|
Module SCM102: Supply Chain Strategies I: Aligning Strategies; Efficiency and Cost Savings
|
|
|
| List Price: |
Duration: |
Word Count: |
Rating: |
Datasheet: |
| $60 | Approx.
1 - 2 hours | Approx.
9,000 words |  
(4.3 / 5) |  Download |
| Certificate: |
Counts toward Fundamentals of Supply Chain Management |
|
| Promotions: | Save $60 on "Fundamentals of Supply Chain Management" bundle; buy modules SCM102, SCM103, SCM104, SCM105, and SCM106 together and save $60 |
|
|
|
|
|
Functional vs. Innovative Products
Consider the labels "Functional Product" versus "Innovative Product"; what do these terms mean to you? Try to assign the following products to one of these groups by clicking on one button (functional or innovative) in each row. Then hit the "Show Answers" button to see our answers.
| Product |
Functional |
Innovative |
Our Answer |
|
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 table1 below lists five characteristics, important to supply chain management, on which we would expect functional and innovative products to differ. 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.
| Product Characteristic |
Statement |
True/False |
Answer |
|
Product life cycle is generally longer for functional products than for innovative products. |
|
|
|
Contribution margin is generally lower for innovative products than for functional products |
|
|
|
Sales forecast error is generally higher for innovative products than for functional products. |
|
|
|
Product markdowns are generally more common for functional products than for innovative products. |
|
|
|
Observed stockout rates are generally higher for functional products than for innovative products. |
|
|
|
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 estimated2 to be as high as 30% of all costs for apparel companies and apparel supply chains.
|
|
|
