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Managers lack a normal framework for deciding which supply chain is the most appropriate for their particular product; therefore, they might choose the wrong supply chain. Fisher [1] considered this mismatch between the type of supply chains and the type of products led to new ideas and techniques haven’t improved performance of supply chain. In his research, Fisher suggested an effective supply chain should be designed with respect to the products that plans to supply through this supply chain and also devised a framework for helping managers understand the nature of the demand for their products and choose the supply chain which could satisfy their particular requirement. The first step of this framework is to define the nature of the demand for the products one’s company supplies, whether the product is functional or innovative? Many factors about products are important when the managers choose supply chain, for example, life cycle, product variety, demand predictability, profitability, and lead time and so on. All these factors determine the availability and inventory level to meet the demand. Fisher found if one classified products in term of demand pattern, most products could be categorized into two groups: primarily functional and primarily innovative.
Functional products include the staple that people could buy in grocery stores and supermarkets. This kind of products without much changes and variety has stable and predictable demand, relative long life cycle and low profit margins since its stability attract more competition. Comparatively, innovative products have the nature of unpredictability and short life cycle. The companies provide innovative products are forced to continue introducin ...