August 30, 2013
"If we build it they will come." It’s a great line from a movie, but it’s not always the wisest strategy for manufacturers supplying the retail marketplace.
Many retailers no longer make "entire season" or large commitments to new products. Instead they make minimal commitments and wait to see how consumers respond to the product. If the response is positive, you start getting orders – and you better be able to deliver quickly. In essence the retailer has pushed the majority of the risk down the supply chain to you. You have to do the same, and share the risk with the rest of the supply chain.
First, take a look at the previous question. For new products, organizations look at similar offerings in the marketplace. Introducing new products is as much a risk management issue as it is a production issue. Identify the risk, determine its probability, establish the consequence of the risk and develop a mitigation plan.
In developing your production plan, look at different product demand scenarios and the risk that they will bring to your business. The greater the probability and consequence of occurrence, the more time you need to spend developing contingency plans to mitigate the risk.
You need to build a supply chain that can react quickly to your customer demands. This means you must work very closely with your raw material and component suppliers, your outsourced production facilities, your logistics providers and your own production environment to shorten lead times to your customer.
Don't leave things to chance. Identifying potential scenarios and developing contingency plans will go a long way in helping you match your production to unknown consumer demand.