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Strategic relation Supply Chain and Product Life Cycle

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International Journal of Management and Humanity Sciences. Vol., 3 (S2), 2442-2449, 2014
Available online at http://www.ijmhsjournal.com
ISSN 2322-424X©2014

Strategic relation Supply Chain and Product Life Cycle

Sayyid Ali Banihashemi*

Department of Industrial Engineering, Payame Noor University, IRAN

*Corresponding author E-mail: banihashemi.a@skpnu.ac.ir

Abstract

By emergence of new areas of business, in which changing is an inevitable feature, it

is so difficult to survive and success in the manufacturing systems. In other words,
business environment changes and today's work which results from changes in
customer needs will lead to uncertainty in parameters, therefore it is necessary for
supply chain to be flexible in decision making while encountering these uncertainties.
For supply chain performance to be more improved, in this paper first patterns of lean
and agile supply chain will be examined, then by introducing Leagilty Supply Chain,
the relationship between product life cycle of different products (standard, innovative,
hybrid) and selection of the proper type of supply chain will be examined.

Keyword: Leagility, Supply Chain Management, Product Life Cycle

Introduction

The turbulent market conditions in the 21st century have heightened the need for more competitive
strategies to be developed for growth (S?nchez and Pérez, 2005). Business, economics and the political
environments are increasingly subjected to unexpected shocks and discontinuities. Many strategic issues
that confront business today stem from: the new rules of competition, globalization down pressure on price
and the customer taking control. Also, as a result of the recent economic meltdown, companies around the
world are confronted by a perfect storm: frozen credit market and long global recession. Events are moving
so rapidly that it is almost impossible to access the implication of the meltdown for the days ahead, let alone
the years to come (Njoroge, 2009).
Enterprises are continuously paying attention to responding to the customer demand for maintaining a
competitive advantage over their rivals. Supply Chain Management (SCM) has gained attention as it focuses
on material, information and cash flow from vendors to customers or vice-versa. One of the key features of
present day business pertaining to the idea which holds it is Supply Chain (SC) that competes, not
companies (Christopher and Towill, 2001), as well as the success or failure of supply chains, is ultimately
determined in the market place by the end customer. Getting the right product, at the right time to the
consumer is not only the linchpin to competitive success, but also the key to survival. Hence, customer
satisfaction and market place understanding are critical elements for consideration when attempting to
establish a new supply chain strategy (Agarwal et al., 2006).
The popularity of supply chain management is characterized by several deriving forces, i.e. global
sourcing, and an emphasis on time and quality based competition and their respective contributions to
greater environmental uncertainty. In this dynamic business environment, the competitions are based on
time and quality. Providing defect free product to the customer on time is the fundamental requirement to be
a successful organization. In order to meet such requirements, a closer coordination with suppliers and
distributor is essential (Tarofder et al., 2010). The main issue is that what is the appropriate strategy in the
use of supply chain? Is agile supply chain always better than lean supply chain? Or it depends on certain
conditions? A supply chain must have the following conditions:
 Consistent with the type of organization's productive product
 Consistent with life stages of the product over the whole supply chain
 Compatible with changing the product type
 Continuous dynamics in turbulent and competitive environment of supply chains
Intl. J. Manag. Human. Sci. Vol., 3 (S2), 2442-2449, 2014

Therefore this research is looking to provide a complete definition of the types of supply chain and
ultimately I will prove their relationship with the type of products.

Supply Chain performance

A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. The
supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers,
and customers themselves. Within each organization, such as manufacturer, the supply chain includes all
functions involved in receiving and fulfilling a customer request. These functions include, but are not limited
to, new product development, marketing, operations, distribution, finance, and customer service. A supply
chain is dynamic and involves the constant flow of information, product, and funds between different stages.
The primary purpose of the existence of any supply chain is to satisfy customer needs, in the process
generating profits for itself. Supply chain activities begin with a customer order and end when a satisfied
customer has paid for his or her purchase. The term supply chain conjures up images of product or supply
moving from suppliers to manufacturers to distributors to retailers to customers along a chain. It is important
to visualize information, funds, and product flows along both directions of this chain. The term supply chain
may also imply that only one player is involved at each stage. In reality, a manufacturer may receive material
from several suppliers and then supply several distributors.
A typical supply chain may involve a variety of stages. These supply chain stages include:
 Customers
 Retailers
 Wholesalers/Distributors
 Manufacturers
 Component/Raw material suppliers

Not every one of these stages is needed to be present in a supply chain. The appropriate design of the
supply chain will depend on both the customer’s needs and the roles of the stages involved (Chopra and
Meindl, 2004).
Supply Chain is described as a chain linking each element from customer and supplier through
manufacturing and services so that flow of material, money and information can be effectively managed to
meet the business requirement. Most of the companies realize that in order to evolve an efficient and
effective supply chain, SCM needs to be assessed for its performance (Gunasekaran et al., 2001).
Lee and Billington (1995) define a supply chain as a network of facilities that procures raw materials,
transforms them into intermediate goods and then final products, and delivers the products to customers
through a distribution system. The management of such a network requires mastery of optimization logistics,
or the specific quantity of goods needed at a particular time and price. Clearly, relationships with suppliers
that make up these networks are a central component to successful supply chain management.
The success and failure of supply chains are ultimately determined in the marketplace by the end
consumer. Getting the right product, at the right price, at the right time to the consumer is not only the
lynchpin to competitive success but also the key to survival. Hence, consumer satisfaction and marketplace
understanding are crucial elements for consideration when attempting to establish a new supply chain
strategy. The initiatives for the improvement of Supply Chain performance strive to match supply and
demand, thereby driving down costs simultaneously with improving customer satisfaction (Mason-Jones et
al., 2000).
Supply chain management can be defined as “the design and management of seamless, value-added
process across organizational boundaries to meet the real needs of the end customer” (Fawcett et al., 2007).
As noted by Gansler and et al. (2004), SCM is the management and control of all materials, funds and
related information in the logistics process from the acquisition of raw materials to the delivery of finished
products to the end user. Hugo et al (2004) defines “SCM as the management philosophy aimed at
integrating a network of upstream linkages (sources of supply), internal linkages inside the organization and
downstream linkages (distribution and ultimate customer) in performing specific processes and activities that
will ultimately create and optimize value for the customer in the form of products and services which are
specifically aimed at satisfying customer demands”. Generally, SCM involves relationships and managing
the inflow and outflow of goods, services and information (network) between and within producers,
manufacturers and the consumers (Samaranayake, 2005).
The objective of SCM is to maximize value in the supply chain. The value a supply chain generates is the
differences between what the final product is worth to the customer the cost that supply chain will in-cure to
fulfill the customers’ request (Marcus, 2010). SCM is about competing for value, collaborating with customers
and suppliers to create a position of strength in the marketplace based on value derived from end consumer
(Chopra and Meindl, 2007). Within an organization, customer value is created through collaboration and
cooperation to improve efficiency (lower cost) or market effectiveness (added benefits) in ways that are most

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valuable to key customers. Value is not inherent in products or services, but rather is perceived or
experienced by the customer (Handfield et al., 2009). The ultimate goal of a SCM process is to create
customer and shareholder value, thus often called a value delivery system.

Lean Supply Chain (LSC)

Lean production was developed at Toyota after a Toyota delegation visited Ford’s car factories in the US
and realized that they never could serve the small home market with a full array of types of cars using the
technologies of mass production. So, they started to develop techniques that allowed them to produce
flexibly as batch size 1. (Vonderembse et al., 2006)
A Lean Supply Chain (LSC) employs continuous improvement efforts that focus on eliminating waste or
non-value steps along the chain. It is supported by efforts to achieve internal manufacturing efficiencies and
step time reduction, which enable the economic production of small quantities and enhance cost reduction,
profitability, and manufacturing flexibility to some degree. The short setup times provide internal flexibility,
but a LSC may lack external responsiveness to customer demands, which can require flexibility in product
design, planning and scheduling, and distribution in addition to manufacturing (Both, 1996).
As the rate of market change increases, the LSC approach has evolved into “multiple niche competition”,
which is the production of any volume, even a single unit, combined with the ability to satisfy multiple market
segments. Organizations recognize that along with the added variety and responsiveness squeeze, they
must remain adaptable to future changes. Customer requirements are continuously evolving (on the one
side) and product life cycles are growing shorter (on the other side), therefore, along with being lean, supply
chains must respond to the market. As a result, successful organizations move from concept to cash flow in
a fraction of the time (Vonderembse et al., 2006).

Agile Supply Chain (ASC)

Agility is vital ability in the revolutionary turning of the business environment into a turbulent place of
competition and struggle for success. Agility is the ability to detect the changes in the business environment,
and responding to them by providing the appropriate capabilities (Sharifi and Zhang, 1999).
The Agile Supply Chain (ASC) paradigm relates to the interface between companies and markets, an
external perspective on flexibility. An ASC focuses on responding to unpredictable market changes and
capitalizing on them through fast delivery and lead time flexibility. It deploys new technologies, methods,
tools, and techniques to solve unexpected problems.

Leagile Supply Chain: beyond Lean and Agile.

The establishment of a new supply chain strategy depends on the consideration of two foremost critical
elements, the customer satisfaction and marketplace understanding. A manufacturing enterprise can
endeavor to develop a strategy that will meet the requirement of both the supply chain and end customer,
only when the constraints of the marketplace are understood (Chan, 2009).
Lean focuses on the elimination of basically seven types of wastes that are overproduction, waiting time,
time incurred in transportation, inventory, motion, defective units, and overprocessing. Agile production
system emerged as an alternative to the lean principles (Richards, 1996). Agile strategy aims at using the
market knowledge and virtual cooperation to utilize the advantageous opportunities in a volatile marketplace.
It focuses on the adaptation according to the changes in the market.
Both the lean and agile strategies have proven their usefulness in their respective situations, but the
present market scenario demands a more robust strategy that can encapsulate the salient features of both.
This gave birth to a new strategy termed as “Leagile”. The leagile strategy combines the lean and agile
principles through a decoupling point, which separates the production line into two parts at the point of
product differentiation (Naylor et al., 1999).
Analytical process for improving supply chain performance is depicted in Figure 1.

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To analyze the supply chain

performance

Supply chain performance

weighted Index

Supply chain performance determinals

Lead Time Cost Quality Service Level

Supply chain performance dimensions

Market Process Information Flexibility

sensitiveness integration driver
Figure 1. Analytical process for improving supply chain performance (Agarwal et al., 2006)

Leanness and Agility in a supply chain do not have to exclude each other, however, Lean Supply Chain
paradigm, with its focus on advanced standardization as the way to improved efficiency; can discourage
innovation, differentiation and complex learning needed to carry on the change. Leanness is about doing
more with less. Agile Supply Chain operations are market sensitive, network based, with process alignment
and virtual operations. Combination of these two concepts within the scope of one firm or a single supply
chain can be called as “Leagility”. Table 1 typifies the distinguishing attributes of the associated supply
chains.

Table 1. Comparison of Lean, Agile, and Leagile Supply Chain

Distinguishing attributes Lean Supply Chain Agile Supply Chain Leagile Supply Chain
Market demand Predictable Volatile Volatile and unpredictable
Product variety Low High Medium
Product life cycle Long Short Short
Customer drivers Cost Lead-time and availability Service level
Profit margin Low High Moderate
Dominant costs Physical costs Marketability costs Both
Stock out penalties Long term contractual Immediate and volatile No place for stock out
Purchasing policy Buy goods Assign capacity Vendor managed inventory
Information enrichment Highly desirable Obligatory Essential
Forecast mechanism Algorithmic Consultative Both/either
Typical products Commodities Fashion goods Product as per customer demand
Lead time compression Essential Essential Desirable
Eliminate muda Essential Desirable Arbitrary
Rapid reconfiguration Desirable Essential Essential
Robustness Arbitrary Essential Desirable
Quality Market qualifier Market qualifier Market qualifier
Cost Market winner Market qualifier Market winner
Lead-time Market qualifier Market qualifier Market qualifier
Service level Market qualifier Market winner Market winner
Sources: Naylor et al. (1999), Mason-Jones et al. (2000), Olhager (2003), Bruce et al. (2004).

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Product life cycle

Product life cycle is the cycle through which every product goes through from introduction to withdrawal or
eventual demise. These stages are:
 Introduction: When the product is brought into the market. In this stage, there's heavy marketing activity,
product promotion and the product is put into limited outlets in a few channels for distribution. Sales take
off slowly in this stage. The need is to create awareness, not profits.
 The second stage is growth. In this stage, sales take off, the market knows of the product; other
companies are attracted, profits begin to come in and market shares stabilize.
 The third stage is maturity, where sales grow at slowing rates and finally stabilize. In this stage, products
get differentiated, price wars and sales promotion become common and a few weaker players exit.
 The fourth stage is decline. Here, sales drop, as consumers may have changed, the product is no longer
relevant or useful. Price wars continue, several products are withdrawn and cost control becomes the way
out for most products in this stage.

Strategic relation Supply Chain and Product Life Cycle

LSC focuses on reducing lead time, increasing efficiency, expanding manufacturing flexibility, and cutting
cost. LSC approach attempts to build a level schedule across the supply chain, and it uses pull production to
respond to customer demand. While striving for these goals, the LSC focuses on incremental improvements
(Kaizen). It tries to improve the product and the associated processes, by balancing the supply chain.
The long product life cycle of standard product provides a stable design over many years. Being a low
cost item, globally manufactured, with highly predictable demand patterns, profitability can be achieved by
minimizing cost and employing a level schedule over the entire supply chain and over all the products life
cycle stages (Mason-Jones et al., 2000). This justifies the usage of a LSC for standard products. In addition
to providing cost minimization, the LSC is efficient and flexible, and it brings about incremental
improvements, permitting firms to constantly improve the quality of their products and keep their customers
satisfied.

Figure 2. Standard Product Life cycle

Thus, to have the highest internal performance and customer satisfaction, standard products should be
designed and produced by lean supply chains through all stages of the product life cycle.
In order for innovative products to succeed, they should be producible in any volume, as per customer
requirements. The first two stages of the product life cycle, introduction and growth, are the testing grounds
to ensure that organizations are achieving customization and market adaptability. For this, on of the strategic
tools provided by ASC in a virtual organizations. Once the product has been firmly established, it transitions
into third stages of its life cycle, maturity. By this stage, the innovative product begins to take on the
characteristics of a standard product.

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Figure 3. Innovative Product Life Cycle

Thus, to have the highest internal performance and customer satisfaction, innovative products should be
designed and produced by agile supply chains in the introduction and growth stages, and lean supply chains
in the maturity and decline stages of the product life cycle.
Hybrid products, which are complex, require the organization to bring together a set of suppliers with a
wide range of capabilities (Choi and Hong, 2002). This implies innovative and standard products as well as
strategic partnerships. While it may be true that hybrid products that are near the end of their life cycle may
use fewer innovation components than a product that is all the beginning, there is always the opportunity to
introduce innovation into the hybrid product. As a result, hybrid products require Leagile Supply Chain
throughout their product life cycle.

Figure 4. Hybrid Product Life Cycle

Thus, to have the highest internal performance and customer satisfaction, hybrid products should be
designed and produced by leagile supply throughout the product life cycle.

Conclusion

Lean and agile patterns in the supply chain are today the main focus of many manufacturing companies
(today) which are seeking to improve performance. Each of the above views, i.e. Lean and agile patterns
have their own specific advantages and strengths, points and have maximum efficiency in the specific
situations. In fact by considering different features and situations of productive organizations and systems it
is possible to take profit from any of them or both of them. Clearly, the development of theories and
researches in this area requires an understanding of these two models. Moreover, their differences, barriers
and constraints without having a proper understanding of the supply chain dimensions in the lean, agile and
leagile patterns and (also) selection of improvement in the supply chain will not have appropriate efficiency

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and effectiveness. In this paper the relationship between type of selected supply chain (lean, agile and
leagile) and life cycle of various products (standards, innovative, hybrid) was investigated. Finally I realized
that the standard products in their entire life cycle require the lean supply chain while standard products in
the two first stage of their life cycle (introduction and growth) require agile supply chain and in later stages
(maturity and decline) require lean supply chain. Also hybrid or leagile patterns are appropriate patterns for
hybrid products. As a general result it can be said that lean and agile supply chains are highly appropriate in
to enhance management performance in turbulent market. Uncertainty in demand and variability in product is
a point of distinction between lean and agile supply chain. For products that have short life cycles we should
consider more sensitivity in analyzing appropriate type of chain because demands grow faster and will have
more fluctuation. Thus, organizations may encounter greater risk for deficiencies in the early stages of
product life cycles; and these deficiencies may create a false demand therefore potential customers may
decrease. As a result, companies may face a huge inventory that their sale is declining. It should be noted
that the manufacturing and construction facility in this situation may be abolished sooner than products with
longer life cycle. As a general conclusion, matching features of supply chain and product is more important
than its improvement in the future. Because the supply chain may not have sufficient time to improve itself
and may only benefit from interesters related to short life cycle of the product.

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