"Supply Chain Changed"

SCM is one of the areas in an organization where about 60%-65% of money flow. In a typical supply chain there is always tradeoff between cost and delivery of the products. But in the current uncertain market scenario, cost and delivery of products won’t create any competitive advantage to the organization. Supply chain should be ‘agile’, to cope with the mismatch between supply and demand. And also an effective supply chain should be adaptable to the market condition. 

Supply chain of an organization should be adaptable to the fluctuations and uncertainties. The organizations should be flexible enough to change their supply chain strategy to meet the uncertainties and fluctuations. To be effective in supply chain management, an organization should align their interests with the customers and suppliers. 

Supply chain strategy depends on the type of product in which the organization is handling whether it is a functional or an innovative product. If it is a functional product, the organization should use the efficient supply chain i.e., it should focus on reducing the lead time unless it doesn’t affect the cost. If it is an innovative product, the organization should use the responsive supply chain i.e., fast enough to meet the demand.

Let’s see some of the examples for functional and innovative products. For functional product take the example of soft drinks (Pepsi, Coco-cola). These soft drinks are fast moving items. They should be in each and every shop whether it is a local kirana store or any big mall. It should be available in all the places. The reason behind this is people need them. Suppose I'm travelling in any rural area and suddenly I want to drink some soft drinks and I approach a store and asking for a soft drink of any brand. If the brand is not available in the shop, what will I do? I'll ask for some other brand and I'll quench my thirst. The supply chain of the soft drinks should be effective and make sure that it should be available in all the shops. At the same time, supply chain should be cost effective. Because replenishment of stocks will happen every day in each and every shop. If it is not cost effective, it will increase the operational cost and ultimately affects the bottom line.

For innovative products like Apple ipads or iphones responsive supply chain is the best. Ipad is an innovative product. It is new to the market. People are seeing the product for the first time. Demand for those products will be high. If the company can't meet the demand then it will lead backlog. Backlog is loss to the company. The supply chain should be fast enough to meet the consumer's demand. Another important thing here is the company should be good in forecasting the demand. If the forecasting is sceptical, it affects in both the ways i.e., it may lead to lots of inventory or backlog. Organisation should be conscientious about predicting the demand.

Reference: "Marshall L.Fisher, What is the right supply chain for your product? HBR, Reprint 97205"
                            "Hau L.Lee, The triple-A supply chain, HBR, page 102-112"