From time to time, producer brands will launch new product lines to complement or replace their existing offerings.
For the manufacturer and distributor, this needs careful planning and execution of production, inventory and overall supply chain resources. Richard House (pictured), managing director, FuturMaster, looks at how manufacturers and distributors can best prepare for the introduction of new products to market, and how to avoid costly pitfalls.
Whether due to changing consumer taste, or in the attempt to establish the next big consumer craze, new products are launched into the UK marketplace every week. And this, of course, is no bad thing. It keeps consumer choice vibrant and sustains interest in both old and more recent brands. It stimulates consumer spend, which can in turn result in increased confidence in the investment market and thus encourage a generally bullish economic milieu.
However, without an efficient and reliable supply chain, even the very best marketing campaigns are on a hiding to nothing. Consumer interest in a new product can be generated, only to leave potential customers disappointed, staring at empty shelves. To make matters worse, this can in some instances result in appalling public relations in the press, even for the most secure and respected brands. On many occasions, the problem relates to poor collaboration within the supply chain network.
Problems can also occur at a more local level. Take manufacturing; the producer brand may provide its manufacturer with plenty of advanced warning regarding the new product or range, together with detailed specifications concerning design and required bill of materials. The supply chain may be finely tuned in terms of sharing information and ensuring each stage of production and distribution is perfectly executed. The supply of goods to the retail outlets may be flawless and the marketing campaign may have had enough impact to have attracted the public into buying the new goods in healthy numbers. However, in the wake euphoria surrounding the new products success, little thought may have been given to certain potential problems surrounding the effect it will have on the brands previous product or product range. Cannibalization a reduction in the volume sales, market value or market share of the previous product or products as a result of the new arrival by the same producer is often the result. For the manufacturer who may have built up a sizeable stock of components or materials related to these more mature product lines, a surplus of inventory can result, due to a falling off of hitherto high demand levels. Even worse, the previous product range may be pronounced old hat by its producer brand and phased out very rapidly, in many cases leaving the manufacturer with a glut of expensive yet near worthless parts and materials. The outside world may never hear of this occurrence, maybe due to some form of professional embarrassment on the part of the manufacturer. Yet this can be a serious problem with potentially devastating financial consequences.
Even if some form of collaborative supply chain communication channel is in place, efficiency at the production level is, of course, by no means guaranteed. You may be able to set your watch to the punctuality of the manufacturers parts and materials supplier and the distributor might be primed for action on receipt of finished goods, but if the manufacturer himself fails to have an effective capacity planning and scheduling methodology balancing machinery, personnel and timelines for the new project with everything else in the order book then the whole supply chain is in danger of collapsing like a pack of cards.
So what is the solution? Constraints such as poor demand planning and capacity scheduling on the shop floor, too many disparate channels of communication across the supply chain, and ineffective inventory management all point to the need for a state-of-the-art, fully customisable demand planning & scheduling software package. The software should have the capacity to be fully integrated, web-enabled and visible to all parties concerned the manufacturer, its suppliers, distributor, and producer/customer across the entire supply chain, whether UK-based or more geographically far-reaching. It should be able to ensure everyone involved has knowledge of future anticipated demand patterns, so they can prepare the means and capacity to respond accordingly when the time comes. Seamless sharing of forecast demand information can not only aid each company in the supply chain network in terms of planning time and resources in advance, it can also provide them with related project in order for them to appropriate the right level of finance in preparation for when things start moving.
As regards inventory planning, the software solution of choice should include a Product Lifecycle Management (PLM) component. This should be geared to aiding the manufacturer in sourcing the most intelligent levels of inventory, based on statistical sales forecast information (such as similar historic sales data or market research) in advance of actual production and launch to market.
Following the flurry of interest that can surround a new product, a period of maturity, and (eventually) product phase-out/demise will follow. Here again, the right PLM functionality can keep the manufacturer on the ball with regard to the most practical, cost effective inventory replenishment levels, ensuring the warehouse is not left with a stock obsolescence problem.
And what of market promotions on the horizon, maybe a few months after the initial product launch? Special offers, such as two for the price of one etc. can naturally stimulate greater levels of consumer interest and thus result in increased volume sales. It is of course highly beneficial from the manufacturers and distributors perspective to be given prior warning from the producer of such an event and when it is scheduled to occur. However it is also important to have the software functionality in place to schedule extra production capacity weeks, even months, in advance, while ensuring other customer orders are not placed in jeopardy, as well as ensuring inventory is kept at an appropriate level in proportion to anticipated future demand.
Arguably, a must-have function within any modern demand planning & scheduling software package is what is commonly referred to as what-if. This facility, which should be able to run separately from the live schedule, can be particularly beneficial when working out the optimum route for a new product. For example, you can consider whether sourcing certain materials from a different supplier can save on cost or ensure quicker delivery. You can also consider whether production or distribution operations will be more efficient and cost-effective if shift patterns were altered, and even determine whether it would be more cost-effective to buy in more production equipment rather than rely on scheduling a variety of tasks (including the new product) within your existing capacity. Once this data is analysed, the optimum route can then be added to the live schedule.
It all boils down to effective, seamless collaboration throughout the supply chain, ensuring information is quickly updated and made immediately available to relevant parties via secure web portals. When such a methodology is in place, manufacturers, suppliers and distributors are in the very best position to provide the very best levels of quality and delivery service to the end customer as well as ensure their own forecasting, planning, scheduling and finance operations are working to optimum efficiency.