Fishers Right Supply Chain

Types of Products
Nature of demand of products
determines Supply Chain
Product life cycle- low or high
Demand predictability
Product variety- high or low
Market standard for lead time-to supply
Market standard for service- stock
availability

Two categories of products based
on demand patterns
Primarily Functional
Primarily Innovative
Both require a distinctly different supply
chain
Mismatches between the products and the
supply chain adopted create problems
Primarily functional
Staple
Satisfy basic needs
Do not change much over time
Predictable demand
Long life cycle and hence stable
High competition because of stability
Low profit margins
Sensitive to price variations
Low mediation costs
SC Goals for Functional products
Efficient process
Minimize inventory
Maximize production efficiency
Minimize physical costs
Plan resources to achieve maximum utilization
Plan and schedule production and freeze
( commit) to achieve the same
Flow of information internal in the chain of
suppliers, manufacturers and retailers
Primarily innovative
Fashion orientation
Newness in design or technology, or concepts
High Variety (in styles, colours, shapes)
Unpredictable demand because of high variety
Short product life cycle, as imitators enter
Risk of obsolescence
High margins
Dependence on consumer behavior to change values or
life- style
Volatile demand
Mediation cost predominate

SC Goals for Innovative products
Responsive process
Early entry and early sales
Establish market share for new products
Quick reaction to market signals
Shorten delivery time, lead time
Faster new product development
Focus on market mediation costs
Positioning of inventory at appropriate channels
Allocation of available production capacity
Speed and Flexibility in changing schedules, variety
Focus on service to customer
Information flow within the chain, as also from market
place
Two types of costs by a SC
Physical costs
Market mediation costs
Physical function
Converting raw materials into parts,
components, finished products,
transportation from one point in supply
chain to the next
Costs: Costs of production, transportation,
inventory storage
A Right SC Strategy
Identify class of product- functional or
innovative
Decide if the present chain is physically
efficient or market responsive
Draw a matrix and determine if these
match. Ideally these should be left top
corner or right bottom corner
Eliminate mismatches by adopting right
SC
Matching Supply Chains with
Products
Functional Products
Innovative Products
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match
mismatch match
mismatch
Efficient SC Responsive SC
Minimize Cost, high
efficiency, quality,
High utilization of
plant capacity
High inventory turns
Continuous
replenishment
High responseSpeed,
flexibility, quality
Buffer of unused
capacity
Safety stocks
Lead time reduction




A simple rule of differentiation
Functional; Predictive demand
Innovative: Unpredictable demand

Functional: Efficient chain
Innovative; Responsive chain

Functional: low profit
Innovative: High profit