Consider smartphones by Apple What kind of supply chain shou

Consider smartphones by Apple. What kind of supply chain should Apple use for the manufacture and distribution of smartphones? Explain your rationale

Solution

Solution :

By virtue of the nature of product demand , there are two different types of products . The two different types are functional and innovative products . Functional products , as the name implies are the staples . Competition is fierce for functional products , and margins along the supply chain are thin , but the demand is constant and relatively easy to forecast .

Innovative products such as smartphones by Apple are differentiated in the markets ; they are fads or fashion and have advanced technological features or styling or both . They carry higher margins , but demand can be hard to forecast , and their lifecycles are likely to be short.

Functional products have longer life than innovative products . Their demand will be easy to forecast with corresponding lower chances of stockouts or markdowns . Lead times is determined by cost trade offs that take into account production and distribution economies , the cost of inventory and other factors .

Innovative products such as smart phones have short lives . The benefits of high profitability are offset by market risks that take the form of higher forecast errors and corresponding markdown threats from overproduction or overpurchasing .

Thus these two products require fundamentally different supply chains. Functional products require an efficient supply chain and innovative products require responsive supply chains .

Smartphone from Apple require responsive supply chains because responsive supply chain purpose is to react quickly to market demand . This model best suits the environment in which market predictability is low , forecasting error is high , product life cycle is short , new product introductions are frequent and product variety is high.