If you have been fighting the battle over many years, you tend to lose perspective and focus on operational minutiae, forgetting the big picture. In this cloumn, I aim to give you an overview of the strategic business drivers in the supply chain that affect system design. Functional vs. Innovative Products People traditionally characterize retail sector products as durable or nondurable goods. This categorization is very useful as it helps determine the appropriate supply-chain design to support differing demand patterns. Even though this classification is simple, it is very powerful in explaining the mismatches between product attributes and supply-chain design.
Functional products are commodities that have predictable demand patterns.
Thus, innovative and functional products' characteristics lay the foundation for supply-chain system design. The entire supply chain's focus is toward reducing costs and getting the right product to the right place, at the right time. Inventory buildups at any point in the supply are not supposed to occur. Innovative-product supply chains are geared toward supplying products with minimal lead times. This focus on lead times lets retailers respond better to spikes in demand, minimize forced markdowns, and avoid obsolete inventory costs.