A lot has to get done when it comes to launching a new product. Aside from marketing and selling, enterprise executives need to know how much to make, how much to stock, and how they’ll spread that stock.
If the new product is replacing an older one, the enterprise would need to figure out what to do with the older product’s inventories and its raw and packaging materials. If the new product will involve purchase of new specialized manufacturing equipment, what will happen to the machines used for the older one?
New products also would have new characteristics. They may have more limited shelf lives. They may use materials that require special handling.
Many enterprise executives often plan very well the manufacturing and distribution of new products. Many, however, don’t have immediate plans how to respond to the actual demand as soon as the new product is launched. Higher than expected demand would wipe out inventories quickly and strain production and transportation capabilities. Lower than expected demand would result in inventories occupying precious floor space and idle machines and workers costing the enterprise money.
Every product has a life cycle. A new product may start slow or move fast but would eventually reach a plateau and decline. Some enterprises try to prolong the lives of their products especially if the products have profitable margins. Enterprise executives, on the other hand, won’t hesitate replacing maturing products in exchange for potentially more beneficial ones.
Joffrey Colignon & Joannes Vermorel, Product Life-Cyle (Supply Chain), April 2012, https://www.lokad.com/product-life-cycle-(inventory-planning)
Supply chain managers and engineers play a key role in the management of product life cycles. And it starts not when a product is launched but before. Many enterprise executives have the habit of telling supply chain managers to plan only when the product is just about to be introduced. And when the demand becomes reality, more often than not it comes out much different than expected; the supply chain manager ends up scrambling for more materials, more storage space, more production capacity, or the opposite.
Supply chain managers and engineers can contribute a great deal in the conception of a new product. The supply chain engineer (SCE) in particular can compute estimated needed capacities for production, transportation and storage. SCE’s can devise deployment plans and simulate various demand scenarios. They can also work out the quality assurance protocols not only for manufacturing but also for procurement and logistics.
In other words, SCE’s can develop a supply chain model for a new product. It wouldn’t just be a production plan or a distribution plan. It would be a comprehensive supply chain road-map that would synchronise the procurement of materials, production of goods, and inbound & outbound logistics. Such a road-map would even cover after-sales services such as warranty responses and retrieval of damaged or rejected items.
An enterprise would stand to benefit a great deal from a supply chain model for a new product. It would offer the enterprise’s finance team a better forecast of cost and working capital and give enterprise executives a clear crystal ball of how a product would do once it is in the market.
Making a supply chain model for a new product is not easy but it wouldn’t require re-invention.
Hernán David Perez, supply chain professional and teacher, developed a “Supply Chain Roadmap” that would answer the question: “which supply chain strategy best fits my business?” (Hernán David Perez, “Supply Chain strategies: Which One Hits the Mark?”, CSSCMP’s Supply Chain Quarterly, https://www.supplychainquarterly.com/articles/720-supply-chain-strategies-which-one-hits-the-mark, 2013 March 06).
Mr. Perez outlined six (6) generic supply chain models enterprises can adopt depending on their industries and strategies. The six (6) models consist of continuous-flow, efficient, fast, custom-configured, agile, and flexible. Each has a different focus, from low-cost (efficient) to agile (responsive to uncertain demand). An enterprise may adopt more than one model, i.e., it may use different models catering to different products or to specific areas of operations.
The role of the SCE would be to find and propose the right model that would best fit an enterprise’s new product. Mr. Perez’s six (6) models can be a reference for the SCE to tailor a model for the new product.
Developing a supply chain model for a new product is similar to managing a project, such as construction of a building. It starts with the design or what one wants the model to look like and function. Next would be the detailed plans of the supporting structures such as materials requirements, transportation, storage & handling methods, work crews, procedures & standards, quality assurance methods, and equipment.
Design and detailed plans are the end objectives, what we want the supply chain model to look like and how it will operate when the new product is launched. To achieve the end objectives, the supply chain professionals would need to draft the road map, the series of activities to build the structures that make up the supply chain model. It’s again similar to what project managers do: a critical path schedule that includes a timeline and the timing of investments in resources.
Implementing a supply chain model involves a lot of uncertainty. Demand, for starters, would be based on forecast and would no doubt come out much different than expected. The model should take into account various scenarios. To put it another way, the supply chain model should be ready to adapt. It should be quick to react to fluctuating demand such as preparing a customer order & shipping system that quickly notifies supply chain planners to position inventories immediately where they’re needed.
Costs, quality, and other issues would also likely crop up when a new product goes on line. Some people would blame it on the “learning curve,” that period of getting accustomed to a new set of activities. The longer the learning curve, however, the greater the expense and enterprises don’t want to spend too much time and capital for it. The supply chain model, hence, should also be prepared for changing situations on the ground. For example, the model should include training of machine operators and warehouse material handlers in regard to a new product’s characteristics and storage requirements. The model may also include facility designs that allow swift change-overs between product variants (e.g. sizes, colours).
The ideal supply chain model is one that does not only cover for the introduction of a product but it’s future life cycle stages as well. The supply chain model should incorporate monitoring systems that watch out for trends not only in demand but also in external factors such as commodity prices, freight rates, exchange rates, labour wages, taxes, and trade tariffs. It should also watch out for disruptions and opportunities which it should be ready to respectively mitigate or take advantage of.
It isn’t easy to launch a new product. It’s not simply just having stock ready when it’s time to sell the product. There are many things to consider if one wants to attain long-term success.
Every product has its life-cycle. One has to understand it and make a supply chain model for it in order to ensure its marketing success.
The best kind of supply chain model is one that is ready to meet the challenges of inevitable change.
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