Analysis

GROUP 4
Abhishek | Gaurabh | Kaushal | Pawan
 Products

Functional Innovative
Products Products

 Satisfy basic needs that do  Uncertainty of Customers

not change much over time reception
 Stable and predictable  Volatile demand
demand  Short life cycle
 High competition  High profit margins
 Low profit margins
 Physically efficient Market responsive
process process

Primary Purpose Supply predictable demand Respond quickly to

efficiently at the lowest unpredictable demand in
possible cost order to minimize stock
outs, forced markdowns
and obsolete inventory

Manufacturing focus Maintain high average Deploy excess buffer

utilization rate capacity
Inventory strategy Generate high turns and Deploy significant buffer
minimize inventory stocks of parts or finished
throughout the chain goods
 Physically efficient Market responsive
process process

Lead time focus Shorten lead time as long Increase aggressively in

as it doesn’t increase cost ways to reduce lead time

Approach to choosing Select primarily for cost Select primarily for speed,
suppliers and quality flexibility and quality

Product design strategy Maximize performance Use modular design in

and minimize cost order to postpone product
differentiation for as long
as possible
 Functional Products Innovative Products

Efficient Match Mismatch

Supply Chain (Campbell Soup Company) (Computer Industry)

Responsive Match
Mismatch
Supply Chain (Sports Obermeyer)
 20 years back Computer Industry produced innovative
products and lead time of one to two years was a norm

 Focus was to make supply chain physically efficient which

worked because of ample lead time

 Now Computer Industry produces PC/workstations and

acceptable lead time has dropped to days

 Focus is still on physical efficiency of supply chain

 Soup - price sensitive functional good
 Predictable demand so lesser scope of improvement in
market mediation cost

Improving Profitability/Sales:
 Traditional ways:
 Cost cutting -may reach saturation in short time span
 Price negotiation

 Recent trends:
 Better coordination across corporate boundaries- with
suppliers & distributors
 It established electronic data interchange links with retailers
 Used continuous replenishment program to predict and
optimize its production schedules
 Noticed that “Price promotions disrupted its supply chain”
 Large Stock ups adding costs to about 25% of price
 Forward buying
 Additional shipment cost

 Program cut the inventories of the retailers which increased

operating efficiency
 Retailers carry broader line and provide more shelf space to
Campbell products leading to high sales
 Demand Uncertainty
 Accept - Many companies find it difficult to accept
 High level of forecast error – Not acceptable
 Invest and command people to achieve forecast accuracy
 Predictable demand – Product would not be sufficiently innovative to drive high
profit margin
 Three co-ordinated strategies
  Functional products – Bought as
commodity
 Unable to compete with inexpensive bikes
from Taiwan and Korea
 New President emphasized on innovative
product
 Sport bicycle that affluent customer to buy,
purely on recreation

 Customized product offering

 Visit Panasonic dealership - Choose among 2 million options for
combining size, color and components
 Order would be faxed to factory, where computer controlled
equipment and skilled workers would manufacture
 Lead time to two weeks (99.99 % time)
 Market share jump from 5% to 29% in less than five years
 Manufactures fashion skiwear , 95% of its products are new
each year so faces the risk of demand uncertainty
 Used the approach called “accurate response” to cut cost of
both over production and underproduction
 To reduce uncertainty, Sports Obermeyer solicited early
orders from important customers
 Reduces Lead time

 Retailers got 99% availability