Product types, matching supply chains

After determining the nature of the product demand (e.g., functional and iimovative products) and the supply chain priorities (e.g., responsive or efficient), managers can employ a matrix to formulate the ideal supply chain strategy. Fisher proposes to plot the nature of the demand for each of the product families and its supply chain priorities, as illustrated in Fig. 4.31, in order to allow identify whether the process used for supplying products is well matched to the product type, which means, an efficient process for functional products and a responsive process for innovative products. 

Matching supply chains to product types — recognizing that supply chains should be designed with different objectives based on the products they support... 

Due to the effect of uncertainties, it is very diflhcult to match demand with supply in the supply chain. Fisher et al. [16] and Fisher [17] researched the matching problem between supply and demand in the uncertain environment, and they also researched and brought up different types of products and their matching supply chains from the perspective products from the sight of products which are produced and sold by the supply chain. Afterwards, the research on the effect of unceitainties on the supply chain has become an entirely new field in the supply chain management. 

For Supply Chain Approach, it is recommended to apply the proposed steps defined by Fisher (1997) to match type of product (functional or innovative) with... 

This line of thinking, Fisher argues, is dangerous if the type of product — functional or innovative — is not considered. For innovative products, this approach is particularly flawed. Fisher recommends consideration of market mediation costs in designing supply chains. Market mediation costs result from mismatches in demand and supply. And it is the core SCM mission to match these. This is particularly difficult because forecasting demand for innovative products is difficult, and disconnects between supply and demand result in market mediation costs. If there is too much product, the price must be marked down. If there is too little product, the company incurs another cost, the cost of lost sales. 

Pull-based ATP Models Pull-based ATP models perform dynamic resource allocation in direct response to actual customer orders. Models of this type can range from a simple database lookup to sophisticated optimization. The purpose of pull-based ATP models is to make best use of available resources (including raw materials, work-in-process, finished goods, and even production and distribution capacities) to commit customer order requests over a period of time across a supply chain. The time horizon in pull-based ATP models is usually so short that a company can assume full knowledge about the availability of production resources. Pull-based ATP models are responsible for matching complicated customer requests with diversified resource availability. The specific decisions usually involve which orders to accept and, for each order, what quantity and which due date to promise. 

Salzmann et al. (2006, p. 15) have identified a broad range of possible stakeholder impacts, e.g. (1) impacts resulting in the innovation of processes, products and supply chains and (2) impacts on brand value and reputation and customer loyalty. Similarly, it has been claimed that shareholder value will be best realized if companies include environmental and social responsibility objectives in their value creating statements, processes and products (Dobers and Wolff 2000). Stakeholders of all types are interested in associating with organizations with whom they can identify, and with whom they perceive a match in values (Pirson and Malhotra 2008, p. 17). 

If a company specializes in either functional or innovative products and has its supply chains designed accordingly, this is a good time to decide whether it s wise to invest in a completely different type of chain. Alternatives would be dropping the product altogether or licensing the technology to a company with a supply chain that matches the requirements of the product and market. 

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