The Impacts and Requirements of Consumer-Focused New Product Development on Supply Chain Management

The purpose of this thesis is to explore the impacts and requirements of a consumer-focused new product development on supply chain management. The issue is examined in a large indepth case study of the Swedish furniture industry, with one wholesaler as the main case company. The case company has changed its business strategy from being product-focused to consumer-focused. The company has started to develop innovative products that are supplied with a postponement strategy. The thesis focuses on how new product development and supply chain management are connected at the case company, and how the new business strategy affects sourcing, manufacturing, inventory, and distribution. Investigations reveal that the consumer-focused new product development resulted in an imbalance between demand creation and supply chain management. New product development is the key process connecting the two management directions. The new business strategy increased the amount of stock keeping units, which in combination with the decline in economy in 2008 resulted in a bad alignment between the business strategy and the sourcing system. This, in turn, resulted in inefficient inventory management. The new products that were developed have high innovative value, but the value may be lost if the retailers are not able to present the value to the consumers. The distortion of information that reduces the value is illustrated with a value gaps model that also explains the importance of demand creation across the supply chain, in order to fully utilize the potential of the supply chain and new product development. Moreover, a model explaining the outcome of low versus high collaboration with retailers, and obvious versus obscure product value, was constructed, highlighting that consumer perceived value may be lost if the value is obscure and collaboration is low. The impact of the investigated new product development approach on supply chain management is that the supply chain might lose efficiency and effectiveness if the supply chain capabilities to support the new products are not considered. The main requirement is to acknowledge that the partners in the supply chain play an important role, in order to preserve the innovative value of the products and increase demand creation