1. Product Supply Chain Management

2. Characteristics of a product in a effective supply chain management :  product life cycle  demand predictability  product variety  market standards for lead times and services.

3. Product classification on demand patterns productfunctionalinnovative

4. FUNCTIONAL PRODUCT The staples that people buy in a wide range of retail outlets.  stable and predictable demand pattern.  Many substitute in the market.  Long product life cycle.  Don’t change much over time. RESULT: 1.Competition in the market. 2.Low profit margin. EXAMPLE: 1.Toothpaste 2.Light bulbs

5. INNOVATIVE PRODUCT A Product that has innovative thought in designing the product which gives the customer additional reason to buy.  Unpredictable demand pattern.  Less alternatives in the market.  Short product life cycle.  Short lead time.  Great variety in product design. RESULT: 1.Steady stream of newer innovation to sustain in the market. 2.Higher profit margin.

6. Example:  Fashion apparel  High end mobile phones  Designer coffee.

7. FUNCTIONS OF A SUPPLYCHAIN Physical function Market mediation function

8. PHYSICAL FUNCTION Raw material partsComponents Finished goods Supply chain flow producerdistributerretailer Finished goods

9. MARKET MEDIATION FUNCTION Market mediation ensures that the variety of products reaching the marketplace matches what consumers want to buy. Product Right product

10. Each of the two supply chain functions incurs different costs: Physical costs are the costs of production, transportation, and inventory storage. Market mediation costs arise when supply exceeds demand and a product has to be marked down and sold at a loss or when supply falls short of demand, results in lost sales opportunities and dissatisfied customers.

11. What type of supply chain is required for different product types?

12. For functional product, predictable demand pattern ensures nearly perfect match between supply and demand. Easy market mediation. Functional product supply chain partners can concentrate on minimizing physical cost due to the price sensitivity of most functional product. PHYSICALLY EFFICIENT SUPPLY CHAIN

13. Efficient supply chain of functional product strategies:  Always in-stock availability through continuous replenishment.  Increased operating efficiency through the reduction in retailer’s inventories.  Greater supplier chain partner interaction and cooperation to cut costs throughout the chain.

14. suppliermanufacturerdistributerretailer marketplace Flow Of information Meet Predictable Demand at Lowest cost FUNCTIONAL PRODUCT - SUPPLY CHAIN INFORMATION FLOW

15. 1.The uncertain market reaction to innovation increases the risk of demand supply mismatch. 2. High profit margin increases the cost of shortage. 3. Short product life cycle increases the chance of obsolescence and thus the cost of excess supply. High market mediation function of the supply chain. To hedge against uncertain demand, the activities of the supply chain targets to minimize market mediation cost through increased speed and flexibility, not the physical cost. MARKET - RESPONSIVE SUPPLY CHAIN

16. market - responsive supply chain strategies to manage uncertainty  Accept the uncertainty as inherent in innovative product.  Continue strive to reduce uncertainty.  Avoid uncertainty by cutting lead time and increasing the supply chain’s flexibility for production to order type environment.  After reducing or avoiding the uncertainty as much as possible, excess capacity or buffers of inventory hedge against the remaining residual uncertainty.

17. suppliermanufacturerdistributerRetailer marketplace internal information External information INNOVATIVE PRODUCT - SUPPLY CHAIN INFORMATION FLOW

18. To devise the right supply chain for the product, the steps required are : 1.Determine the product types i.e. functional or innovative. 2.Decide the product supply chain is physically efficient or responsive to the market. Then the product supply chain matrix will direct which supply chain strategy is best suitable for different products.

19. MATCH MISMATCH MATCH INNOVATIVE PRODUCTFUNCTIONAL PRODUCT EFFICIENT SUPPLY CHAIN RESPONSIVE SUPPLY CHAIN PRODUCT – SUPPLY CHAIN MATRIX

20. Consequence of product – supply chain mismatch Functional product – responsive supply chain  High product cost  Poor service level to the market  Stock run out  Customer dissatisfaction. Innovative product – efficient supply chain  High inventories of unsold product.  Supply chain partner conflict.  Broken supply chain or unresponsiveness.  Product innovation affect badly.

21. GETTING OUT OF BLACKOUT Innovative product – efficient supply chain Moving to the left on the matrix and making the product functional. Or Moving down the matrix and making the supply chain responsive. Or For unresponsive supply chain for innovative product, product line fragmentation is done. REFERENCE

22. functional product – Efficient supply chain GETTING OUT OF BLACKOUT MATCHMISMATCH MATCH INNOVATIVE PRODUCTFUNCTIONAL PRODUCT EFFICIENT SUPPLY CHAIN RESPONSIVE SUPPLY CHAIN Innovative product – efficient supply chain

23. BACK Moving to the left is important when the product line characterized by frequent introductions of new offerings, great variety and certainly low profit margin. Example: Toothpaste is a product category in which a move to the left – from innovative to functional- makes sense.

24. Innovative product – responsive supply chain MATCHMISMATCH MATCH INNOVATIVE PRODUCT EFFICIENT SUPPLY CHAIN RESPONSIVE SUPPLY CHAIN BACK Innovative product – efficient supply chain

25. Innovative product – responsive supply chain AND Functional – efficient supply chain MISMATCH INNOVATIVE PRODUCTFUNCTIONAL PRODUCT EFFICIENT SUPPLY CHAIN RESPONSIVE SUPPLY CHAIN Innovative product – efficient supply chain MISMATCH MATCH

26. EXAMPLE 1.AUTOMOBILE INDUSTRY 2.CHEMICALS INDUSTRY BACK

27. REFERENCE: Marshal L. Fisher :What is the right supply chain for your product, Harvard Business Review