Fischer Supply Chain Matrix - Case Study Example

Fischer Supply Chain Matrix Name Professor Class University City Date of submission Introduction Supply chain management is the process through which companies actively manages the activities of supply chain to maximize consumer value and at the same time achieve a sustainable competitive advantage (Whipple and Robert, 2009, 21) This process is a representation of the active input of supply chain firms to manage and develop their firms in a way that is possibly efficient and effective. The latter involves the development of a product, sourcing, logistics, production and the systems of information that are required in the coordination of this activities as illustrated in the diagrams. Information flows and physical flows are used to link companies that form the supply chain altogether. In this case, physical flows represent the transportation, transformation and storage of goods and materials. On the other hand, control of the flow of goods and materials on a daily basis up and down the chain of supply and organization of supply chain partners for long term plans is made possible through information flows. Although supply chain management is a critical factor of success for current businesses, the latter is a rather challenging idea with goals that are very elusive all together (Whipple and Robert, 2009, 24). Henceforth, companies have now focused on searching for ways to make strategic decisions, improve their performance and come up with competitive strategies that add value to consumers tastes and fashion. Nonetheless, supply chain management lays emphasis on holistic management of the organization’s network that actively involves the production and delivery of products to customers. (Whipple and Robert, 2009) (Whipple and Robert, 2009) Literature Review The most important strategic issues for companies arise from the questions regarding supply chain management. To that end, a supply chain model that is well adjusted can generate decreased costs, increased turnover and increased efficiency with a company. Fischer suggests that the nature of product demand helps to design a supply chain strategy (Crandall, William and Charlie, 2011, 128). This implies that a match between a supply chain and type of product should exist. According to him, products can either be innovative or functional primarily depending on the characteristics of its demand. On the other hand, supply chains can either be physically efficient or market responsive depending on its design interms of inventory strategy, resource strategy and overall objectives. Fischer argues that functional product’s supply chain should be physically efficient and thus manufacturers should invest their energies towards the maintenance of high average rates of utilization and minimizing inventory (Crandall, William and Charlie, 2011, 132). On the other hand, innovative product’s supply chain should maintain a responsive process with manufacturers focusing on where to deploy excess buffer capacity and strategically place inventory in order to meet demand changes. Fisher’s model of supply chain is supported by Christopher and Towill’s models which also suggests the type of a product developed by a company is the main factor in determining the supply chain strategy to be implemented in an organization (Crandall, William and Charlie, 2011, 135). A company such as Diva relies on Fischer’s model in developing a supply chain strategy (Harrison and Remko, 2011, 124). Notably, reality tends to be simplified too much by the model and the theories of Fischer supply chain matrix as well as Christopher and Towill’s models. In this regard, a reason to question the theories is essential since the analysis of Diva’s operations has experienced a lot of problems based on the theories. To that end, other philosophers like Lo and Power (2010) and Selldin and Olhager (2007) have strongly criticised Fischer’s supply chain matrix theory. According to Lo and Power, the gap between innovative and functional products is too sharp that in actual sense, many products tend be functional and innovative in nature (Harrison and Remko, 2011, 126). This implies that the complexity of a product, the situation of a product in the life cycle and its uncertainty in material supply are also fundamental towards finding the most suitable supply chain strategy. In addition to that, they assert that Fischer’s model seem to lack product dimension and the impact it has on transport since different product types often call for different solutions of transport which may ultimately affect the supply chain strategy (Harrison and Remko, 2011, 129). On the other hand, Selldin and Olhager asserts that a much better and satisfying result is achieved by companies that do not match their supply chain strategy with their product as opposed to those like Diva which sticks to Fischer’s model. This is with regard to speed, competitiveness for price and certainty of delivery. Fischer Supply Chain Matrix and its Importance to Organizations Fischer developed the supply chain matrix from the fact that technologies and new ideas had failed to improve performance in supply chain (Stadtler, Hartmut, and Bernhard, 2011, 22). Ideally this is due to lack of a framework by managers towards making a decision on which ideas and technologies best suite situations in the companies. It was from Fischer’s efforts of consultation and research on diverse industrial issues of supply chain such as fashion apparel, food and automobiles that he was able to devise the supply chain matrix. The matrix is of important use to organizations as far as the designing of supply chain configurations is concerned (Stadtler, Hartmut, and Bernhard, 2011, 26). This is because it helps the management to have a clear understanding of the nature of product’s demand and consequently enabling them to formulate a supply chain strategy that efficiently satisfies the demand. According to Fischer’s supply chain matrix, an important step is involved in the designation of supply chain configurations. The nature of product’s demand supplied by a company is considered and involves many attributes like demand predictability, life cycle of product and its variety, lead time market standards and service. Fischer found out that products fall into two categories when classified based on demand patterns (Stadtler, Hartmut, and Bernhard, 2011, 33). Therefore, they can either be primarily innovative or primarily functional with each type calling for a distinctly differently supply chain. Henceforth, organizations are able to correctly match between product type and supply chain. Characteristics of Functional and Innovative Products According to the Fischer supply chain matrix, based on demand patterns, products are categorised into functional or innovative (Martin, 2010, 155). Functional products are all those products that are considered staple and are bought in many retailing outlets like fuel stations and grocery stores. Functional products are majorly used to satisfy basic needs that are stable, unaffected by changes in time, with a long life cycle and with predicable demand (Martin, 2010, 158). However, the stability of functional products tends to invite competition that in return results to low profit margins. On the other hand, many companies have opted to venture into innovative products in order to avoid the low margins of profit. To that end, they have introduced innovations in technology or fashion to offer an additional reason for customers to but their products. Examples of such products are personal computers and fashion apparel although there are other occasions in which innovations are least expected but have still managed to impress. Food companies such as Mrs. Fields, Starbucks Coffee and Ben and Jerry’s for instance, have gained an edge with designer flavours and concepts of innovation in the traditionally functional category of food (Martin, 2010, 162). Although innovative companies are able to realise higher margins of profits, demand can be made unpredictable to them by the very newness of products that are innovative. Nonetheless, the life cycle for products of innovation is short usually lasting for a few months since the competitive advantage enjoyed by innovative products tend to be eroded by imitators and thus companies are obliged to maintain a steady flow of innovations (Swink, 2011, 108). Furthermore, the unpredictability of innovative products is increased further by the great variety and short life cycles typical of these products. In addition, unlike functional products, innovative products tend to be unstable and change when the potential consumers change some aspects of their lifestyles and values. As opposed to the low margin and stable functional products, a fundamentally different supply chain is significant for innovative products with their volatile demand and high profits margins (Swink, 2011, 110). The market mediation for the functional products are made easy due to the predictability of such products. This is because a perfect match exists between demand and supply that can nearly be achievable. Therefore, industries that have specialized in functional products have an opportunity to exclusively invest towards the minimization of physical costs. However, this approach tends to be different for innovative products such that there is increased risk of excess supplies and shortages due to the uncertain market reactions to innovative products (Swink, 2011, 112). In this case, the short life cycle of innovative products increases the cost of excess supplies and the risk of obsolescence. Similarly, shortages cost tend to be increased by the importance of early sales and high profit margins towards the establishment of market share for the newly products of innovation. The type of supply chain processes required for functional and innovative products To be sure of the supply chain processes to be adopted by a company, Fischer suggests that the company should first determine the nature of their products as either functional or innovative or whether they have predicable or unpredictable demand (Lambert, 2008, 115). Second, the company should make a decision as to whether its supply chain is physically responsive or efficient to the market. The organization can therefore employ Fischer four cells of matrix which is a representation of the four accurate combinations of priorities and products for forming an ideal supply chain strategy (Lambert, 2008, 120). Using this matrix enables the organization to make a discovery of the process it employs for the supply of products and determine whether it is well matched to the type of the product. To that end, Fischer discovered that it is ideal for the functional products to have an efficient supply chain process while products of innovation recommend a responsive supply chain process. Conclusion In a nutshell, the insights drawn from the literature is that the association between the supply chain strategy and the nature of product as articulated in Fischer’s model is of less significance in supply chain management strategies. This is because most organizations have instead employed a hybrid strategy that takes into account product diversity to pursue both responsiveness and efficiency irrespective of their primary supply product. It is not possible to categorize products based on Fischer’s theory due to their diversity in terms of production. Henceforth, there is need to match several criteria in order to categorise products as either functional or innovative. In my own opinion, I recommend that a review of Fischer’s model and those of his critics is be done in order to come with a comprehensive model that takes into account the diversity of the nature of industrial products. I believe that when this is done, there will be no more operational problems in determining whether a company is operating on an efficient or responsive supply chain process. Bibliography Albaum, Gerald S., and Edwin Duerr. International Marketing and Export Management. Harlow [u.a.]: Financial Times Prentice Hall, 2011. 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