Supply Chain Management and New Product Development - Research Paper Example

Supply Chain Management and New Product Development New product development and supply chain configuration or management go hand in hand. The underlying ingredient here is information or knowledge management. This paper integrates these three concepts to better understand supply chain management. Importance of New Product Development In keeping with the theories of competitive advantage which today's global market place thrives on, it is apparent that innovation is the name of the game. Innovation is that element in the global market place which deals with variations of the same product for the creation of a unique selling point for each kind of product and producer of the same. The reason for using the word producer along with product when talking of unique selling point is the fact that in today's world of commerce, brand identity is everything and this brand identity comes from a successful marriage of the product and its producer. (Chopra et al, 2007) New product development is that series of events that starts with the conception of the product and its ideation, and ends with reaching the product to the end user through strategic brand positioning through the meeting of competitive advantage. New product development is an important part of any and every business today in order to show a portfolio that thrives on enrichment through innovation and new experiences in the market place. It is a concept that will hold the prospective consumer's attention for long enough in order to turn him or her into an actual end user. In a nutshell, through new product development, one renders a quality of improvising and strategic branding to the business and helps reach out to more and more people and turn them into consumers. Therefore, it is an important part of meeting competition and venturing into new markets to increase profitability and brand visibility as well. (Savage, 2007) Table 1. Where Are the New-Product Opportunities Product type Advantages Disadvantages Examples True break- Through High profit High failure rate High R&D expense Epilady hair remover Betamax VCR Selectavision by RCA Lactaid (enzyme for break- Ing down milk sugar) Adaptations of existing product Greater chance of success More predictable sales patters Low R&D cost Small piece of large pie Less prestige Can become very competitive IBM personal computer Colgate baking soda toothpaste Healthy Choice frozen Dinners Line extensions Presold audience Keeps brand fresh and new Inferior product can dilute core brand Healthy Choice soups Compaq laptop computer Haagen Daz frozen yogurt Sony walkman variations New use No new manu- facturing costs Incremental sales opportunity Arm & Hammer baking soda as refrigerator deodorizer Planters nuts for baking New for you Existing market Tendency to jump in without proper research Thrive hair vitamins Conair telephones Citrus Hill OJ w/calcium Next generation Existing market Keeps you ahead of competition Makes competitive products seem old Helps fend off price competition Sell-in to retailers key Consumers may resist frills Computers (any brand) Citrus Hill orange juice with calcium (Source: Savage, 2006) According to the above diagram, the importance of new product development lies in the fact that there is a need in today's world of competition to keep redefining the business and its offerings. Most of the companies listed in the table have done just that by adhering to the latest technologies and making sure that their research and development department is on top of things every step of the way. This has also given rise to a particular kind of brand positioning and a pattern that these companies have constantly improved upon. (Ellram et al, 2007) Supply Chain Configuration: Offshoring and Outsourcing Fig 1: Options for a More Effective Supply Chain Management Model for Texan (Anderson et al, 2003) This model has been presented in the form of a flow chart with the aim of collaborating and organising the knowledge and information within an organisation to zero in on a strategy that makes the best possible use resources. (Hugos, 2005) The best option facing an organisation in context of the above diagram or flow chart is to test its supply management strategy on various suppliers instead of one supplier alone, in order to find the strengths and weaknesses of each of the suppliers. This will facilitate easy distribution of resources and efficiency in operations. (Copacino, 1997) The above diagram also relates to innovation in the supply chain. Role of Technology: Codifying Information and Knowledge Management According to the elements demonstrated in the above diagram, the operational context for knowledge management is one that follows a strategic approach. The guidelines for following the same within this particular organisation are as follows: (Payne, 1996) Converting localised efforts into more integrated efforts on the global front. Departmentalisation of efforts. Standardisation of activities. (Ellram et al, 2007) Investigative approach. Better personal networks. (Bernstein, 1997) Product Life Cycle: Importance of Technology, Knowledge in New Product Developement 1. Identification of an emerging demand of interest. According to this step, as described by Rick Kash in his book titled The New Law of Demand and Supply, there is a need to basically start out by defining the new product as a germination of an idea that has taken place due to certain observations in the market regarding new interest areas of consumers. (Kash, 2002) This follows a certain pattern. Thus, the firm hired a research and development team for the following purposes, listed according to priority: The latest goods in the market and their pricing. The most commonly purchased products. The segments that are buying these different kinds of products. The variations of products that most people in these segments are asking for or looking for. A segmentation of the products according to price and income groups of consumers buying them. The research and development team first carry out an appreciation by simple window shopping. Once they had a price list in their hands, they met with the store managers to get out names and income groups of the various consumers - both regular and otherwise. This helped them formulate questionnaires accordingly, which they would use in the progressive steps. The point of carrying out this step is to be able to implement a feature of demand as Rick has described in his book when he says that "demand is multifaceted." The translation of this law would mean that various kinds of consumers mean various kinds of need. (Lysons et al, 2006) 2. Funding and support Many business expansion plans needed funding for a variety of activities like research, development, production and marketing. Business loans have become easy to acquire in the past decade. With her credit drawing limit available with the bank one has a current account with, one can apply for business expansion loans for long and short term periods. 3. Target Segment The research and development team get together with the information team (IT) to get information on the target segments at the two following levels: Target or prospective buyers Competitors (Chopra et al, 2007) The first category promoted the following activities: Different sets of questionnaires for different segments so as to find the niche crowd to be targeted. First draft of the promotional agenda so as to effectively target this segment. The second category prompted the following activities: A study of the promotional strategies followed by the competitors, so as to zero in on a strategy that would be different and unique. A study of the unique selling points of these competitors so as to devise a unique selling point that would define the brand identity of the firm. These activities were found to be omnipresent in the following activities that are actually the stages that were followed towards preparation for the creation of the new product prototype: Defining the existing demand. Estimating the future demand. Finding store owners and other brands willing to buy and sell the product. Identifying the factors required for production and marketing, as well as the sources for the same. Devising a clear cut flow chart for the flow of activities from production to marketing to selling and finally repeat orders. In all these activities, there was a clear focus on the demand and the changing environment of the field of lifestyle and interiors. 4. Interviewing the Target Segment The interviews consisted of mostly option type questions and very few open end questions. They were conducted among the following groups: (Lysons et al, 2006) Upper class Upper Middle Class Lower Middle Class: Questionnaire V) Touch Points (Chopra et al, 2007) The following touch points were found among the target segments: Exclusivity Pricing More variety in the same line of products. VI) Competitors: (Chopra et al, 2007) The genuine competitors include combinations as follows: Strength: Quality; Weakness: Price Strength: Mass production and Price; Weakness: No exclusivity. Strength: Exclusivity; Weakness: Price. The touch points here would be: Price Exclusivity VII) Pillars and Concept Cards According to these touch points or parameters, the product was defined according to the following diagram: Source: ttm.co.uk This diagram will help the research and development team decide on the parameters of branding so as to articulate the needs of the core consumer. According to these segments and the competitors, the implementation team decide on a strategy so as to capture maximum consumer share and to make the touch points of the consumers as well as the competitors diverge so that the perfect product prototype could be designed and implemented for successful testing. (Fieg, 1993) VIII) Testing and Prototype Once the prototype has been readied, the testing stage follows in quickly. This is a crucial stage where the overall consumer behaviour is judged and any deviations in the path of the new product development process are found and corrected. (Kash, 2002) This kind of testing reveals that people liked the product and found it appealing in its freshness. (Chopra et al, 2007) IX) Final Approval The final analysis showed that the pricing as well as literature are then approved by and large with public consensus. This is where the product is either accepted or discarded. (Chopra et al, 2007) References Chopra, S. and Meindl P. (2007) Supply Chain Management: Strategy, Planning & Operation, 3rd Edition, Pearson Prentice Hall. Lysons K. and Farrington B. (2006) Purchasing and Supply Chain Management, 7th Edition, FT Prentice Hall. Fawcett S.E., Ellram L.M. and Ogden J.A. (2007) Supply Chain Management: From Vision to Implementation, Pearson Prentice Hall. Savage, Adam J (2007). Crafting an Ad that works. Available at: papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID306859_code020411530.pdfabstractid=306859&mirid=1 (Accessed during: August, 2008) Feig, Barry (1993). The New Products Workshop. ISBN: 0-07-020351. McGraw Hill Publications. Savage, Adam J (2006). Improving Business Education. Available at: papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID306859_code020411530.pdfabstractid=306859&mirid=1 (Accessed during: August, 2008) Kash, Rick (2002). The New Law of Demand and Supply. 2002. ISBN: 0-385-50432-2. Doubleday. L. Payne (Aug, 1996) Making Knowledge Management Real at the National Security Agency. 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