Add to cart : $60
Rating:  4.3 / 5  (1237 ratings)

...Functional products are likely to have more stable demand patterns and less forecast error than innovative products. Also, inventory of functional products is less likely to become obsolete quickly, compared to inventory of innovative or "fashion-oriented" products. These differences will be important as we explore supply chain strategies.

The table below lists five characteristics, important to supply chain management, on which we would expect functional and innovative products to differ.¹ Read the statement next to each characteristic, and select whether you think it is generally true or false. When you have selected an answer for each of the five characteristics, press "Show Answers" to see the correct answers.

The typical functional product has more predictable demand and more competition; contribution margins are driven down by that competition. The typical innovative product has less predictable demand, less competition at the outset, and generally higher margins. However, the unpredictability of demand also creates overstocks for some Stock-Keeping Units (SKUs) and shortages for others, so that for innovative products we would expect to see both higher markdowns (at end-of-season) and higher out-of-stock situations. For example, these two costs are particularly high in the apparel industry; they have been estimated to be as high as 30% of all costs for apparel companies and apparel supply chains²...