The Supply Chain and New Products

Technology has a genius for becoming invisible — or, when not invisible, perfectly ordinary. 

From a supply chain standpoint, the introduction of a new product is both an opportunity and a threat. It s an opportunity to the extent that the new product will increase sales and vitalize a company s offerings. It s a threat if the introduction somehow misses the mark with prospective customers, rendering the investment in its development worthless. The supply chain may have a lot to do with success or failure. Supply chain management techniques cannot guarantee that a product will be a hit with customers. But a properly designed supply chain will assure that the product is introduced with the right kind of supply chain and that the economics of tiie supply chain are figured into tile product development process. 

There are as many new-product processes as there are companies that produce new products. Some companies depend on a constant flow of new products. An example is Rhino Records, which rereleases past hit music. This process produces about 15 releases a month. These add to an already significant catalog of prior releases. Au Bon Pain is a sandwich shop with locations in major metropolitan areas. Its customers may grab Ixmches at Au Bon Pain several times a month, so the menu can t be static. A flow of new menu items adds variety to customers diets. 

Both Rhino and Au Bon Pain rely on a fixed supply chain into which they laxmch new products. The supply chain processes for each product introduction are common, but each new product will have some variation that must 

For Rhino and Au Bon Pain, fhe supply chain is a central, vital process. However, it is likely to be stable — not changing much fundamentally but susceptible to continuous improvement modifications. Individual new products don t vary significantly from ifem to item. Each Rhino CD or tape and each Au Bon Pain sandwich has a lot of corranon with those that preceded it. But speed and efficiency in the process that produces them continues to be quite important. 

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Consumer packaged goods (CPG). The most common type of CPG supply chain is based on flows turn volume, promoted volume, and new product introductions. Hirn volume (frequently ordered products with stable demand) supply chains are designed to drive an efficient response. Heavily promoted items require a responsive supply chain and new products need an agile supply chain. New product introductions introduce the greatest variability and risk. The challenge is adapting the supply chain over time as companies launch promotions and new products into the market. 

It is often pointed out that the impact of the supply chain on new product development (NPD) and new product introduction is important in areas such as ... 

Product structure issues include how coordinated new product development is across the supply chain and the product portfolio. Lack of coordination in new product development can lead to inefficiencies of production, but there is also the risk of giving away corporate competence. The com-... 

However, if we prioritize access to capacity for product 1 (which has a higher variability), then the new lead times, using the formulas provided earlier, would be Z, = 1.12 and L2 = 4.03 days. With these lead times, notice that the corresponding safety stock for the first product would be 272.55 units (which decreases from the earlier case), while the safety stock for the second product would be 103.15 units (which increases from the earlier case). Note that the total inventory across both products is now 375.72 units. This decrease in inventory reflects the benefit of tailoring access to the supply chain based on product demand characteristics. Notice that giving priority to the more variable product permits its lead time to decrease, thus decreasing the safety stock for that product. But clearly this comes at a cost to the less variable product, whose lead time increases but at a slower rate. Thus, we have traded off lead time customization for an aggregate decrease in the overall inventory. 

Section 5.1.3 describes the differences between innovative and functional products. One observation is that similar products, like automobiles, may be different. An example is a Taurus being a functional product while a fashionable new convertible is an innovative one. The supply chains for these products should be different. The differences may not be so much in the physical flow, but in the decisions regarding inventory and availability of product. Because the products cater to different segments, they are likely to produce different margins and require different inventory economics. 

The ramp-up phase involves the adjustment of aU elements of the production system, so that instances of the new product (workpieces) can be produced with the required quality, in the planned quantities and within the proposed production costs per piece. This is a complex and stdl error-prone multidisciplinary task which involves engineers of several domains of expertise. As shown in the sequel, the major issue is related to knowledge management within the production system and along the supply chain of a production process. 

Redesign the business system. Create a new business model in which product, production system, delivery system, supply chain and customer care may all be changed. 

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