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Efficient supply of functional products

4 important questions on Efficient supply of functional products

What can be improved more than just physical costs for functional products?

A big gain for the supply chain can be to increase operating efficiency, through the reduction in retailers' inventories.

What is the challenge with consumers of functional products?

Consumers of functional products offer companies predictable demand in exchange for a good product and reasonable price. The challenge is to avoid actions that would destroy the inherent simplicity of this relationship.

What can happen if companies overuse price promotions?

They start by using price incentives to pull demand forward in time to meet a quarterly revenue target. But pulling demand forwards helps only once. The next quarter, a company has to pull demand forward again just to fill the hole created by the first incentive. The result is an addiction to incentives that turns simple, predictable demand into chaotic series of spikes that only add to costs.

How can different interaction between supply chain partners pursuit higher profit?

Functional products such as groceries are usually highly price-sensitive, and negotiations along the supply chain can be fierce. If a company can get its supplier to cut its price by a penny and its customer to accept a one-cent price increase, those concessions can have a huge impact on the company's profit.