The effect of demand visibility in product introductions

Abstract

Purpose

Aims to examine the value of manufacturer access to downstream demand information in managing product introductions and to Identify factors affecting this value.

Design/methodology/approach

Simulation based on actual data on 19 product introductions is used for comparing different types of demand information and their usefulness to a manufacturer. Two metrics are introduced. Bias indicates if there is a consistent difference between demand information from two sources. Delay in demand synchronization measures how long it takes for demand information from two sources to start conveying demand similarly in a transient situation.

Findings

Finds that, in the supply chain examined, demand variability is mainly induced by distributors, whereas bias and delay in demand synchronization are mainly induced by retail outlets, especially for products with large wholesale packages compared with their sales.

Research limitations/implications

The simulation model is simple and does not enable realistic examination of how a manufacturer could best use downstream demand data in managing its operations. Further research including such mechanisms as forecasts and stock‐outs is needed.

Practical implications

Provides a means for manufacturers to assess when they should invest in gaining access to downstream demand information and to estimate when their traditional information sources start to accurately convey end‐customer demand for new products.

Originality/value

Although it has been suggested that the value of access to downstream demand information could be greatest in situations with transient or irregular demand, such as product introductions, this claim has not yet been thoroughly examined. This study is a first attempt at filling this gap in the theory.

Citation

Lehtonen, J., Småros, J. and Holmström, J. (2005), "The effect of demand visibility in product introductions", International Journal of Physical Distribution & Logistics Management, Vol. 35 No. 2, pp. 101-115. https://doi.org/10.1108/09600030510590291