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What Is The Right Supply Chain For Your Product

By ton-y Apr 12, 2015 381 Words
Executive reaction - What is the right supply chain for your product, Newsvendor
1) What were the main supply chain issues or concepts presented in the article? (Use a bullet point list)

Utilizing the right supply chain for products is critical to improve performance Understand the nature of demand for products helps managers to devise supply chain that can satisfy that demand
Products that are classify by demand patterns are either functional or innovative Each type requires a different supply chain
Functional products require physically efficient process and innovative products require a responsive process
Functional products can become innovative products and vice versa over time. Mismatch between type of product and type of supply chain leads to waste and inefficiencies

2) What "take away's" did you get from the article? (i.e what did you learn that seems useful) The first step in devising an effective supply chain strategy is to figure out if you have a functional or innovative product. Since, functional products (staples such as toilet paper or toothpaste) have a predictable demand, companies can focus exclusively on minimizing physical cost to minimize inventory, maximize production efficiency, and maximize overall profits. Whereas innovative products have uncertain demand making the focus on market mediation more important because of the higher profit margins, higher cost of excess supplies, and shorter life product cycles. Thus, only when managers understand their product, they can more effectively manage the supply chain to gain a significant competitive advantage. In particular, the article provides really useful strategies between physical efficient and market responsive process. For example, physical efficiency focus should maintain high average utilization rate, generate high turns and minimize inventory, shorten lead time, select supplier based on cost and quality, and try to maximize performance by minimizing cost. For market responsive process, one should try to employ excess buffer capacity, deploy significant buffer stocks of parts or unfinished goods, invest to reduce lead time, select supply for speed, flexibility, and quality, and use modular design.

Lastly, managers should not become passive to one process because the products that are functional can transform to innovative types and vice versa. For examples computers companies were focus on physical efficiency, but when the market changed, and the product become more innovative, they needed to learn to become more responsive process.

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