To meet customer’s demands, an expensive option is to keep a large finished goods inventory. But what happens when the market demands something else? The now-obsolete product becomes wasted money. Companies have to use supply chain planning to anticipate conditions and act, not react. In other words, SCM is a prerequisite to doing business.
Consider the computer supply chain. The consumer has a specific need for one of a thousand possible configurations of processors, hard drives, peripherals, and so forth. One manufacturer, such as Compaq, reacts by tieing up millions of dollars building an inventory of premade models (which the customer may not want), whereas another manufacturer, such as Dell with its responsive supply chain, can quickly assemble every customer’s order. Which manufacturer pleases customers and saves money?
Clearly, SCM is not a technology issue; it’s a business strategy issue. In a classic articles titled “What is the Right Supply Chain for Your Product,” Marshall Fisher wrote: “Before devising a supply chain, consider the nature of the demand for your products,” because “functional products require an efficient process; innovative products, a responsive process.”