New Product Introduction & Supply Chain Needs

Business strategy can be based on varied objectives.But common to them is to increase revenue and improve margins.To meet this end,companies introduce various growth strategies and identify the opportunities that may produce results in future.The growth strategy of companies varies considerably based on a number of factors such as:

• Operating Industry
• Competitive Landscape
• Capabilities
• Business Strategy

Often companies tries to differentiate themselves on the basis of certain offering or the derived value.The goal of the firms is to carve out a niche from the existing market segment so as to avoid direct competition.But over a period of time competitors encroach into that niche and it becomes increasingly difficult to maintain the niche any longer.The most obvious response to the competitors' move is either to compete on the basis of cost or create a new differential.Such improvements in existing products is what is called incremental innovation.But, for how long can a company sustain with these improvements without actually introducing a fresh product concept.This makes us think about the need for disruptive innovation.One that actually nullifies the competition and is more aligned to the basic of extracting value from capturing newer insights and opportunities not explored by any competitor as of now.This concept is what is explained by Prof. Mauborgne in Blue Ocean Strategy.Though it is difficult to pinpoint exact offering that demarcate between incremental and disruptive innovation,one can probably identify it as the offering that can not be imitated easily by the competitor in a short span of time and that it provides the innovator first mover advantage for a considerable period.This can be an untapped market or a product feature that nobody thought of before.

Firms that possess these abilities and capabilities usually sustain the tides of time.Example of this can be P&G which introduced diapers for the babies,a product which was not conceptualized by anyone before, but it was an obvious need.The Pampers brand is still a billion dollar brand.This example brings another important fact about new product development and its about how you capture customer needs.One of the preferred method is tapping customer verbatims i.e. understand the voice of customer and convert that into product.Another is emphathic design i.e. understanding the latent needs of customer without they being explicitly mentioned.Its this design approach that provides companies with exponential growth and exorbitant value.Not to forget, it is not easy to hit the right spot every time with this design philosophy,hence patience and endurance is required in making iterations over a period to bring the product closest to what the customer require, but is unable to communicate that need.This design thinking led to products like iPods, iPads etc. which transformed fortune of Apple.

Though there is lot to discuss how products can be designed to capture needs and how to position them where one's capabilities are bigger constraints relative to competitor move,we will take forward this discussion with the needs and complexities of supply chain when a company goes into an expansion drive.In case of non-durable consumer goods,its marketing that guides most of the new product development initiatives while supply chain is merely asked to make arrangements for the follow up production & distribution plans.Now that is where the catch lies,one can create wonderful products but without proper assessment of manufacturing and distribution capabilities it may be a failure.As said by Paul Polman of Unilever,"we have wonderful products and we have wonderful customers,the problem is us".It is the criticality of the supply chain in making those innovations work that brings out such concern.

Companies while developing growth strategy fail to identify supply chain capabilities as a possible constraint.Growth can be organic or it can be through acquisitions.But in both the cases it becomes imperative to consider the design and capabilities of supply chain.This has been proved in number of failed mergers and acquisitions.How many times we have came across a new successful product that is not available? Quite a many.Latest being Apple iPhone 5S. One can argue that it is a strategy to maintain the niche positioning of the product and manage the demand according to supply in order to safeguard margins.But this is not always the case.Let us discuss the new product introduction from perspective of both the growth strategy i.e. organic and artificial.

In case of organic growth the company may resort to:

• Expansion of Product Line
• Expansion of Product Type
• Upward/Downward Stretch

and many more.In such cases two situations may arise.If the product is similar to the already existing line of products in terms of supply chain needs, then we are putting more stress on the supply chain to deliver more products to even larger customer base while maintaining the desired costs and service level.If the product is significantly different in terms of supply chain need and we intend to push it through the same,then we are probably creating a mismatch.In both the cases,distribution might fail a successful new product idea.Consider the case of any successful FMCG company,mostly they operate their supply chains at full capacity.Due to competitions and higher revenues they constantly upgrade their product lines and introduce new items.Now the products are similar in nature and they need to be pushed through the same pipeline.Capacity being a constraint,one has to sacrifice the other in order to find itself in the shelves.Now,if we do not exploit the new product to the fullest, we are losing on a probable market winner and if we sacrifice the old product we are losing one of the brand that takes a lot of money and time to build.In case of acquisitions,often supply chain is a neglected field of negotiation.There is a different approach altogether in which the firms might be working and trying to bring them under the same umbrella supply chain might create unforeseeable problems.That is why we do not mix Tata and Jaguar-Land Rover.Supply chain capabilities thus should be viewed as strategic consideration before embarking on a growth plan.In terms of careful supply chain planning and implementation,there are few examples which shows the way to do it. Marico is known for its continuous up-gradation of supply chain capabilities and considering them before implementing any growth plan.That is the reason why they at any time have surplus capabilities and are able to manage any emergency way better.

Hence companies should understand that is not marketing alone that is responsible for a successful new product launch and it is not supply chain alone that is responsible for a failed product launch.The concept of concurrent engineering applies to such management issues as well where everyone in the development team understands the opportunities as well as the constraints.