A consumer driven business models´ impact on sourcing and inventory

Increased competition in many markets has forced firms to adopt new business models. Oneway to differentiate from the competition is to develop products based on implicit consumerneeds that may be sold at a premium price. This research uses case study methodology toinvestigate a Swedish furniture wholesaler, and how their shift to a consumer driven businessmodel has affected sourcing and inventory. The research reveals that the high focus on thedemand-side of the company has had detrimental effect on the supply-side. Between 2004 and2009 the number of stock keeping units increased dramatically, and the sales increased with22%. Sourcing was affected since the order quantities became smaller, which lead to longerlead times in manufacturing. The inventory levels also increased, as did the averageinventory turnover. As the market dropped in 2008 due to the economical situation, the casecompany was not able to respond to the changes in demand. The main theoretical implicationis that the management of the demand- and the supply-side of the firm have to be coordinatedon macro level, the main practical implication is that managers needs to devote time to bothmanagement directions, and the main social implication is that differentiated supply chainstrategies may employ people closer to the consumption market