Fisher and Lee in their two articles proposed categories of demand risk based on
ID: 366034 • Letter: F
Question
Fisher and Lee in their two articles proposed categories of demand risk based on product type (functional v. innovative) and supply risk (stable v. emerging) to yield 4 categories of product considerations. (efficient, responsive, risk-hedging, and agile). Consider a new drug, fashion, or smartphone introduction. Which category might it best fit and why? Give at least 5 attributes of the product or supply that support this categorization. Given this category, what might be two good metrics to use as success measures for our firm and why? Give an example of a metric that would create conflicting objectives for this firm. I.e. if they were to set a target to minimize or maximize this metric it would be counter-productive to the firm's real goals and challenges.
Explanation / Answer
Let's take the case of a smartphone introduction. It is a functional product, that would be used on a daily basis by people who purchase it. To cater to its demand requires the establishment of an efficient supply chain that focuses on delivering the phone at the lowest possible cost to customers. Selection of suppliers, capacity usage and product design should be carried out after giving great thought to achieving the overall aim to create an effective low-cost solution.
The metric that can be used to track the success of the product would be the sales figures, number gained through referrals which would point to the fact that the product has been successful in winning the hearts of people and they have become ambassadors of the brand.
A metric that would create a conflicting situation would be one where newer models are helping us gain market share but at the expense of reducing margins which seems acceptable in the short-term but can hurt in the long-term
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