The document discusses the differences between functional and innovative products and how they impact supply chain practices. It notes that functional products have predictable demand and longer life cycles, allowing for forecasting, while innovative products have unpredictable demand, many variants, and shorter life cycles. The document advises determining if a product is functional or innovative in order to design the appropriate supply chain practices, focusing on efficiency for functional products and responsiveness for innovative products.

1. Presented by
Anupam Sharma
TAPMI, Manipal

2.  Latest technologies at use
 Dysfunctional industry practices
 Poor coordination among supply chain nodes
 Too much dependence on Forecasting
 High lead times
 Frequent stock outs
It all boils down to one question:
What is the nature of the demand?

3.  Functional product
 Demand can be forecasted
 Lower contribution margins
 Low product variance
 Less or no clearance sales
 PLC of 2 or more years
 Innovative Product
 Unpredictable Demand
 Higher contribution margins
 Often millions of variants per category
 Stock out rate of 10%-40%
 PLC of 3 months to 1 year

4.  Step 1
Is your product functional or innovative?
 Step 2
What is the nature of the current practices followed at
every node of the supply chain?
 Step 3
Identifying, based on step 2, whether the supply chain
is physically efficient or is market responsive

6.  What should I consider doing?
 Do I make my product functional ?
 Do I make my processes more market responsive?
 What factors should I consider?
 Would I make more by investing in the processes to
increase their responsiveness?
 Or does a functional product’s consistent, no-risk
offering sound more lucrative?

7.  Age old practice of supplying an innovative product
with a high lead time
 Over emphasis on making the supply chain efficient
 ‘If a customer really wanted it, he would wait’
 Product availability still a problem at large though
product innovations continue to increase in number
 Overcome the schizophrenia by making some of the
products functional and the rest innovative

8.  Having a match does not solve all the problems
 How do I supply my products efficiently?
 The Campbell mess
 Efficient processes at all nodes of the supply chain
 EDI links with retailer
 Slashed delivery lead time by continuous
replenishment
 Intensive price promotions lead to chaos

9.  Step 1
Accept the uncertainty
 Step 2
Strive to reduce uncertainty
 Step 3
Avoid uncertainty
 Step 4
Hedge against the residual uncertainty

10.  Accepted the uncertainty
 The product provided 2 million options to choose from
 Reduce uncertainty
 Demand became more predictable with proper
communication channels established
 Avoid Uncertainty
 A lead time of 2 weeks was promised to the customers
 Hedge Against Uncertainty
 Produce to order system allows National to match
supply with demand

11.  The nature of demand for your product offerings is to
be considered before devising a supply chain
 Following efficient practices need not necessarily
imply that you are doing all the right things
 Functional products require an efficient process
 Innovative products require a market responsive
process
 You, a manufacturer, can increase your share of the pie
by cooperating with the retailers by cutting costs
throughout the system