HOW TO CHOOSE THE SUPPLY CHAIN OF MY PRODUCTS
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#2 Week 1 - Supply Chain Management: Be Global
Hello friends, today, I will bring you an interesting topic that I learned on Coursera, Supply Chain Management: Be Global by Dr. Mehrdokht Pournader from Macquarie University.
This series will last for 6 weeks corresponding to the content of the course. I will experience and rewrite what I learn through each subject in a bilingual manner. Hopefully, my sharing will help you, especially those who are interested in Supply Chain!
#2 - Week 1:
Today we are talking aboutChoosing the right supply chain
When working in the Global Supply Chain, one may encounter problems with poor coordination between the company and its suppliers or the quality and quantity must be correct when the customer places an order, at the same time, the inventory of the company must be correct. We are missing or redundant leading to many unnecessary costs. These are just the tip of the iceberg, the problem will increase when we do not identify the right supply chain for our products and services as well as the overall strategy of our business.
Fisher’s framework
Fisher's framework is a tool to help you quickly and efficiently identify the right properties for your supply chain, helping to avoid problems. About tools, in 1997, Marshall Fisher introduced innovative products on Harvard Business Review as "What is right supply chain for your product". Fisher (1997) argues that almost all products can be placed in the spectrum from functional to innovative. Products and services will be classified and located in that range.
Imagine you are going to a mall with a list of things to buy for the next week. Looking at the shelves outside your list, you seem to forget that you are buying things on the list, you immediately visit the shelves of clothes, electronics, or try fruit and vegetables.
Back to Fisher, think about how often you shop, it's normal if you buy vegetables and food every 1-2 weeks, but with TVs and expensive headphones, it's less often right Are not? Almost all of us follow that buying behavior. That is also the biggest difference between the function (Functional) and creativity (Innovative) of the product. Functional products are products that meet your basic needs such as fruits, vegetables, food, these products are easily predictable with fairly stable demand and long product cycle (Product Life Cycle). Demand for innovative products such as electronics is less predictable with a shorter product life cycle because it requires continuous improvement to serve customers. As a matter of fact, many people often change their Iphone to higher-end models every year to enjoy the latest technology services.
The Innovative model is difficult to predict in terms of demand, but it offers a higher profit value than Functional. Based on Fisher's statement, we can compare Product Life Cycle, Profit Margin, Variety and Lead time to make-to-order products of two types of products (See more in the image below).
Innovative Product: Shorter Lifecycle, Higher Profit Margins, More Product Types, and Shorter Product Creation Time.
Functional Product: Long life cycle, Low profit margin, similar looking products, not much difference, quite long time to create
Fisher divides the two types of products into two different supply chains, which he calls Functional Product a supply chain that is physically-efficient. Innovative product is a market-responsive supply chain.
Physically-efficient supply chains, with a focus on the supply chain manager's need to reduce costs. For example, for dairy products (Dairy supply chain), we need to reduce the cost of milk production, reduce the cost of storing milk in the warehouse because this is a commodity with a limited shelf life and a perishable commodity. Perishable goods).
Market-responsive supply chain, the focus is on supply chain managers to respond quickly and promptly to market changes, minimize inventory, even no inventory, reduce inventory product prices to avoid inventory of obsolete products. For example, Smart TVs, manufacturers can only use the same production technology for a limited period of time. They need to make sure assembly lines and inventory levels are responsive to short-term fluctuations in customer demand. They must minimize the appearance and distribution of older TVs that are in less demand and when new product lines are produced. With the new TV line, manufacturers need technology suppliers who have components and spare parts at the time they need to be produced. The new supplier needs to ensure the expected quality and specifications. Manufacturers also need to redesign their production lines for the new TV product. This cycle repeats every time the company releases a new product.
Fisher is the starting point that provides you with an arrangement of strategies to suit each product type, Functional or Innovative.
How to do this, I will see you in the next post #3 Week 1!
Grate to Learn,