Demand and Design of Product as Determinants of Supply Chain Strategy - Example

Demand and Design of product as Determinants of Supply Chain Strategy Course Name Course Number Student’s Name Student’s Number Lecturer’s Name Date Demand and Design of product as Determinants of Supply Chain Strategy Introduction The past few decades have seen great advancements in the electronic and technology industries. Due to that many companies have totally revolutionalized their ways of functioning and approach to management. In general terms the electronics industry can be termed as highly competitive and most significantly fast-moving. The changes that have been witnessed in the recent past have boosted productivity by making more efficient, cheaper, faster and capable of producing high quality products (NAM, 2006). Electronic industry can be ranked among the growing industries going by the rapid speed of transitions witnessed in the industry. There are a number of implications that go with such kind of an industry. For instance there exist many market imperfections such that economic models fail to be reflected in the industry. This is exactly the case when the price trends are studied. Increases in prices of electronic products do not reflect a proportionate change in demand. What the perception is by consumers is that increases in prices represent value of the product in question. Imperfections are reflected in the market liberalization where there a lot of restrictions and regulations by national laws. Governments are sensitive to dumping of electronic products and companies have to negotiate long and cumbersome procedures before they are allowed to operate in overseas markets. Modern supply and distribution functions are based on the demand perspective rather than the supplier perspective. In this sense the producers have to design their products in regard to what the market wants. This is followed by a supply chain that is devised to efficiently link the producer and the consumer with minimum bureaucracies. Such strategies require that the design of product and supply chain be incorporated in the initial stage of strategy formulation by management. The report herein will focus on the effect of both demand and design of the products of Apple and Samsung on the choice of the supply chain. The demand levels have been turbulent in the industry with new products generally enjoying high demand in their initial days of introduction. This scenario can be traced back to the desire by consumers to move with fashion. The design of the products also influences the choice of supply chain will the owner of the design trying to protect the original product from counterfeit products or imitations. Product Demand and Supply Chain The link between product demand and the supply chain has proved a prudent idea in this time and age. The supply that maximizes revenue is that which is pulled by the consumers rather than that which is pushed by the producers. Every entity produces with an intention to sell and hence distribution should be guided by demand levels. There are two negative outcomes of supply chain strategy that is not demand oriented. One is the supply of less than wanted demand levels (Fisher 1997). This is where the consumers are left asking for more but the market cannot provide. The entity is likely to lose customer loyalty as they lose confidence in the company’s ability to meet their needs satisfactorily. The other case is where the company distributes more that the consumer group can buy. The organization bears the costs of re-shipment to new regions or remark the products downwards famously known as selling at a throw away price. The two outcomes are undesirable for business that operates in a competitive industry. In this regard the connection between supply management and demand levels is well exemplified. The operations of the two companies largely reflect that. This is going by the location of their distribution stores. The grand strategy has been placing the distribution points at the closest destination possible based on the target customers. The products of Apple for example target the high class population and to that effect its distribution stores are concentrated in developed countries particularly in major cities and towns. Product Design and Supply Chain Product design refers to the physical feature of the product with respect to usability, aesthetics, ease of handling and functionality. Supply chain design entails the logistical process that transfers the product in question from the hands of the producer to the hands of the final consumer. This incorporates the associated formalities of storage, transportation, fragility among others. All these attributes together dictate the design of the product as well as the choice of supply chain that best serves the specifications of the product. The physical attributes of the product has a dimension on supply costs. Very sensitive products will require specialized warehouses for storage and transportation. High value products require high security measures and by extension high insurance premiums. It is in light of all these factors that a high correlation can be drawn between the design features of a product and the supply chain strategy that would suit its distribution (Khan & Creazza 2009). Apple and Samsung operate in the technology field where fashion is the tone of business language. People are generally trendy and want constant transformations in the products they use. Other players in the industry are fast to design new forms of products and the pressure mounts to each and every firm to develop the product that best appeals to the well informed customer base. Newness is the trend is the technology business. This is, however, not to suggest that consumers are not responsive to quality (Apple, 2012). The youth and corporate customers lead the wave of social transformation in the electronic industry. For the youth their desire is to have high quality and fashionable accessories that are multitasking. Corporate customers on the other hand are looking for the software products that are highly advanced, efficient and most importantly guarantee the security of their information. They want an assurance that they can store, manipulate and transfer data without the risk of being hacked or being distorted along the way. In this sense Apple and Samsung have been moving with the pace of their customers. This is evident in its fast transformation of products. Year 2011 was a year of transformation for the two companies going by the number and the quality o the products they offered to the market. The most striking by Apple Inc was the iPhone which comes as a combination of a cell phone and an internet communication device. The iPad is another mobile device with multipurpose applications including handling mails, watching web videos, reading e-books and many more. Other introductions in the industry include the large variety of mac hardware products, itunes, mac app store, icloud, many software products and computer technologies. These are just few examples demonstrating the company’s desire and ability to respond to social trends and fashion (Apple Inc., 2012). Samsung was not left behind with its classical Samsung Galaxy. These developments were as a result of top class innovation initiatives aimed at giving a new taste to the consumer groups who never cease to log on new products. The rationale of the massive developments in new design is the known and verified results of new products. Past reviews and research studies on the effect of design on the success of business have provided compelling evidence suggesting that the two go hand in hand. Design has been linked to various positive market fundamentals such as market share, competitive edge of a product and company and general growth in the entity and sales volume. There are associated financial aspects that result from design which include increase in share price in the money and stock markets, high return on investments for the owners of the company among others. There are also operational benefits that come with advancement in design. Such would include high productivity and reduction in the costs of production as a result of improvement in technology and new ways of production. The two companies operate in a fast-moving industry where the preferences of the consumers change randomly and rapidly. The changes in perceptions of consumers in the electronic industry do not follow any trend that can be objectively analyzed. What can be said of the market is that a new brand of product will hit the market with a boom at the first stages of its introduction if and only if its introduction strategy is well formulated and implemented. The perception of the consumers must be geared into believing that the product has features not currently contained with the existing brands in the market. The wave of competition in the industry almost dictates that a competing firm will borrow the features of the new product and apply them to create a parallel product to rival the original one. The competitor is likely to be able to offer more competitive prices since he has not incurred much cost on research. This means that when a firm comes up with a new design then it must design the supply chain co-currently that will facilitate its fast and effective distribution to the market such that before a rival product reaches the market the research costs have been recovered and some profit margin ascertained (Rich & Peter 1997). This argument underlines the vast importance of linking product design and supply chain design. It is in line with this understanding that the two companies have opted for very aggressive supply chain strategies. The two multinational companies have distribution stores in more than one hundred countries of the world where they serve. This reduces the distribution channel as well as reducing the number of third parties (intermediaries) who are handling the products. Largely this is due to the sensitivity of the products hence requiring careful and specialize handling. The high value of the products they deal with necessitates that the number of destroyed units in distribution be kept at minimum. In any case the costs of preventing such destruction are far below those of replacing destroyed units. Discussion and Recommendations There are two strategies that would go well with supply chain management for the two multinationals. One of those is the just in time strategy. This entails production that is fully based on demand. The system, initially applied by Japanese automobiles entails producing units for which orders have been made. The system demands a high level of efficiency from the manufacturer and the supplier of the factors of production. The rationale of the system is to completely eliminate the holding costs. Another strategy that the two companies have adopted is the online shopping formally known as emarketing. The emarketing objective is aimed at modernization of consumer relations management by placing the customers at the center of all marketing operations. That means that all online initiatives are dedicated at providing what the customer perceives as valuable. This is a total marketing perspective. In essence the first stage is ensuring that what the customer needs is availed in the place he/she would most prefer and on time. Market information and real time data is passed to the consumer to guide him/her on the buying behavior. This is with regard to new models, change in prices, branding and such attributes (Weller 2007). In this regard online shopping should be made the most convenient and easiest way of interacting with customers. The information they may want to have regarding the most recent market trends is made ready for them for use for the mutual benefit of the consumers and the company. Marketing automation and increasing of the customer contact points will facilitate this move. Online shopping would fasten the rate of transactions as the consumers would simply log onto company websites and learn from the catalogues the products on offer and their functional features. They would have the option to make an order online and make payment through services such as PayPal. The marketing approach for the electronic industry has to take a full cycle transformation. Previously the industry has been dominated by the manufacturers and wholesalers striving to avail the products at the consumer’s point of convenience. This state of affairs is, however, changing with the advent of online shopping. This has been a major breakthrough in the electronic industry globally. Design oriented entities such as Samsung and Apple benefit from the aspects of continuous improvement which is their core calling in their line of duty. Each subsequent unit of production is an improved form of the previous one. They are able to reap the accruing rewards of learning curve effects and this among other factors have enabled the two companies to be the market leaders in the versatile industry by leading the wave of design and innovation. Conclusion Based on the ensuring facts it is safe to conclude that the operating policies of an entity will best yield the intended results if and only if they are properly aligned with market demand, product design and the supply chain management. There is universality of practices for entities that incorporate supply chain management at the conception of their new product development. Supply chain management is a viable toll that can be applied to reconcile the resources of an organization to the opportunities and threats subsisting in the market. For the system to succeed, all the discussed variables need to be consolidated into the grand corporate strategy to promote internal synergy and resource reduce wastage. References Apple Inc. 2012, April 14, International Business Times. Apple. 2012 Investor News, Retrieved from http://investor.apple.com/ on 30th September 2012. Cox, A 1999, ‘Power, Value and SCM,’ Supply Chain Management: An International Journal. Vol. 4 no.4, pp. 167-175. Fisher, ML 1997, ‘What is the Right Supply Chain for Your Product?,’ Harvard Business Review, Vol. 75, 2, pp. 105-16. Harps, LH 2000, ‘The Haves and the Have Nots: Supply Chain Practices for the New Millenium,’ Inbound Logistics Journal. Pp.75-114. Khan, O & Creazza, A 2009, ‘Managing the product design-supply chain interface: Towards a roadmap to the design centric business,’ International Journal of Physical Distribution & Logistics Management, Vol. 39, No. 4, pp. 301-19. National Association of Manufacturers, (NAM) 2006, ‘How Structural Costs Imposed on U.S. Manufacturers Harm Workers and Threaten Competitiveness,’ Report. Pero, M, Abdelkafi, N, Sianesi, A & Blecker T 2010, ‘A framework for the alignment of new product development and supply chains,’ Supply Chain Management, An International Journal,Vol. 15, No. 2, pp. 115-28. Rich, N & Peter, H 1997, ‘Supply Chain Management and Time-Based Competition: The Role of the Supplier Association,’ International Journal of Physical Distribution and Logistic Management, Vol. 27, no. 3, pp. 210 – 225. Weller, SA 2007, ‘Fashion as Viscous Knowledge: Fashion's Role in Shaping Trans-National Garment Production,’ Journal of Economic Geography, Vol.1 pp.39–66. Read More