supply chain management in short life cycle products

Abstract

With a large increase in the number of products available in the market today, the consumers have a wider range to make their buying decisions from. Higher degree of product innovation has also driven up the competition in the market substantially. All this in conjunction with the higher purchasing power of the customers has lead to a significant decrease in the life cycles of various products. Such a scenario presents a challenging situation for firms with respect to the demand forecasting, planning, production, distribution and inventory management. As a part of this Contemporary Concerns Study, we take a detailed look at supply chain management in products with short life cycle and address the specific challenges that a firm faces with such products: 1. Demand forecasting plays a vital role in determining the quantity of the product to be manufactured. Various techniques suggested by researchers for demand planning of short life-cycle products are examined. We also take a look at SAP s Advanced Planner and Optimizer tool which uses various optimization techniques such as non-linear programming and dynamic programming in order to predict demand. 2. Excess inventory management techniques are addressed, which include auctions, discount pricing and the use of internet in disposal of non-moving inventory. An Indian auction engine, MatexNet, which facilitates the process of inventory disposal, was also studied. Further, in order to validate our academic research, we examine a company, specifically Titan Watches, which has seen the life cycles of some of its products reduce from 2-3 years to almost 6 months now. We examined in details the demand forecasting and inventory management techniques used at Titan. The report is concluded by linking the theoretical and the practical issues which are involved in the management of supply chains of short life-cycle products. Based on these inferences, we have come up with the following recommendations for Titan: 1. Use aggregate demand forecasting in conjunction with risk pooling to reduce safety stocks and optimize allocation of finished goods. 2. Use re-branding to create a new brand for lower end segment of the market for disposing non moving inventories. 3. Support online auction platform(s) to incorporate optimization techniques for effectively using auctions as a channel for managing excess inventories. 4. Invest in building supplier capacity to reduce lead time.