are

characterized by variation in demand and by short life cycles, they should therefore be

transformed through a responsive supply chain that has extra capacity, the capability for

market information processing, and that is more flexible.

On the other hand, a steady demand pattern, high volumes and long product life cycles

characterize products that are functional. A physically efficient supply chain that focuses

on cost minimization and high utilization of resources should handle this kind of product.

The other two combinations are assumed to create mismatches between supply chain and

products.

Fisher’s model is supported by case studies of Campbell Soup and Sport Obermeyer.

Campbell soup case has been brought as an example of successful distribution of

functional products via efficient supply chain. The company is implementing continuous

replenishment program. It allows to cut the inventories of participating retailers from

about four to two weeks of supply. At the same time this program embodies a model in

which the manufacturer and the retailer cooperate to cut costs throughout the chain,

thereby increasing profits.

Afterwards an author is bringing...
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