Product Category and Life Cycle are Key Components in Supply

Product Category and Life Cycle are Key Components in Supply
Chain Management
WANG Dongai
Mechanical Engineering School
Tianjin University of Commerce, P. R. China, 300134
Abstract Supply chain management (SCM) has been given much attention in academic research and
industrial application. However, failures in SCM are still not uncommon in today's industries. In order
to improve and optimize supply chain performance, different products should match different SCM
strategies and SCM strategies should change over the life cycle of the product. This paper synthesizes
past research about SCM based on product and product life cycle and discusses the product
classification and supply chain types. We close the paper with recommendations for future research in
supply chain management based on product and product life cycle.
Keywords supply chain management, product life cycle, product classification
1. Introduction
Due to development of science and technology, the globalization of market economies, shortened
product life cycles and rising manufacturing costs, increasing attention has been placed on supply
chain management. Supply chain management is the term used to describe the management of
materials, money and information across the entire supply chain, from suppliers to component
producers to final assemblers to distribution (warehouses and retailers), and ultimately to the
consumer[1]. It is the use of information technology and automated intelligence to the planning and
control of the flow of supply chain to speed time to market, reduce inventory levels, lower overall costs
and, ultimately, enhance customer service and satisfaction.
Despite much attention given to supply chain management, failures in SCM are still not uncommon
in today's industries. For a manufacturing enterprise, the products are their core competences, which
make them survive in the current competitive marketplace. Effective and efficient supply chain design
should be based on the manufacturing enterprise’s product characteristics and product life cycle. This
paper synthesizes past research about SCM based on product and product life cycle. Similar and
dissimilar aspects, advantage and shortage are discussed about the product classification and supply
chain strategy. Moreover we extend Fisher’s matching frame between product types and SCM
strategies. Recommendations are put forward for future research in supply chain management based on
product and product life cycle, including marketable product life cycle and physical product life cycle.
2. Review the research
Product is the core of supply chain. The aim of SCM is to make the right product, for the right
customer, in the right amount, at the right time. Many scholars and supervisor have done much work
on SCM based on product and product life cycle. Product life cycle describes the stages a product goes
through from beginning to end. It is generic description of the way a product behaves in the market. It
is divided into four stages: introduction, growth, maturity, and decline. Figure 1 illustrates the product
life cycle. We define it as marketable product life cycle.
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Figure 1 Marketable product life cycle
In Fisher's research, a number of cases were analyzed to indicate reasons for success and failure in
supply chain management. As a result of the research, Fisher proposed a conceptual model for
matching product types to supply chain management strategies as illustrated in Fig. 2[2]. As seen in
the conceptual mode, products are classified into two categories, functional products (with small
demand variance ,long product life cycle, low variety and low profit margin) and innovative products
(with uncertain demand, short product life cycle, high variety, and high profit). Then, supply chain
strategies are classified into a physically efficient process to supply predictable demand efficiently at
the lowest possible cost, and a market-responsive process to provide quickly response to unpredictable
demands. Fisher's conclusion provides a significant framework for establishing suitable SCM strategies
under particular operational environment.
Responsive
Supply Chain
Efficient Supply
Chain
Functional Products
Innovative Products
Match
Mismatch
Mismatch
Match
Figure 2 Fisher’s conceptual model on matching SC
strategy to products[2]
Christopher and Towill developed the product classification system with five parameters, Duration
of life cycle, time Window for delivery, Volume, Variety and Variability, with the acronym DWV3[3].
Childerhouse[4] et al apply the system to the supply chain management approach of their case
company in the lighting industry. Interestingly, the product life cycle appears to be best suited to
explain the five different supply chain strategies identified. According to the authors, the product life
cycle provides not only the basis for shaping the supply chain to suit particular marketplaces, but it
incorporates the dynamic perspective needed in order to adapt to changing marketplace conditions. The
dynamic product routing through its product life cycle is best supported by supply chain strategies
ranging from “design and build” in the introduction phase, via “MRP” and “Kanban” in the growth
and maturity phases, to “packaging centre” and “MRP” in the product’s saturation and decline
phases[6].
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Vonderembse[5] et al developed a framework for categorizing the supply chain types according to
product characteristics and stage of the product life cycle. They considered the key success factor for a
product change as the product moves through its life cycle, and this may require different supply chain
characteristics and capabilities [3]. They provided the insights for discrete part manufacturing firms
that design, implement, and participate in supply chains based on the literature review, theory
development and case studies. From table 1 it can be seen that to have the highest internal performance
and customer satisfaction, Standard products should be designed and produced by Lean Supply Chains
through all stages of the Product Life Cycle. Innovative Products should be designed and produced by
Agile Supply Chains in the Introduction and Growth stages of the Product Life Cycle but by Lean
Supply Chains in the Maturity and Decline stages of the Product Life Cycle. Hybrid Products should be
designed and produced by Hybrid Supply Chains throughout the Product Life Cycle.
Table 1 Supply chain classification based on product
type and product life cycle[5]
Product Type
Product
Life Cycle
Introduction
Growth
Maturity
Standard
Lean
Supply
chain
Decline
Innovative
Agile Supply
chain
Hybrid/Lean
Supply Chain
Hybrid
Hybrid
Supply
chain
These are three typical literatures linking product types in general, and the product life cycle with
supply chain management. There are more other contributions to the research. Table 2 illustrates an
overview of the works.
Table 2 Supply chain strategy based on product and product life cycle in the literature
Author
Product(life cycle)
SC strategy
Fisher
(1997)[2]
Product demand pattern:
Innovative
Functional
Pagh and Cooper
(1998)[7]
Market-responsive supply chain
Physically efficient supply chain
Product life cycle:
Introduction
Growth
Maturation/maturity
Decline
Naylor et al.
(1999)[13]
Postponement and speculation
Full speculation
Manufacturing postponement
Logistics postponement
Full postponement
Product:
Standard
Customized
Product:
Cost
Quality
Lead time
Lean
Agile
Leagile
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Lamming et al.(2000)
[12]
Christopher and
Towill(2000) [11]
Childerhouse et al.
(2002) [ 6] [8]
Vonderembse et al.
(2006)[5]
Service level
Demand stability
Product:
Innovation
Uniqueness
Complexity
Innovative-unique and complex
Innovative-unique and non-complex
Functional and complex
Functional and non-complex
Product:
Duration of life cycle
Time Window for delivery
Volume
Variety
Variability
Product life cycle:
Introduction
Growth
Maturity
Saturation
Decline
Product:
Innovation
Standard
Hybrid
Agile
Lean
Design and build
MRP
Kanban
Packing centre
MRP
Agile
Lean
Hybrid
Product life cycle:
Introduction
Growth
Maturity
Saturation
Decline
Agile
Lean
Hybrid
3. Discussion
3.1. Product types and SCM strategy
From above literatures, SCM emphasize on product’s characters, especially the aspects in relation to
market and customer requirements. Fisher thinks many aspects are important for products, including
product life cycle, demand predictability, product variety, and market standards for lead times and
service. But he found that if one classifies products on the basis of their demand patterns, they fall into
one of two categories: they are either primarily functional of primarily innovative. Vonderembse et al’s
researches are based on three types of products: standard, innovative, and hybrid. Lamming et al
propose that three aspects of the product being supplied may have impacts upon the way in which
supply networks should be managed. The three aspects are the degree of product innovation, product
uniqueness, and product complexity. They classify products four types, such as innovative-unique and
complex, Innovative-unique and non-complex, Functional and complex, functional and non-complex.
These classification methods are uniform. The latter two are based on Fisher’s system.
Innovative products are new or derivative products that are aimed at new customers and markets and
are designed to be adaptable to changing customer requirements. These products require close and
continuous customer contact, have uncertain demand, and their product designs may be unstable.
Lamming et al took notice of research on strategy has given considerable attention to the nature of
products and resources and what makes them “unique”. In the meantime they take into account
product’s complexity. So they extend two parts, namely innovative-unique and complex, Innovativeunique and non-complex[2][5][12].
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Standard or functional products have stable demand, and their design characteristics and production
requirements change slowly over time. As a result of this stability, customer contact tends to be
periodic rather than continuous Commodities like staples or fasteners are standard products that
require straightforward supply chains with few participants. Lamming et al extend two parts, namely
functional e and complex, functional and non-complex.
Hybrid products are complex products that have several to many components, which may be a
mixture of standard and innovative products. Automobile or other assembled products are examples.
These products are usually major purchases that are made periodically by customers after careful
consideration and investigation. This type of product is similar to functional and non-complex type
above.
Supply chain management strategy is emphasized on lean and agile conception[2][9][10]. A lean
supply chain or efficient supply chain employs continuous improvement efforts that focus on
eliminating waste or non-value steps along the chain. The agile supply chain or market-responsive
supply chain, paradigm relates to the interface between companies and markets, an external
perspective on flexibility. A hybrid supply chain generally involves “assemble to order” products whose
demand can be forecasted with a relative accuracy. The chain helps to achieve mass customization by
postponing product differentiation until final assembly. The lean or agile supply chain techniques are
utilized for component production with different characteristics. The matching between product types
and SCM strategy is illustrated in table 1 and table 2.
Early in their product life cycle, innovative products, which may employ new and complex technology,
require agile supply chain. As the product enters the maturity and decline phases of the product life cycle,
innovative product might turn into standard product[5]. So a lean supply chain could be more
appropriate. Supply chain management strategy should change over the whole product life cycle.
3.2. Shortage and future work
Though much research work has done in the literature, there are some shortage and problems in
practical application.
Firstly, in practical supply chain operations, companies are facing SCM problems which concern
more concrete production planning and quantitative operational decisions than merely qualitative
strategies and product type identifications. Therefore, more explicit quantitative criteria and tools for
SC strategy designs would provide further benefits to SCM. Qualitative analyses on the characteristics
of products and their impacts on supply chain performance have been reported in the literature.
However quantitative analysis of matching products to supply chain strategies has so far not been
sufficient to assist decision-making significantly in supply chain management.
Secondly, product classification and supply chain strategy aim at the end product for customers like
automobile. Middle component products like automobile engine are not mentioned. How component
enterprises design or join the supply chain is a future research problem.
Thirdly, lean supply chain and agile supply chain problems about supply chain are only taken
account of during different stages of product life cycle. Other problems such as suppliers’ selection,
logistics and so on aren’t related with the stage of product life cycle.
At the end, the product life cycle describes the stages a product goes through from beginning to end.
It is generic description of the way a product behaves in the market. It is divided into four stages:
introduction, growth, maturity, and decline. Figure 1 illustrates the product life cycle. We define it as
marketable product life cycle. The literatures’ researches are based on it. Otherwise in engineering
field, for products themselves, they have their life cycle, from concept to design, manufacturing, sale,
use and maintenance, dissolve and recycle. We name it as physical product life cycle. Due to market
changes in regulation, increasing customer expectations, competition between enterprises has turned
around service after sale from price. Customers begin to think of products’ recycle. Most supply chains
do not presently engage in these activities. Closed-loop supply chain, recovering materials from post
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consumer and reusing them by the same company, is the direction of supply chain management. See
figure 3.
Figure 3 SCM based on physical product life cycle
4. Conclusion
This paper synthesizes past research about SCM based on product and product life cycle and
discusses the product classification and supply chain types. Moreover we extend Fisher’s matching
frame between product types and SCM strategies. We put forward some recommendations for future
research in supply chain management based on product and product life cycle, especially closed-loop
supply chain based on physical product life cycle.
References
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Economics, 1998,55 (3): 281 294
[2] M.L Fisher, “What is the right supply chain for your product”, Harvard Business Review, 1997 (March
April): 105 116
[3] J. Aitken, P. Childerhouse, M. Christopher, and D. Towill, “Designing and managing multiple pipelines”,
Journal of Business Logistics, 2005,26(2): 73 95.
[4] P. Childerhouse, J. Aitken and D.R.Towill, “Analysis and design of focused demand chains”, Journal of
Operations Management, 2002,20: 675 689.
[5] M.A. Vonderembse, M. Uppal S.H. Huang and J.P. Dismukes, “Designing supply chains: Towards theory
developent”, International Journal of Production Economics, 2006, 100: 223 238.
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[7] J.D. Pagh and M.C. Cooper, “Supply chain postponement and speculation strategies: How to choose the right
strategy”, Journal of Business Logistics, 1998,19 (2):13 33.
[8] P. Childerhouse, J. Aitken and D.R. Towill, “Analysis and design off focussed demand chains”, Journal of
Operations Management, 2002, 314:1 15.
[9] R. Mason-Jones, B. Naylor and D.R. Towill, “Lean, agile, or leagile? Matching your supply chain to the
marketplace”, International Journal of Production Research, 2000, 38, 4061 4070.
[10] J. Aitken, M. Christopher and D.R. Towill, “Understanding, implementing and exploiting agility and
leanness”, International Journal of Logistics: Research and Applications, 2002, 5 (3), 59 74.
[11] M. Christopher and D.R. Towill, Marrying lean and agile paradigms. Proceedings of EUROMA, Ghent,
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[12] R. Lamming, T. Johnsen, J. Zheng and C. Harland, “An initial classification of supply networks”,
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[13] J.B. Naylor, M.M. Naim and D. Berry, “Leagility: interfacing the lean and agile manufacturing paradigms in
the total supply chain”, International Journal of Production Economics, 1999,62, 107 118.
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The author can be contacted from e-mail: [email protected]
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