Supply Chain Basics
Define the term “supply chain.”
Answer: The network of suppliers, manufacturers, distributors, and retailers involved in producing and delivering a product to consumers.
Describe the typical profit margin for functional products.
Answer: Typically low.
Describe the lifecycle length typically associated with innovative products.
Short, typically 3 to 12 months.
Identify the appropriate supply chain strategy for functional products.
Answer: Efficient supply chain strategy.
Identify one critical factor that reduces supply chain risk for innovative products.
Answer: Speed to market or responsiveness.
Identify the two product categories defined by Fisher
Answer: Functional products and Innovative products.
Describe the demand pattern commonly seen with functional products.
Answer: Stable and highly predictable demand.
Characterize the typical demand pattern of innovative products.
Answer: Highly volatile, uncertain, and difficult to predict.
Identify the appropriate supply chain strategy for innovative products.
Answer: Responsive supply chain strategy.
Define the practice of “dual sourcing.”
Answer: Having multiple suppliers for the same component or product to mitigate risks.
State the primary objective when managing supply chains for functional products.
Maximizing cost efficiency.
State the typical product lifecycle length of functional products.
Answer: Usually longer than two years.
Describe the typical profit margin associated with innovative products.
Answer: Usually high.
Describe the main consequence of using a responsive supply chain for functional products.
Answer: Increased operational costs without creating additional value.
State how frequently Fisher advises companies to review the alignment of their supply chains with product types.
Answer: Regularly or periodically, especially as market conditions or products evolve.
State the primary objective when managing supply chains for innovative products.
Answer: Maximizing responsiveness and flexibility.
Provide two specific examples of functional products mentioned by Fisher.
Answer: Groceries (e.g., milk, bread) and basic clothing (e.g., socks, standard jeans).
Give two specific examples of innovative products identified by Fisher.
Answer: Fashion apparel and consumer electronics (e.g., smartphones).
Describe the main consequence of using an efficient supply chain for innovative products.
Increased risk of inventory shortages or excesses, leading to lost sales or markdowns.
Identify the specific type of uncertainty mitigated by responsive supply chains.
Answer: Demand uncertainty.
Explain the consequences of mismatching supply chain strategies with product types, as discussed by Fisher.
Answer: Mismatching strategies leads to inefficiency: functional products managed with responsive chains incur unnecessary costs, while innovative products managed with efficient chains face inventory excess or shortages, resulting in lost sales and reduced profitability.
Explain why functional products specifically allow companies to take advantage of economies of scale.
Their predictable demand and stable, high-volume production allow companies to streamline operations, standardize processes, and lower costs per unit through economies of scale.
Explain why innovative products have higher market mediation costs according to Fisher’s analysis.
Answer: Due to uncertain demand, innovative products frequently face costs from markdowns, inventory obsolescence, lost sales, and stockouts, significantly raising the cost of aligning supply with market demand.
Summarize the method Fisher recommends for companies to correctly match their product type with an appropriate supply chain strategy.
Companies should explicitly categorize their products based on lifecycle, demand predictability, and margin structure, and strategically align these product categories with either efficient or responsive supply chains to optimize performance.
Explain why excessively prioritizing responsiveness for functional products creates unnecessary complexity and increases costs, according to Fisher.
Answer: Responsiveness involves maintaining higher inventories, flexible logistics, and rapid reaction capabilities—none of which provide meaningful benefit to products with stable and predictable demand. Thus, it unnecessarily inflates operating costs and complexity without adding value.